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The Only Muni-Fund Companies You Need

Muni investing can be pretty easy.


This article originally appeared in Kiplinger's.

Choosing a municipal-bond fund can be a piece of cake--if you start by choosing the fund company before you look for the fund. Muni-bond funds are often team efforts, making the manager less important than the group behind the fund. Typically, a fund company will run all its muni funds with the same core philosophy and the same underlying fee structure. There's tremendous uniformity of quality and strategy within a fund company's muni operations.

It Gets Easier
Now I'm going to make it really easy by telling you to limit your search to just two fund companies (if you are a no-load investor). That's right, Fidelity and Vanguard are the only fund companies you need to know when you're looking for a tax-free bond fund. If you're familiar with the prowess of great bond firms such as BlackRock, PIMCO, and Western Asset, you may wonder why they aren't in the running. The reason is that they mostly manage money for giant institutions, such as pension funds, and pension funds don't need municipal bonds' tax advantages. (Click here to see all of our  Fund Analyst Picks.) They have a couple of good muni funds here and there but it's just not where they focus their efforts.

Russel Kinnel has a position in the following securities mentioned above: FTABX. Find out about Morningstar’s editorial policies.