municipal bond fund

Municipal Bond Fund

A mutual fund that invests in municipal bonds, operating either as an investment trust or as an open-end fund.

Investopedia Commentary

Because the bonds are local government issues, they usually help to maximize tax-exempt income.

Related Links

Bond Basics Tutorial
Mutual Fund Basics Tutorial
Weighing The Tax Benefits Of Municipal Securities

See also: Municipal Bond, Mutual Fund, Open End Fund, Private Purpose Bond, Trust

municipal bond fund

A mutual fund that invests in tax-exempt securities and passes through tax-free current income to its shareholders. Some municipal bond funds purchase long-term securities that provide a relatively high current yield but vary substantially in price with changes in interest rates. Other funds choose short-term securities that have lower yields but fluctuate little in value. Municipal bond funds differ from municipal bond unit trusts in that the funds manage the bond portfolios and charge an annual management fee. See also double-exempt fund, junk muni-bond fund, tax-exempt money market fund.