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3 Municipal Bond Funds for Steady Returns

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The debt securities category will always be the first choice for risk-averse investors because this class of instruments provides a regular income at low levels of risk. Income from regular dividends helps to ease the pain caused by plunging stock prices.

When considering the safety of capital invested, municipal bond mutual funds are second only to those investing in government securities. In addition, interest income earned from these securities is exempt from federal taxes and, in many cases, from state taxes.

Below, we share with you three top-ranked municipal bond funds, viz., American Funds Tax-Aware Conservative Growth and Income Portfolio (TAIAX - Free Report) , Invesco Limited Term Municipal Income Fund (AITFX - Free Report) and JPMorgan Tax Aware Real Return Fund (TXRAX - Free Report) . Each has a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future. Investors can click here to see the complete list of municipal bond funds.

American Funds Tax-Aware Conservative Growth and Income Portfolio fund invests in a variety of funds from the United States in different combinations and weights. The funds that it invests in are characterized to generate income from their investments and may include growth-and-income, equity-income, balanced and fixed-income funds. TAIAX also focuses on dividend-paying stocks and invests a portion in emerging markets.

American Funds Tax-Aware Conservative Growth and Income Portfolio has three-year annualized returns of 4.1%. Andrew B. Suzman has been one of the fund managers of TAIAX since 2012.

Invesco Limited Term Municipal Income Fund seeks to generate a high level of tax-exempt income. AITFX invests most of its assets in securities that generate income not subject to regular tax rules or the alternative minimum tax rules.

Invesco Limited Term Municipal Income Fund has three-year annualized returns of 0.7%. AITFX has an expense ratio of 0.33% compared with the category average of 0.60%.

JPMorgan Tax Aware Real Return Fund seeks after-tax returns by investing most of its net assets in a portfolio of municipal securities whose interest payments are excluded from federal income tax. TXRAX creates inflation-protected instruments by investing in a combination of municipal securities along with inflation-linked derivatives such as Non-Seasonally Adjusted Consumer Price Index for all Urban Consumers (CPI-U) swaps.

JPMorgan Tax Aware Real Return Fund has three-year annualized returns of 2.1%. As of the end of July 2023, TXRAX held 46.9% of its net assets in miscellaneous bonds.

To view the Zacks Rank and the past performance of all municipal bond funds, investors can click here to see the complete list of municipal bond funds.

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