Best Top Performer Tax Free Muni Municipal Bond Mutual Funds of 2010

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Intro

This article is all about the top performer tax free municipal bond fund or fixed income fund of 2010. In my previous article, I’ve provided the top performer domestic stocks, international stocks and taxable bond funds. The list can provide a new idea to invest in muni bond sectors for upcoming 2011 year and beyond. As we know, fixed income mutual fund primarily consists of taxable bonds and tax exempt muni bonds funds. Muni bond sectors or categories are as follows National Muni, State Muni, Short term muni, California municipal and more.

Mutual funds are a simple way of investing money on the bond market especially tax free muni bond. Majority of funds are actively managed by fund manager who can have extensive experience in bond market. Some of the funds may also track its index; this type of fund is passively managed by lead manager.

The fund manager invests parts of the fund into specific debts or bonds, thereby doing all the necessary study and trading or investing. The best thing in muni bond fund investment is most of these muni bond funds pay a fixed rate of interest income or distribution yield regularly. Muni bond fund yield is tax free from federal tax. Some state muni funds also exempt from state tax or local tax.

Criteria

I always use the following 4 criteria when I filtered the best performer muni bond mutual funds. The 4 criteria of choosing best performer municipal bond mutual fund of 2010 are:

  1. The %YTD return is the highest in its own class. Most can be either Top 20% of the class.
  2. The fund total asset is more than 0.25 billion
  3. It has Morningstar Rating of 3 stars or more (3,4,5)
  4. It is not part of leveraged or bear fund

Note: Some of these mutual funds may have a sales load (Front End Sales Load or Deferred Sales Load). If you like, please try to find other classes which don’t have a sales load or max 12b1 fee. Most institutional class fund don’t have this sales load and it also has a lower expense. This type of fund classes can be found in majority of IRA account or 401k account.

The following is the list of top performer municipal bond funds of 2010.

  • Muni Short: AllianceBern Interm CA Muni A
  • Muni National Intermediate: Vanguard High-Yield Tax-Exempt
  • Muni National Long: Franklin Double Tax-Free Income A
  • High Yield Municipal Bond: Ivy Municipal High Income A
  • Muni California Intermediate: American Funds Tax-Exempt CA A
  • Muni California Long: Franklin CA High Yield Municipal A
  • Muni New York Intermediate: Dreyfus NY AMT-Free Muni Bond A
  • Muni New York Long: Rochester Municipals A
  • Muni Single State Intermediate: Tax-Free Fund for UT Y
  • Muni Single State Long: Nuveen MO Municipal Bond A
  • High Yield Municipal Bond: Ivy Municipal High Income A

Top Performer Tax Free Municipal Bond Mutual Funds of 2010

(click column header to sort results)
Description  
Ticker  
Category  
Expense Ratio  
Yield  
M* rating  
Min Invest  
2010 YTD  
AllianceBern Interm CA Muni A
AICAX
Muni Short
0.89%
2.94%
3
$2,500
2.90%
Vanguard High-Yield Tax-Exempt
VWAHX
Muni National Interm
0.20%
4.54%
4
$3,000
2.55%
Franklin Double Tax-Free Income A
FPRTX
Muni National Long
0.69%
4.39%
3
$1,000
3.37%
Ivy Municipal High Income A
IYIAX
High Yield Muni
0.95%
4.59%
5
$500
6.69%
American Funds Tax-Exempt CA A
TAFTX
Muni California Interm
0.62%
3.99%
3
$1,000
3.31%
Franklin CA High Yield Municipal A
FCAMX
Muni California Long
0.63%
5.43%
4
$1,000
4.94%
Dreyfus NY AMT-Free Muni Bond A
PSNYX
Muni New York Interm
0.85%
3.87%
3
$1,000
1.71%
Rochester Municipals A
RMUNX
Muni New York Long
1.15%
6.05%
3
$1,000
3.63%
Tax-Free Fund for UT Y
UTAYX
Muni Single State Interm
0.60%
4.67%
5
$1,000
3.00%
Nuveen MO Municipal Bond A
FMOTX
Muni Single State Long
0.83%
4.36%
4
$3,000
2.94%

A. AllianceBern Interm CA Muni

AllianceBernstein Intermediate CA Muni A fund seeks safety of principal and maximizes total return after taking account of federal and state taxes for California residents. The fund normally invests most of its assets (>80%) in municipal securities rated A or better by national rating agencies. The fund lead manager is Terrance Hults since 1995.The total expense ratio is 0.89% per year. The fund has returned 3.16% over the past five years and 3.36% over the past decade. The fund also has a yield of 2.94%.

The fund average credit rating is rated A (investment grade). The average effective duration is 3.79 years. The average effective maturity is 4.46 years.

B. Vanguard High-Yield Tax-Exempt

Vanguard High-Yield Tax-Exempt fund objective is to provide a high and sustainable level of current income that is exempt from federal personal income taxes. The fund usually invests majority of assets (>80%) in investment-grade municipal bonds, with ratings of Baa or higher or BBB or higher. The fund lead manager is Christopher W. Alwine since 2009.The total expense ratio is 0.20% per year. The fund has returned 4.05% over the past five years and 4.98% over the past decade. The fund also has a yield of 4.54%.

The fund average credit rating is rated A (investment grade). The average effective duration is 7.02 years. The average effective maturity is 8.30 years.


C. Franklin Double Tax-Free Income A

Franklin Double Tax-Free Income fund seeks high income exempt from federal and state personal income taxes by employing prudent investment management and preservation of capital. The fund usually invests most of its net assets (>80%) in securities whose interest is free from federal income taxes, including the federal alternative minimum tax (AMT). The fund lead manager is Carrie Higgins since 1992.The total expense ratio is 0.69% per year. The fund has returned 2.81% over the past 3years and 3.29% over the past 5 years. The fund also has a yield of 4.39%. The fund average credit rating is rated A (investment grade). The average effective maturity is 20.90 years.

D. Ivy Municipal High Income A

Ivy Municipal High Income A fund objective is to provide a high level of income exempt from Federal income tax. The fund normally invests >80% of net assets in a diversified portfolio of tax-exempt municipal bonds. It invests 65% of assets in bonds rated in the lower tier of investment-grade (BBB by S&P and Baa by Moody's) or lower, including bonds rated below investment-grade. The fund lead manager is Michael J. Walls since 2008.The total expense ratio is 0.95% per year. The fund has returned 4.01% over the past five years and 4.91% over the past decade. The fund also has a yield of 4.59%.

The fund average credit rating is rated BB (non-investment grade). The average effective duration is 8.82 years. The average effective maturity is 18.37 years.


Disclosure: I have no affiliation with any of these funds. I also have no position in any of these funds currently. Please do your own research for additional details. Please trade and invest responsibly. Past Performance is No Guarantee of Future Results.

Note: You will need a brokerage account to buy these mutual funds, please check Fidelity, Schwab, TD Ameritrade, Etrade, Scottrade.


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