Municipal bonds, or “muni bonds,” comprise 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. These municipal securities regularly pay interest payments, usually semi-annually, and the original investment or principal amount at the time of maturity. Interest paid on such bonds is generally exempt 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 municipal bond funds, namely, SEI Asset Allocation Trust Conservative Strategy Allocation Fund SMGAX, Eaton Vance Total Return Bond Fund EBABX and Franklin High Yield Tax-free Income Fund FRHIX. Each has earned 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 funds, their Zacks Rank and past performance.
SEI Asset Allocation Trust Conservative Strategy Allocation Fund invests most of its assets in underlying SEI funds which are in turn diversified across securities and other instruments of various asset classes each of which has its own investment goal. Generally, the underlying SEI funds of SMGAX consist of equity funds, bond and money market funds, and real estate funds.
SEI Asset Allocation Trust Conservative Strategy Allocation Fund has three-year annualized returns of 8.1%. As of the end of March 2025, SMGAX had 3 issues with 20.13% invested in the money market.
Eaton Vance Total Return Bond Fund invests its net assets in bonds and other fixed and floating-rate income instruments. EBABX advisors also invest in bonds and income instruments that are either rated below investment grade or unrated.
Eaton Vance Total Return Bond Fund has three-year annualized returns of 4.4%. EBABX has an expense ratio of 0.72%.
Franklin High Yield Tax-free Income Fund invests most of its net assets in securities whose interest is free from federal income taxes, including the federal alternative minimum tax. FRHIX advisors generally invest in municipal securities rated in any rating category, including defaulted securities.
