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Buy These 3 Municipal Bond Funds for Steady Returns

Municipal bonds, or "muni bonds," comprises debt securities issued by various states, cities, counties and other governmental entities to raise money to build roads, schools and a host of other projects for the public good. These municipal securities regularly pay interest payments, usually semi-annually, and pay the original investment or principal amount at the time of maturity. Interest paid on such bonds is generally exempted from federal taxes making them especially attractive to people in higher income tax brackets.

Thus, risk-averse investors looking to earn a regular tax-free income may consider municipal bonds mutual funds. These mutual funds are believed to provide regular income while protecting the capital invested. While mutual funds from this category seek to provide dividends more frequently than other bonds, they offer greater stability than those primarily focusing on equity and alternative securities.

Below, we share with you three top-ranked municipal bond funds, viz., Invesco Rochester Municipal Opportunities Fund ORNAX, Delaware National High Yield Municipal Bond Fund Class A CXHYX and AB Municipal Bond Inflation Strategy AUNAX. 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.

Invesco Rochester Municipal Opportunities Fund invests the majority of its assets in municipal securities that its advisors believe are exempt from federal income tax and the fund's corresponding state income tax. ORNAX invests in securities issued by the governments of states, their political subdivisions, and the District of Columbia, U.S. territories, commonwealths, and possessions or by their agencies and other authorities.

Invesco Rochester Municipal Opportunities Fund has three-year annualized returns of 2%. ORNAX has an expense ratio of 0.69% compared with the category average of 0.92%.

Delaware National High Yield Municipal Bond Fund Class A seeks a high level of exempted current income by investing most of its assets in medium and lower-grade municipal securities exempted from federal income tax. CXHYX primarily invests in lower-rated municipal securities with higher income potential and greater risk.

Delaware National High Yield Municipal Bond Fund Class A has three-year annualized returns of 1.9%. Stephen J. Czepiel has been the fund manager of CXHYX since 2007.

AB Municipal Bond Inflation Strategy invests the majority of its net assets in high-quality investment-grade municipal fixed-income securities that pay interest exempt from federal tax, and are rated A or better by one or more recognized rating agencies. AUNAX also invests a small portion of its assets in below-investment-grade fixed-income securities or junk bonds.

AB Municipal Bond Inflation Strategy has three-year annualized returns of 3.3%. As of April 2022, AUNAX had 63.6% of its net assets invested 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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