Page 39 - Kiplinger's Personal Finance - November 2018

INVESTING

SPOTLIGHT: INTERMEDIATE NATIONAL MUNI FUNDS say, but they come with a
risk that homeowners will
Betting on Housing Bonds pay off their loans early,
which would curtail future
This fund looks for undervalued corners of the muni market. interest income. Such bonds
constitute 48% of the fund’s
assets, compared with 1.9%
for the average muni fund.
IT’S EASY TO SEE THE APPEAL Some 20% of the fund’s
of municipal bonds for in- INTERMEDIATE-MATURITY NATIONAL bond holdings aren’t scored
vestors in the highest tax MUNICIPAL BOND FUNDS by credit agencies, com-
brackets. These IOUs, issued Ranked by one-year return 1-year Max. pared with 6.4% in the aver-
total
by state and local govern- Rank/Name Symbol return Current sales Exp. age muni fund. Most of the
yield charge ratio
ments, are typically exempt nonrated issues are com-
1. Sit Tax-Free Income @ SNTIX 3.0% 2.7% none 0.80%
from federal taxes as well 2. Goldman Sachs Dynamic Mun Inc A GSMIX 2.9 2.4 3.75% 0.76 parable to bonds rated BB or
as from most state and local 3. BlackRock Strategic Muni Opps A MEMTX 2.9 2.6 4.25 0.96 BB+ (the highest ratings for
taxes for hometown buyers. 4. BNY Mellon Municipal Opps A MOTIX 2.6 2.4 none 0.99 non-investment-grade debt),
Max.
So investors who hold munis 2.1 and the fund’s overall credit
sales 0.65
5. Segall Bryant & Hamill Mun Opps Ret WTTAX 2.9 none
charge
in taxable accounts enjoy 6. Brown Advisory Tax Exempt Bd Inv BIAEX 2.0 2.8 1.00 r 0.49 quality equates to single-A,
higher effective yields than 7. USAA Tax Ex Intermediate-Term @ USATX 0.8 2.4 none 0.51 says senior portfolio man-
they’d get on comparable 8. Nuveen Inflation Protected Muni Bd A NITAX 0.8 2.0 3.00 0.94 ager Paul Jungquist.
taxable debt. And now 9. Principal Tax-Exempt Bond A PTEAX 0.8 3.1 3.75 0.79 The portfolio’s duration
may be a good time to buy. 10. Nuveen Interm Duration Muni Bond A NMBAX 0.7 2.4 3.00 0.68 (a measure of interest rate
Although demand for the CATEGORY AVERAGE –0.2% 2.0% sensitivity) is currently 4.0,
bonds remains relatively implying that the fund’s
constant from year to year, come with varying maturi- yield for a taxpayer in the share price would drop by
so far in 2018 muni bond ties, credit ratings, sources highest, 40.8% federal in- roughly 4% if rates were
issuance is running 15% of revenue and guarantees. come tax bracket. to rise by one percentage
below levels for the same Many investors prefer to Sit has loaded up on point. The fund has lagged
period last year. A shortage leave those decisions to the housing bonds. The bonds its benchmark, the Bloom-
of new supply boosts the pros. The managers at SIT raise money to develop berg Barclays Municipal
value of existing bonds, and TAX-FREE INCOME scour the affordable single- and 5-Year index, in just two
the current supply-and- muni market for bonds with multi-family housing and calendar years out of the
demand imbalance should robust yields in undervalued are backed by mortgage past 10, including so far
continue for now. sectors. The fund yields revenue. These issues offer in 2018. RYAN ERMEY
Like taxable bonds, munis 2.7%—equivalent to a 4.5% juicy yields, the managers rermey@kiplinger.com

20 LARGEST STOCK AND BOND MUTUAL FUNDS Ranked by size. See returns for thousands of funds at kiplinger.com/tools/fundfinder.
Annualized Max. 1-year Max.
STOCK MUTUAL FUNDS Assets total return sales BOND MUTUAL FUNDS Assets † total Current sales
†
Rank/Name Symbol (billions) 1 yr. 5 yrs. charge Rank/Name Symbol (billions) return yield charge
1. Vanguard Total Stock Market Idx Inv VTSMX $643.4 19.1% 13.3% none 1. Vanguard Total Bond Market Index Inv VBMFX $162.9 –1.6% 3.1% none
2. Vanguard 500 Index Inv VFINX 349.5 18.5 13.6 none 2. Pimco Income A PONAX 113.3 0.3 3.5 3.75%
3. Vanguard Total Intl Stock Idx Inv VGTSX 343.0 0.0 4.3 none 3. Vanguard Total Intl Bd Idx Inv VTIBX 98.8 2.2 0.9 none
4. American Growth Fund of America A AGTHX 197.3 21.6 14.5 5.75% 4. Metropolitan West Total Return Bd M MWTRX 73.4 –1.3 2.7 none
5. Fidelity 500 Index Inv FUSEX 165.1 18.6 13.7 none 5. Pimco Total Return A PTTAX 70.0 –2.6 2.2 3.75
6. American EuroPacific Growth A AEPGX 160.6 –0.1 5.9 5.75 6. Vanguard Short-Term Inv-Grade Inv VFSTX 59.5 –0.1 3.1 none
7. Fidelity Contrafund FCNTX 135.4 24.9 15.7 none 7. Vanguard Interm-Term Tax-Ex Inv VWITX 58.9 –0.5 2.5 none
8. American Balanced A ABALX 131.1 9.0 9.3 5.75 8. Dodge & Cox Income @ DODIX 57.1 –0.1 3.2 none
9. American Washington Mutual A AWSHX 109.7 15.7 12.2 5.75 9. DoubleLine Total Return Bond N DLTNX 48.9 –0.3 3.5 none
10. American Income Fund of America A AMECX 109.2 5.5 7.7 5.75 10. Lord Abbett Short Duration Income A LALDX 40.2 0.9 2.9 2.25
S&P 500-STOCK INDEX 18.7% 13.8% BLOOMBERG BARCLAYS US AGGREGATE BOND INDEX –1.4% 3.4%
MSCI EAFE INDEX 1.7 4.4 B OF A MERRILL LYNCH MUNICIPAL MASTER INDEX 0.1 2.7
As of September 14. @ Only share class. Unless otherwise indicated, funds come in multiple share classes; we list the share class that is best suited for individual investors. r Maximum redemption fee.
† For all share classes combined. MSCI EAFE tracks stocks in developed foreign markets. SOURCES: Bank of America Merrill Lynch, Morningstar Inc., Vanguard.
64 KIPLINGER’S PERSONAL FINANCE 11/2018

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