Skip to Content
Our Picks

The Best Municipal-Bond Funds

Here are the highest-rated mutual funds and ETFs across a series of Morningstar’s municipal bond fund categories.

Investors rely on bonds for many reasons: funding short-term goals, diversifying an equity-heavy portfolio, or generating income during retirement, to name a few. Before getting down to choosing a bond fund, however, step back and consider why you need one. What role is it playing for you?

Once you know what need a bond fund would fill, figure out whether a taxable-bond fund or municipal bond fund is a better choice for you. If you’re investing via a tax-deferred account like an IRA or 401(k), a taxable-bond fund will be the better match. If you’re investing in a taxable account, however, municipal bonds might be the better choice on an after-tax basis.

Why? Municipal bonds, which are issued by state and local governments, offer tax advantages to investors in higher tax brackets. So even though a muni-bond fund’s yield may look shrimpy when you compare it against the yield on a similar quality and similar term taxable-bond fund, that muni fund’s yield doesn’t reflect the tax advantages that may apply to you. How can you determine whether there’s a tax advantage if you take the muni-bond route? Walk through our five-step program to find out.

If there is in fact a tax advantage for you, you can begin the search for a muni-bond fund with the term and interest-rate sensitivity that meets your time horizon and appetite for risk. We suggest that you begin your search with Morningstar Medalist Funds--funds that we think are most likely to outperform over a full market cycle thanks to their competitive advantages, such as low costs and solid processes.

The muni-bond funds and exchange-traded funds listed below all earn our highest rating--a Morningstar Analyst Rating of Gold--as of this writing. They’re great starting points for your research.

Morningstar.com Premium Members have access to a complete list of all Medalist Funds and ETFs.

 

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.