10 Muni Closed-End Funds to Consider for Tax-Free Income

What are Muni Closed-End Funds?

Muni closed-end funds (CEFs) are a type of investment fund that invests in municipal bonds. Municipal bonds are debt securities issued by state and local governments to finance infrastructure projects and other public services. Muni CEFs offer investors the opportunity to earn tax-free income from municipal bonds, while also providing diversification and liquidity.

Benefits of Muni Closed-End Funds

There are several benefits to investing in muni CEFs, including:

• Tax-free income: The income from muni CEFs is exempt from federal income tax, and may also be exempt from state and local income taxes if the fund invests in bonds issued by the investor's home state.
• Diversification: Muni CEFs invest in a variety of municipal bonds, which can help to diversify your portfolio and reduce risk.
• Liquidity: Muni CEFs are traded on exchanges, which provides investors with liquidity and the ability to buy and sell shares quickly and easily.

How to Choose a Muni Closed-End Fund

When choosing a muni CEF, investors should consider the following factors:

• Investment objective: The investment objective of a muni CEF will determine the types of municipal bonds that it invests in. Some muni CEFs focus on high-yield bonds, while others focus on investment-grade bonds.
• Expense ratio: The expense ratio of a muni CEF is the annual fee that is charged to cover the costs of operating the fund. Lower expense ratios are better, as they will reduce the amount of income that is paid out to investors.
• Distribution yield: The distribution yield of a muni CEF is the annual dividend that is paid out to investors. Higher distribution yields are better, as they provide investors with more income.
• NAV premium/discount: The NAV premium/discount of a muni CEF is the difference between the market price of the fund and its net asset value (NAV). A NAV premium indicates that the fund is trading at a higher price than its NAV, while a NAV discount indicates that the fund is trading at a lower price than its NAV.

10 Muni Closed-End Funds to Consider

The following are 10 muni CEFs that investors may want to consider for tax-free income:

1. Nuveen Municipal Value Fund (NUV)
2. PIMCO Municipal Income Fund III (PMF)
3. BlackRock Municipal Income Trust (BBN)
4. Federated Premier Municipal Income Fund (FPM)
5. Lord Abbett Municipal Income Fund (LRD)
6. Invesco Municipal Income Trust II (PII)
7. T. Rowe Price Municipal Income Fund (PRF)
8. Vanguard Municipal High-Yield Fund (VHY)
9. Fidelity Municipal Income Fund (FMF)
10. Franklin Municipal Income Fund (FFI)

Conclusion

Muni closed-end funds offer investors the opportunity to earn tax-free income from municipal bonds, while also providing diversification and liquidity. When choosing a muni CEF, investors should consider the investment objective, expense ratio, distribution yield, and NAV premium/discount. The 10 muni CEFs listed above are all solid options for investors who are looking for tax-free income.