With the recent tax law changes and fear of an upcoming recession, is it time to take another look at municipal bonds and other tax advantaged funds? Munis may seem like a perfect investment to add to your taxable space in your portfolio.
Especially if you live in a high tax State like California and New York, buying your state specific munis may add to your state tax break.
Let’s take a look at some of these funds:
Invesco Oppenheimer Rochester AMT-Free Municipal Fund Class A (OPTAX) This fund will not invest in municipal securities the interest on which would be subject to the federal “alternative minimum tax”. So far, it has a 1 year return of 9.65%. However, it has high expense ratio of 1.06.
Vanguard High-Yield Tax-Exempt Fund Admiral Shares (VWALX) This fund seeks income by investing in a portfolio of long-term municipal bonds with an average maturity of 10-25 years. Currently it is returning 5.92% per year, with a very low expense ratio of 0.09. Require $50,000 minimum. Also available in investor shares with an expense ratio of 0.17 and $3000 minimum.
The Vanguard Intermediate-Term Tax-Exempt Fund Admiral Shares (VWIUX) The fund invests in high-quality municipal bonds and has a predictable duration profile of about 5–6 years. One year return of 5.15% with a low expense ratio of 0.09. Require $50,000 minimum. Again, also available in investor shares with an expense ratio of 0.17 and $3000 minimum.
BlackRock Allc Trgt Shrs Ser E Port (BATEX). The fund aims for a greater Federal tax-free income, in comparison with other municipal bond funds that invest primarily in investment grade securities, by investing in a combination of investment grade and non-investment grade municipal bonds. It is a bit risker but comes with a higher return than average and a low expense ratio of 0.08. So far, it has a one year return of 6.44%.
Do you think it is a good time to add municipal bonds to your portfolio? Leave a comment below!