Many investors look at municipal bonds and make the same mistake: They think they’re all the same—an investment option with tax-exempt income features, almost zero risk and the same low yield. Investors might be surprised to learn there can be large differences in munis, both in their coupon rates and in the returns of the mutual funds that invest in them. Currently, average returns for muni funds in some states can differ by as much as a full point, which over time can add up to a tidy sum. Investigating the full sample of dollar-denominated, U.S.-issued mutual funds that invest in munis, I came up with 17 states in which at least 25 mutual funds focus on their local municipal debt. What follows is a look at how the average returns for the funds in those states compare.

Source: Wall Street Journal September 07, 2020 15:00 UTC