There are plenty of choices in the Muni - Bonds category, but where should you start your research? Well, one fund that might be worth investigating is American Funds High Income Municipals Bond F (ABHFX). ABHFX has a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

ABHFX is one of many Muni - Bonds funds to choose from. Muni - Bonds funds invest in debt securities issued by states and local municipalities, which are typically used to pay for infrastructure construction, schools, and other government functions. These securities can be backed by taxes (revenue bonds), but others are known as " general obligation " and are not necessarily backed by a defined source. These bonds are especially attractive because of their inherent tax benefits.

History of Fund/Manager

American Funds is based in Los Angeles, CA, and is the manager of ABHFX. Since American Funds High Income Municipals Bond F made its debut in September of 1994, ABHFX has garnered more than $97 million in assets. The fund is currently managed by a team of investment professionals.

Performance

Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 1.91%, and it sits in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of -0.72%, which places it in the top third during this time-frame.

It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. Compared to the category average of 13.14%, the standard deviation of ABHFX over the past three years is 8.54%. The standard deviation of the fund over the past 5 years is 8.27% compared to the category average of 13.92%. This makes the fund less volatile than its peers over the past half-decade.

With a beta of 0.9, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, ABHFX has a positive alpha of 0.93, which measures performance on a risk-adjusted basis.

Ratings

However, it is worth noting that 36 % of the bonds in this fund are not ranked, so take the average quality level with a bit of caution.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, ABHFX is a no load fund. It has an expense ratio of 0.70% compared to the category average of 0.94%. Looking at the fund from a cost perspective, ABHFX is actually cheaper than its peers.

While the minimum initial investment for the product is $250, investors should also note that each subsequent investment needs to be at least $50.

Fees charged by investment advisors have not been taken into considiration. Returns would be less if those were included.

Bottom Line

Overall, American Funds High Income Municipals Bond F ( ABHFX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, better downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

For additional information on the Muni - Bonds area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into ABHFX too for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.

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