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Noteworthy Municipal-Bond Funds

These offerings provide tax-efficiency for the income-minded investor.

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For the income-oriented, tax-conscious investor, municipal-bond funds have long been a compelling investment option. But the asset class began bleeding assets in late 2010 and has continued to do so in 2011, spurred on by interest-rate jitters and negative headlines about municipal finances.

True, not all munis are safe, but investors can take steps to reap the tax-free income that most munis deliver while also cushioning on the downside.

Diversification has been called investing's only free lunch, so one way to put a damper on risk is to take a pass on state-specific muni bonds and funds and instead invest in a muni fund with exposure to high-quality bonds from all throughout the United States. With that universe as a starting point, we turned to the  Premium Fund Screener to layer on other additional criteria to unearth some topnotch municipal offerings that keep a lid on volatility.

Esther Pak does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.