Best Municipal Bond Funds to Buy and Hold in 2021

 

As an investor, you are looking for an investment that generates high returns and suits you. Many investors in the high-income tax bracket prefer investing in their cash on assets that are tax exempt. Then if that's the case, you should consider buying municipal bond funds. Also known as muni-bonds or munis. Local authorities and national governments facilitate these types of bond funds.

When you purchase this type of bond funds, the capital is used in funding infrastructure projects such as building learning institutions, bridges, highways, harbors or maintaining these investments from wearing out.

Presently, the United States of America is the biggest market for municipal bond funds. Currently, the US market value for municipal bond funds is approximately $3.7 trillion.

So, in today's article, you will get to learn more and why you should invest in municipal bond funds.

Table of Contents

Best Municipal Bond Funds 


Are Municipal Bond Funds a Good Investment? 


Top 10 Municipal Bond Funds to Buy and Hold 

Vanguard Tax-Exempt Bond ETF – VTEB 

iShares National Muni Bond ETF – MUB 

Nuveen Select Tax-Free Income Portfolio – NXP 

Vanguard Ohio Long-Term Tax-Exempt Fund - VOHIX 

iShares Short-Term National Muni Bond ETF – SUB 

Nuveen AMT-Free Municipal Value Fund – NUW 

JPMorgan Tax Free Bond Fund – PRBIX 

Invesco New York AMT-Free Municipal Bond ETF – PZT 

iShares iBonds Dec 2022 Term Muni Bond ETF – IBMK 

Eaton Vance National Municipal Opportunities Trust – EOT 


How to Buy Municipal Bonds 

· Through a Broker or Bank 

· Online Trading 

· Exchange-Traded Fund (ETF) 

· Mutual Fund 

 

Are Municipal Bond Funds a Good Investment?

 

Are you looking to invest in munis? Then you will be on the right track. Muni-bonds are one of the best you can purchase this year.

The only challenging thing about munis is they require you to invest so much money to get high returns due to high-interest rates. Thus, municipal bond funds are widely bought by first-class citizens (millionaires and billionaires), but this doesn't mean you cannot invest in this type of bond and build your income portfolio.

Additionally, you will be exempted from tax. This is because you are funding government projects such as roads, bridges, schools, hospitals, and much more infrastructure projects.

According to Moody's corporation, munis have a low default rate. As per their report, the percentage of default is approximately 0.03% from 2009 to 2014. This is unlike other cooperate bonds whose default rate is always at 2.5% per annum. But as per Warren Buffet's predictions, the expected default rate of muni-bonds was higher than the 0.03%.

But before you invest in munis, please consider consulting a municipal bond expert to help you choose the right municipal bond fund. This is because not all muni-bonds have a high return and decide to tolerate its volatility.

Top 10 Municipal Bond Funds to Buy and Hold

 

If you invest in bonds, then going for munis is the best option. This is because it offers high returns, and you will not be taxed. Additionally, it gives you financial stability during your retirement period.

But which are the ten best municipal bond funds you should purchase and hold? So, if you are not well-versed, the following are the ten best munis in the market.

Vanguard Tax-Exempt Bond ETF – VTEB

The Vanguard tax-exempt bond ETF -VTEB was launched on 21st August 2015 and is managed by The Vanguard Group, Inc. Presently, this fund is based in the United States of America and capitalizes in fixed income markets.

Market analysts say that this is the best munis issuer that will give you high returns, and the net expense ratio is low (0.06%). The VTEB has $9.78 billion in assets under management. This muni has a 52-week return and range of 4.89% and $44 to $55.41, respectively.

Furthermore, the turnover of VTEB is 18%, while you will be charged 0.05% as management fees.

iShares National Muni Bond ETF – MUB

Based in the United States, MUB was launched on 9/7/2007 and was previously known as iShares National AMT-Free muni bond ETF. This name was changed on 1st March 2016. When you invest in MUB, you will have access to over two thousand municipal bonds in one fund.

This type of muni-bond deals with fixed income markets. This bond's expense ratio is 0.07% higher than VTEB, including management fees, acquired fund fees and expenses, and foreign taxes and other costs.

iShares National Muni Bond ETF – MUB has $16.49 billion in assets under management. As of 16th December 2020 MUB, had $20,122,445,078 in net assets. This muni has a turnover of 8%. Furthermore, its 52-week range is between $99.90 to $117.16.

Nuveen Select Tax-Free Income Portfolio – NXP

NXP is managed by Nuveen Investments Inc., Nuveen Fund Advisors LLC, and Nuveen Asset Management, LLC. NXP is a fixed income mutual fund whose inception was on 19th March 1992.

When you invest in this municipal bond fund, you will get attractive after-tax total returns, monthly tax-free income, and portfolio diversification. NXP has a 10% turnover rate.

Nuveen Select Tax-free income portfolio's low and high share price – NXP is between $13,17 to $17.47, respectively.

When it comes to dividends investors who bought this muni-bond this year, the payout ratio will be 67.90%, while the dividend yield is 3.25%. NXP's expense ratio is 0.26%.

Vanguard Ohio Long-Term Tax-Exempt Fund - VOHIX

This is a muni that gives investors current income tax exempted by the Federal government and Ohio on personal income taxes. The issuer of this muni-bond is the Ohio state, local governments, regional governments, and public financing establishments.

The inception of the Vanguard Ohio long-term tax-exempt fund – VOHIX was on 18th June 1990.  VOHIX has a dividend yield ratio of 3.15%, while the annual payout of this muni-bond is $0.42.

Its 52-week range is between $11.68 to $13.35. Furthermore, VOHIX has a turnover rate of 26%. VOHIX being a mutual fund it has $1.58 billion assets under management, and its expense ratio is 0.13%.

iShares Short-Term National Muni Bond ETF – SUB

This is an exchange-traded municipal bond fund that was started by Blackrock, Inc, and its management is by Blackrock Fund Advisors. The current issuer is iShares. This muni-bond was launched on 5th November 2008.

SUB has a dividend yield rate of 1.28% and a yearly payout (TTM) of $1.38. Additionally, this muni-bond has a 52-week range of $96.56 to $108.01.

iShares Short-Term National Muni Bond ETF – SUB has $3.91 billion on assets under management. Moreover, the expense ratio of this muni-bond is 0.07%.

When you choose to invest in this short-term muni-bond, you will have access to most US short-term municipal bonds. Furthermore, you can seek tax-exempt income and manage interest rate risk.

Nuveen AMT-Free Municipal Value Fund – NUW

The NUW was begun by Nuveen Investments Inc. and is managed by Nuveen Fund Advisors LLC and Nuveen Asset Management, LLC. Its inception date was on 25th February 2009. NUW majorly invests its assets in the municipal securities portfolio.

This muni has a turnover rate of 31$, and its number of holdings are one hundred and thirty-three. Nuveen AMT-Free municipal value fund has an annual dividend yield rate of 2.89%.

The expense ratio of this muni-bond is 0.73%. Moreover, the assets under management by this muni-bond are $251.98 million. Its 52 weeks high and low share price is between $13.08 to $16.85.

JPMorgan Tax-Free Bond Fund – PRBIX

As you invest, you need to choose a municipal bond fund that maintains your principal's stability while you get high-level federal tax-exempt. This is what you will get when you select the JPMorgan Tax-Free Bond Fund – PRBIX.

This muni-bond was started on 1st February 1995. PRBIX has a turnover risk rate of 31%, while its number of holdings is seven hundred and sixteen.

The 52-week range of this muni-bond is between $10.95 to $12.65. Another vital aspect of any bond to an investor is dividends. JPMorgan Tax-Free Bond Fund – PRBIX has a yearly dividend yield rate of 2.47%, and its annual dividend payout is $0.31.

Its expense ratio is 0.45%, and the assets under management are $596.78 million.

Invesco New York AMT-Free Municipal Bond ETF – PZT

This is a fixed income muni that was started and is managed by Invesco Capital Management LLC. Its launch was on 11th October 2007.

PZT capitalizes no less than 80% of its assets on municipal securities. Its high and low share price on a 52 week is between $21.34 to $26.49.

The total expense ratio of Invesco New York AMT-Free Municipal Bond ETF is 0.28%. When it comes to risk tolerance, this muni has a turnover rate of 12%, and their number of holdings is sixty-five.

PZT has $94.03 million in assets under management.

iShares iBonds Dec 2022 Term Muni Bond ETF – IBMK

IBMK capitalizes on fixed income markets in the United States of America. It was launched on 1st September 2015 and is issued by iShares. This municipal fund uses a sampling technique to track the S&P AMT-Free municipal series Dec 2020 Index performance.

Investing in this muni gives a chance to buy municipal bonds that mature in 2022. As of 16th December 2020, IBMK has net assets totaling $365,497,796. This muni has one thousand four hundred and seventy-nine holdings.

The dividend yield of this municipal bond is 1.40%, and its annual payout is $0.37. iShares iBonds Dec 2022 Term Muni Bond ETF – IBMK has an expense ratio of 0.18%.

Eaton Vance National Municipal Opportunities Trust – EOT

The formation of EOT was on 27th May 2009 and is managed by Eaton Vance Management. One of the reasons you should consider investing in EOT is that it has a dividend yield of 3.76%. This dividend yield rate is regarded as one of the best in the market.

The turnover risk rate of Eaton Vance National Municipal Opportunities Trust is 44%, while the number of holdings of EOT is one hundred and ninety-nine. $317.45 million is the total assets under management by this munis.

How to Buy Municipal Bonds

 

Now that you have known about the ten best municipal bonds to invest in. so, how do you go about buying them?

In this section, you will get to know about the ways of a muni-bond.

· Through a Broker or Bank

The first way to purchase muni-bonds is through a certified broker and bank. The broker has the best knowledge about the current market and will help you invest wisely. Furthermore, the bank will also do that.

· Online Trading

You can decide to buy municipal bonds alone, and you can do it via online trading platforms. All you need is to open an account on your preferred online platform, which you will solely manage. However, you need to well-versed with this type of bond before taking this route.

· Exchange-Traded Fund (ETF)

ETF usually tracks the index performance of bonds. Therefore, if you invest in short-term municipal bonds tax-exempt, you will best use an exchange-traded fund. The only challenge trading munis using ETF is you can buy and sell bonds once per day.

· Mutual Fund

For diversifying your investment holdings, you can use mutual funds to purchase municipal bond funds. Therefore, this is another method you can use to invest in municipal funds.