Education Mutual Fund

Vanguard Municipal Bond Mutual Funds

Here are some Municipal Bond Mutual Funds that we have researched for our portfolio. Also see Fidelity California Municipal Bond Mutual Funds. Research done 1/12/2012.

Morningstar’s favorite National intermediate term municipal bond fund picks and California intermediate term municipal bond fund picks.

California specific tax exempt funds

Vanguard California Intermediate Term Tax Free Fund (VCAIX)

Average maturity 5.7 years. Average duration 5.55 years. Average credit quality A. Expense ratio 0.20%, 0.12% Admiral shares. Morningstar rating 4 stars, Silver.

2011 return: 10.16%

Note: Very low expense ratio, but longer duration than Fidelity’s fund and lower average credit quality.

Vanguard California Long Term Tax Exempt Fund (VCITX)

Average maturity 7.6 years. Average duration: 6.74 Years. Average Credit quality: A. Expense Ratio: 0.20%, 0.12% Admiral shares. Morningstar Rating: 4 Star, Silver.

2011 return: 11.49%

Note: Too long the duration for us.

Comparing Fidelity and Vanguard California Intermediate Term municipal bond mutual funds. We can see the effect of longer duration net asset value fluctuations. The Vanguard fund does yield more though.

National tax exempt funds

Vanguard High-Yield Tax-Exempt Fund (VWAHX)

Average maturity 8.4 years. Average duration 6.73 years. Average credit quality BBB. Expense ratio 0.20%, 0.12% Admiral shares. Morningstar rating 4 stars, Silver.

2011 return: 10.98%

Note: Too long the duration for us and low average credit quality. This high-yield tax exempt fund can invest up to a fifth of its assets in below investment grade bonds. The other 80% must be in investment grade municipal bonds.

Vanguard Intermediate Term Tax-Exempt Fund (VWIUX)

Average maturity 5.7 years. Average duration 5.45 years. Average credit quality A. Expense ratio 0.20%, 0.12% Admiral shares. Morningstar rating 4 stars, Silver.

2011 return: 9.71%

Note: Too long the duration for us.

Vanguard Limited Term Tax-Exempt Fund (VMLTX)

Average maturity 2.8 years – Average Duration: 2.45 Years – Average Credit quality: AA. Exp Ratio: 0.20%, 0.12% Admiral shares. Morningstar Rating: 3 Star, Silver

Note: very good credit quality and duration.

Vanguard Short Term Tax-Exempt Fund (VWSTX, VWSUX)

Average maturity 1.2 years – Average Duration: 1.12 Years – Average Credit quality: AA. Exp Ratio: 0.20%, 0.12% Admiral shares. Morningstar Rating: 2 Star, Silver

Note: Very Short duration and high credit quality. Almost an enhanced  money market type fund.

Comparing Fidelity Intermediate Term and Vanguard Short Term municipal bond mutual funds. We can see the effect of longer duration net asset value fluctuations. The Fidelity fund does yield more though.

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