Debt securities will always be the natural choice of the risk-averse investor because this category of instruments provides regular income flow at low levels of risk. Income from regular dividends helps to ease the pain caused by plunging stock prices. When considering safety of capital invested, municipal bond mutual funds are second only to those investing in government securities. In addition, the interest income earned form these securities are exempt from federal taxes and in many cases from state taxes as well.
Below we will share with you the 5 highest yielding Zacks #1 ranked municipal bond mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future. To view the Zacks Rank and past performance of all municipal bond funds, then click here.
| Mutual Fund | Sec Yield |
| Commerce National Tax Free Intermediate Bond | 3.91% |
| Nuveen Intermediate Tax Free A | 3.81% |
| U.S. Global Investors Tax-Free | 3.47% |
| USAA Tax Exempt Intermediate-Term | 3.26% |
| Consulting Group Municipal Bond | 3.16% |
Commerce National Tax Free Intermediate Bond (CFNLX) seeks current income free from federal income tax as well as preservation of capital invested. The fund utilizes the majority of its assets to purchase municipal securities not subject to federal income tax and the alternative minimum tax. The municipal bond mutual fund returned 3.83% over the last one year period.
The municipal bond mutual fund has a minimum initial investment of $1,000 and an expense ratio of 0.70% compared to a category average of 0.86%.
Nuveen Intermediate Tax Free A (FAMBX) invests heavily in municipal obligations the interest earned from which is exempt from the federal income tax. The fund primarily purchases investment grade securities or unrated instruments of similar quality. The municipal bond mutual fund has a five year annualized return of 4.14%.
The Fund Manager is Christopher L. Drahn and he has managed this municipal bond mutual fund since 1994.
U.S. Global Investors Tax-Free (USUTX) seeks significant current income free from federal income taxes. The fund invests a large portion of its assets in municipal securities with regardless of their maturity. The interest earned from these instruments is exempt from federal income tax. The municipal bond mutual fund returned 2.99% over the last one year period.
The municipal bond mutual fund has a minimum initial investment of $5,000 and an expense ratio of 0.70% compared to a category average of 0.86%.
USAA Tax Exempt Intermediate-Term (USATX) invests the majority of its assets in municipal securities exempt from the federal income tax and the alternate minimum tax. The maturity period of the fund varies between three to ten years. The municipal bond mutual fund has a ten year annualized return of 4.31%.
As of March 2011, this municipal bond mutual fund held 522 issues, with 1.44% of its total assets invested in Harris Cnty Tex Indl Dev Corp Rev Bds 5%.
Consulting Group Municipal Bond (TMUUX) seeks significantly high interest income which is exempt from federal income taxes along preservation of capital. The fund primarily purchases municipal obligations with a wide range of maturity periods. The municipal bond mutual fund returned 3.68% in the last one year period.
The Fund Manager is Dawn Mangerson and she has managed this municipal bond mutual fund since 2006.
To view the Zacks Rank and past performance of all municipal bond funds, then click here.
About Zacks Mutual Fund Rank
By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Learn more about the Zacks Mutual Fund Rank at http://www.zacks.com/funds.
Zacks Investment Research
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