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IntroAs part of bond mutual fund, municipal bond fund provides an attractive opportunity for investors who seek tax free income or yield. This muni bond mutual fund invests mainly in investment grade fixed income obligation issued by various states, cities, towns, transportation authorities and public utilities.
Top 6 municipal bond mutual funds
These top diversified municipal funds are selected based on its long term performance. These mutual funds don’t have a sales load or a transaction fee. You can find the fund review and other fund information below such as the yield, expense ratio, fund manager, top holdings, top sectors, etc.
The 6 best no load municipal bond mutual funds of 2012 are:
- Wells Fargo Advantage Municipal Bond Inv (SXFIX)
- Fidelity Tax-Free Bond (FTABX)
- T. Rowe Price Summit Municipal Income (PRINX)
- BMO Intermediate Tax-Free Y (MITFX)
- Commerce National Tax Free Intermediate Bond (CFNLX)
- DWS Managed Municipal Bonds S (SCMBX)
This Wells Fargo Advantage Municipal Bond fund objective is to provide tax free income by mainly investing in a diversified portfolio of municipal bonds. The fund managers are Lyle J. Fitterer and Robert J. Miller. It has a distribution yield of 3.74%. The total net assets are $2.74 billion. Its expense ratio is 0.80%.
This diversified municipal bond mutual fund is rated with 5 star rating by Morningstar. It has a 5-year annualized return of 6.37%. The portfolio turnover rate is 57.56% (as of June 2012). In 2008, it has its worst 1 year total return of -11.67%. This best bond fund is introduced to investors on October 23, 1986. The CUSIP number is 949917819.
2. Fidelity Tax-Free Bond (Ticker: FTABX)
Fidelity Tax-Free Bond fund utilizes its assets to purchase investment grade municipal bonds whose interest is exempt from federal income tax. This muni bond fund is managed by Jamie Pagliocco, Kevin J Ramundo, Mark Sommer. This no load fund has an expense ratio of 0.25% per year. It has $2.3 billion of total assets.
This best municipal bond mutual fund has a yield of 3.67. It is ranked with 4 star and gold rating. The average effective duration is 7.51 years. As of May 2012, the top 5 municipal states are California, Illinois, New York, Texas, and Florida. The top 2 sectors include education and state & local general obligation. The year-to-date return is 4.30% (up to 6/19/2012).
Another alternative fidelity fund is Fidelity Municipal Income Fund (FHIGX). This fund has lower initial investment requirement which is only $10,000. It is managed by the same portfolio managers.
3. T. Rowe Price Summit Municipal Income (PRINX)
The T. Rowe Price Summit Municipal Income fund aim is to provide high income level exempt from federal income tax rates. Konstantine B. Mallas is the fund manager. This 5-star bond mutual fund has an expense ratio of 0.50%. The total net assets are $694 million. The portfolio turnover rate is 21%.
You can buy this municipal bond fund with $25,000 initial funding. It opens to new investors. The current yield is 3.85%. The average effective maturity is 17.67 years and the average effective durations is 5.33 years.
The bond fund has returned 8.97% over the past 3year, 5.83% over the past 5 year, and 5.44% over the past decade. The 3 year beta risk is 1.09.
4. BMO Intermediate Tax-Free Y (Ticker: MITFX)
This BMO Intermediate Tax-Free fund invests in investment-grade municipal securities whose income is exempt from federal income tax rate. John Boritzke and Duane McAllister are the fund managers. This BMO fund is formerly known as Marshall Intermediate Tax-Free fund. Its yield is 3.12%. It has $966 million of total assets. The annual expense ratio is 0.55%.
This no load muni bond fund opens to new investors. The average credit quality is A (investment grade). It has returned 6.73% over the past 5 year, and 4.87% over the past 10 year. US News rate this fund with 8.3 out of 10.0. TheStreet rates this bond fund with A+ rating (buy). The institutional class of this fund is MIITX.
5. Commerce National Tax Free Intermediate Bond (CFNLX)
Ranked with 4-star, Commerce National Tax Free Intermediate Bond fund has a distribution yield of 3.24%. The fund objective is to provide tax free income from federal individual tax with capital preservation. You can buy this fund with $1,000 initial investment. This no load municipal bond fund is managed by Brian P. Musielak and Brent L. Schowe.
As of June 2012, this bond fund has an average effective duration of 7.37 year and an average maturity of 6.70 years. The top 3 sectors in its portfolio are education, state & local general obligation, and health. Its year-to-date return is 4.52%.
6. DWS Managed Municipal Bonds S (MUTF: SCMBX)
DWS Managed Municipal Bonds fund has total net assets of $5.1 billion. It also has an expense ratio of 0.56%. The portfolio turnover rate is 24%. The current 12-month yield is 4.48%. Investors can invest in this fund either in regular brokerage account or retirement account (IRA).
This long duration national muni bond fund has a 5-year average return of 6.19%. The top 2 holdings are California State GO bonds, and Puerto Rico Sales Tax Fing Cor Rev Bonds.
Disclosure: No Position
Note: These best funds are suitable for 2013 investment as well.
Fund Performance
| No | Fund Description | Ticker | Expenses | YTD Return % | 1 Year Return % | 3 Year Return % | 5 Year Return % | 10 Year Return % |
|---|---|---|---|---|---|---|---|---|
| 1 | Wells Fargo Advantage Municipal Bond Inv | SXFIX | Average | 6.07% | 11.61% | 10.23% | 6.37% | 6.19% |
| 2 | Fidelity Tax-Free Bond | FTABX | Average | 4.25% | 10.87% | 7.94% | 6.03% | 5.47% |
| 3 | T. Rowe Price Summit Municipal Income | PRINX | Average | 5.19% | 11.69% | 8.97% | 5.83% | 5.44% |
| 4 | BMO Intermediate Tax-Free Y | MITFX | Below Average | 3.60% | 8.98% | 7.44% | 6.73% | 4.87% |
| 5 | Commerce Natl Tax Free Interm Bd | CFNLX | Average | 4.52% | 11.28% | 7.84% | 6.31% | 4.94% |
| 6 | DWS Managed Municipal Bonds S | SCMBX | Above Average | 5.30% | 10.78% | 8.34% | 6.19% | 5.22% |
| 7 | Schwab Tax-Free Bond | SWNTX | Below Average | 2.95% | 8.34% | 7.36% | 6.11% | 5.04% |
| 8 | State Farm Municipal Bond | SFBDX | Average | 1.99% | 7.23% | 6.12% | 6.10% | 4.91% |
| 9 | Elfun Tax-Exempt Income | ELFTX | Below Average | 3.92% | 10.34% | 7.58% | 6.01% | 5.23% |
| 10 | TIAA-CREF Tax-Exempt Bond | TIXRX | Above Average | 2.11% | 8.64% | 7.45% | 5.94% | - |
| 11 | Northern Tax-Exempt | NOTEX | Average | 4.05% | 10.62% | 7.54% | 5.88% | 5.11% |
| 12 | American Century Long-Term Tax-Free Inv | ACLVX | Average | 3.87% | 10.33% | 7.87% | 5.83% | - |
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