Morningstar's Russel Kinnel
writes that investors should stop listening to the noise on municipal bond funds post-Detroit, especially if that noise comes from Meredith Whitney, whose predictions have been significantly off.
Kinnel provided a list of five funds that investors can use to bet on a rebound.
He suggests T. Rowe Price
] Tax-Free High Yield
, which has a Morningstar Gold rating. Kinnel said it's crucial for a high-yield muni fund to be managed by a firm with analyst breadth, as it's especially important to do deep analysis of each of the fund's holdings. The fund is down 7.5 percent year-to-date.
He also suggests Fidelity
] Municipal Income
, which has less credit risk than the T. Rowe fund and skilled management, and Vanguard
] High-Yield Tax-Exempt
, that is so cautious it doesn't qualify for the Morningstar muni high-yield category. It's been down only 5.9 percent this year.
Kinnel is a fan of Vanguard's muni funds. He lists two more: Vanguard Limited-Term Tax Exempt
and Vanguard Short-Term Tax Exempt
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