California municipal bond mutual funds seek tax-free stable income by investing in municipal debt obligations of issuers from the state. These mutual funds are expected to offer the state’s investors a federal income tax and California state income tax exempted steady income. Moreover, municipal bonds or “munis” are preferred by investors seeking a steady stream of tax-free income in a volatile market. Though munis come with lower yields than taxable bonds, they fetch better returns for investors in high tax brackets if we consider after-tax returns.
Below we share with you four top-rated California muni bond mutual funds. 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 muni bond funds.
Vanguard California Long-Term Tax-Exempt Investor (VCITX – Free Report) invests the lion’s share of its assets in high-quality municipal bonds income free from federal and California state taxes. VCITX invests in sureties of California state and local governments, and is expected to maintain average maturity duration of 10 to 25 years. Vanguard CA Long-Term Tax-Exempt Investor is a non-diversified fund and has three-year annualized returns of 3.21%.
James M. D’Arcy is the fund manager of VCITX since 2011.
American Century California High Yield Muni A (CAYAX – Free Report) invests a large chunk of its assets in municipal securities that are believed to provide interest income free from federal and California income taxes. CAYAX focuses on acquiring California municipal securities that are rated below investment grade. The fund may also invest in securities that are unrated. American Century California High Yield Muni A is a non-diversified fund and has three-year annualized returns of 4.1%.
CAYAX has an expense ratio of 0.75% as compared to the category average of 0.84%.
Nuveen California Municipal Bond A (NCAAX – Free Report) invests a major portion of its assets in municipal debt obligations that provide interest income exempted from federal and California personal income tax. NCAAX invests in securities including bonds of the State of California or its affiliates, and debt obligations issued by the U.S. government. Nuveen California Municipal Bond A has three-year annualized returns of 3.5%.
As of August 2018, NCAAX held 383 issues, with 2.93% of its assets invested in GOLDEN ST TOB SECURITIZATION CORP CALIF 5%.
To view the Zacks Rank and past performance of all muni bond mutual funds, investors can click here to see the complete list of muni bond funds.
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