States Municipal
  • State municipal funds can offer tax exemption benefits that other investment methods can not
  • The best no load mutual funds are those which maximize municipal holdings and tax benefits to investors, while minimizing investment fees and costs
  • No load municipal bond funds are becoming extremely popular, and are ideal for a large number of investors

What are state municipal funds, and why are they becoming more popular and numerous? These are funds which invest in municipal bond debt, and municipal debt funds offer some advantages that most other funds can not. Municipal debt funds offer tax advantages to investors, because these funds invest in municipal debt which usually offers double or even triple income tax exemptions on the interest earned from the investments. Instead of paying taxes on any interest income, the money can be invested back into the state municipal funds so that the investment value increases. No load municipal bond funds are not all the same, because bond debt can vary in both quality and maturity ranges. Short state municipal funds only invest in municipal debt which matures five years or less from the date of issue, while intermediate debt refers to maturity dates which are between five and ten years from issuance. Long municipal bond debt funds invest in municipal debt which does not mature for ten years or longer. Most experts agree that short and intermediate funds are best for most investors, unless long term goals like retirement are desired. There are many no load municipal debt funds available to residents of each state and many cities, so that all fifty states offer tax exemptions to some investors.

The best no load mutual funds concerning municipal debt, and all other investment types, will have low operating expenses and no or minimal 12b-1 marketing fees. Even some no load funds may charge these marketing fees as a way to offset marketing and advertising expenses without increasing the operating expenses of the fund, and just because a fund has this fee does not mean that it is a load fund. The amount or percentage of the marketing fee can help determine whether a state municipal fund is a no load fund or not. Compare the 12b-1 marketing fee with the total net assets for the fund. If the percentage of the marketing fee is more than one fourth of one percent of the fund’s total net assets the fund is not really one of the no load municipal bond funds. This is important because some funds may be deceptive, and appear to be no load municipal debt funds when in fact the 12b-1 marketing fee includes commissions paid to bring in new investors and capital. This makes them load funds and not true no load funds.

State municipal funds can have initial investment requirements that can be very high, very low, or somewhere in between these two extremes. The same is true of the municipal debt quality. Individual mutual funds offer lower initial investment requirements than institutional mutual funds do, and institutional fund may require half a million dollars or more for investment while individual mutual funds may require as little as one hundred dollars or less to invest. Another difference between these two mutual fund types is that institutional state municipal funds usually have lower fees and operating expenses. The best no load mutual funds can be either one, depending on the situation of each investor. Load fees can be as high as seven or eight percent and they deduct from investment capital, and even returns when back end load fees are charged. Choosing no load state municipal funds makes excellent financial sense for a majority of investors. These funds may not be very diversified though, and each municipal bond debt mutual fund will have specific risks and returns, so careful evaluation should be done for each possible fund before choosing where to place investment capital. This research will help minimize the risk of losses, and choosing only high quality state municipal funds can also prevent this from happening.