Kiplinger\'s Personal Finance 02.2020

INVESTING

36 KIPLINGER’S PERSONAL FINANCE^ 02/2020

mark modeled on the Bloom-

berg Barclays Municipal

index, with a tilt toward

lower-quality, higher-

yielding names. From there,

Kiselak relies on input from

Vanguard’s extensive muni

bond team. In 2019, the

fund began shifting assets

from single-A-rated bonds

to higher-quality, double-

A-rated debt. Within the

fund’s slug of triple-B-rated

debt (one step above junk

and 22% of assets), the

team favors bonds backed

by revenues from essential

services, such as airports,

hospitals and toll roads, all

of which are unlikely to fare

poorly even in a recession.

Low costs allow the fund

to deliver nice returns

without wading deep into

junky waters. The 0.17%

expense ratio is less than

a third of the average for

similar funds. Over the past

decade, the fund’s 5.3%

annualized return bested

91% of peer funds. The fund

has beaten the Bloomberg

Barclays muni index in

nine of the past 10 calendar

years. RYAN ERMEY

[email protected]

Just Don’t Call It Junk

Despite its name, this muni bond fund is keeping an eye on risk.

NAMES CAN BE DECEIVING.

French fries aren’t really

French, and VA NG UA R D HI G H-

YIELD TAX-EXEMPT fund isn’t

a high-yield bond mutual

fund. In the bond investing

world, the words high yield

are interchangeable with

junk—meaning bond issues

rated below investment

grade that pay high yields

and come with an elevated

risk of default. Vanguard

High-Yield’s peer group,

however, is muni bond

funds with long maturities.

Though the fund’s 15%

stake in junk-rated or un-

rated muni debt is higher

than the category average

of roughly 4.5%, the typical

fund in the actual high-yield

muni category has 10 times

that much—45%—in junk

and unrated bonds.

The remainder of the

fund’s assets are in invest-

ment-grade issues. Its yield

SPOTLIGHT: VANGUARD HIGH YIELD TAX-EXEMPT

is a generous 2.3%, which,

because income from mu-

nicipal bonds is exempt

from federal taxes, is the

equivalent of a 3.9% yield

for investors in the highest

federal tax bracket.

Should interest rates re-

main low, the muni market

is a relatively safe place to

hunt for yield, says Mathew

STOCK MUTUAL FUNDS

Rank/Name Symbol 1 yr. 5 yrs.

Assets†

(billions)

Max.

sales

charge

Annualized

total return

1.Vanguard Total Stock Market Idx Adm VTSAX $741.0 15.3% 10.6% none

2.Vanguard Total Intl Stock Idx Adm VTIAX 393.3 16.1 10.9 none

3.Vanguard 500 Index Adm VFIAX 385.6 10.9 4.2 none

4.Fidelity 500 Index Inv FXAIX 223.9 16.1 11.0 none

5.American Growth Fund of America A AGTHX 198.6 14.6 11.5 5.75%

6.American EuroPacific Growth A AEPGX 166.1 15.5 5.3 5.75

7.American Balanced A ABALX 157.3 11.6 7.6 5.75

8.American Washington Mutual A AWSHX 126.3 13.1 10.0 5.75

9.Fidelity Contrafund FCNTX 119.7 16.4 12.4 none

10.American Income Fund of America A AMECX 113.9 10.9 6.1 5.75

S&P 500-STOCK INDEX 16.1% 11.0%

MSCI EAFE INDEX 12.4% 4.3%

20 LARGEST STOCK AND BOND MUTUAL FUNDS Ranked by size. See returns for thousands of funds at kiplinger.com/tools/fundfinder.

BOND MUTUAL FUNDS

Rank/Name Symbol

1-year

total

return

Assets†

(billions)

Max.

sales

charge

Current

yield

1.Vanguard Total Bond Market Idx Adm VBTLX $199.3 10.8% 2.2% none

2.Pimco Income A PONAX 132.2 7. 1 2. 7 3. 7 5 %

3.Vanguard Total Intl Bd Idx Adm VTABX 117.1 9.5 0.5 none

4.Metropolitan West Total Return Bd MMWTRX 80.4 10.9 2.1 none

5.Vanguard Interm-Term Tax-Ex Inv VWITX 72.3 7. 7 1. 6 n o n e

6.Pimco Total Return A PTTAX 67.4 9.4 2.1 3.75

7.Dodge & Cox Income@ DODIX 63.2 10.6 2.7 none

8.Vanguard Short-Term Inv-Grade Inv VFSTX 61.5 6.3 2.2 none

9.Lord Abbett Short Duration Income ALALDX 55.5 5.5 2.4 2.25

10.DoubleLine Total Return Bond N DLTNX 55.0 7. 3 3. 2 n o n e

BLOOMBERG BARCLAYS US AGGREGATE BOND INDEX 10.8% 2.3%

B OF A MERRILL LYNCH MUNICIPAL MASTER INDEX 8.7% 1.9%

NATIONAL LONG-MATURITY MUNI BOND FUNDS

Ranked by one-year returns

Max.

sales

charge

1.Invesco Oppenheimer Municipal A OPAMX 10.9% 1.8% 4.25% 0.90%

2.Eaton Vance TABS 10-20 Yr Ldrd Mn Bd AEATTX 10.9 1.5 4.75 0.65

3.Robinson Tax Advantaged Income AROBAX 10.9 2.6 3.75 2.92

4.Nuveen Strategic Municipal Opps A NSAOX 10.9 1.9 3.00 0.83

5.Pioneer AMT-Free Municipal A PBMFX 10.8 1.5 4.50 0.81

6.Vanguard High-Yield Tax-Exempt VWAHX 10.1 2.3 none 0.17

7.Lord Abbett National Tax Free A LANSX 10.0 1.8 2.25 0.77

8.Victory Tax-Exempt A GUTEX 9.9 1.7 2.00 0.80

9.Nuveen All-Amer. Municipal Bond A FLAAX 9.7 1.9 4.20 0.73

10.Fidelity Municipal Income@ FHIGX 9.6 1.7 none 0.46

CATEGORY AVERAGE 8.7% 1.7%

Kiselak, who’s helmed the

fund since 2010. In the 10

years through 2016, muni

bonds defaulted only 0.18%

of the time, compared with

a 1.74% default rate for cor-

porate bonds. Even so, the

fund’s portfolio is built with

a watchful eye toward risk.

Portfolio construction

starts with a custom bench-

Rank/Name Symbol

Max.

sales

charge

1-year

total

return

Current

yield

Exp.

ratio

As of November 30. @Only share class. Unless otherwise indicated, funds come in multiple share classes; we list the share class that is best suited for individual investors. †For all share classes

combined. MSCI EAFE tracks stocks in developed foreign markets. SOURCES: Bank of America Merrill Lynch, Morningstar Inc., Vanguard.