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Muni-Fund Investors Have Been Their Own Worst Enemies

A more disciplined approach should lead to better results.

Municipal-bond fund investors have often been their own worst enemies, but they don’t have to be.

With holdings that help finance state and local governments and other essential projects like schools, water systems, bridges, and toll roads, muni funds might seem like a staid backwater of the fixed-income world. When it comes to investor behavior, though, they’ve often been prone to erratic cash flows that have ended up hurting investor returns (also known as dollar-weighted returns or internal rates of return). 

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