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Is NHMAX a Strong Bond Fund Right Now?

On the lookout for a Muni - Bonds fund? Starting with Nuveen High Yield Municipals Bond A NHMAX is one possibility. NHMAX has a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

NHMAX is one of many Muni - Bonds funds to choose from. Muni - Bonds funds invest in debt securities issued by states and local municipalities, which are typically used to pay for infrastructure construction, schools, and other government functions. These securities can be backed by taxes (revenue bonds), but others are known as " general obligation " and are not necessarily backed by a defined source. These bonds are especially attractive because of their inherent tax benefits.

History of Fund/Manager

NHMAX finds itself in the Nuveen family, based out of Chicago, IL. Nuveen High Yield Municipals Bond A debuted in June of 1999. Since then, NHMAX has accumulated assets of about $5.26 billion, according to the most recently available information. The fund is currently managed by John V. Miller who has been in charge of the fund since December of 2000.

Performance

Of course, investors look for strong performance in funds. This fund has delivered a 5-year annualized total return of 7.66%, and it sits in the top third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 6.17%, which places it in the top third during this time-frame.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. Over the past three years, NHMAX's standard deviation comes in at 4.72%, compared to the category average of 7.27%. Looking at the past 5 years, the fund's standard deviation is 4.92% compared to the category average of 7.17%. This makes the fund less volatile than its peers over the past half-decade.

Bond Duration

Modified duration is a measure of a given bond's interest rate sensitivity, and is a metric that's a good way to judge how fixed income securities will respond in a shifting rate environment.

If you believe interest rates will rise, this is an important factor to look at. NHMAX has a modified duration of 10.78, which suggests that the fund will decline 10.78% for every hundred-basis-point increase in interest rates.

Income

It is important to consider the fund's average coupon because income is often a big reason for purchasing a fixed income security. This metric takes a look at the average payout by the fund in a given year. For example, this fund's average coupon of 6.96% means that a $10,000 investment should result in a yearly payout of $696.

For those seeking a strong level of current income, a higher coupon is typically good news. However, it could pose a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond.

Investors also need to consider risk relative to broad benchmarks, as income is only one part of the bond picture. With a beta of 1.44, this fund is more volatile than a broad market index of fixed income securities. Taking this into account, NHMAX has a positive alpha of 2.37, which measures performance on a risk-adjusted basis.

Ratings

Investors should also consider a bond's rating, which is a grade ( 'AAA' to 'D' ) given to a bond that indicates its credit quality. With this letter scale in mind, NHMAX 's junk bond component-bonds rated 'BB' or below-is at 34.35%. This means that the fund has an average quality of BBB, and focuses on medium quality securities.

However, it is worth noting that 42% of the bonds in this fund are not ranked, so take the average quality level with a bit of caution.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, NHMAX is a load fund. It has an expense ratio of 0.76% compared to the category average of 0.87%. NHMAX is actually cheaper than its peers when you consider factors like cost.

Investors need to be aware that with this product, the minimum initial investment is $3,000; each subsequent investment needs to be at least $100.

Bottom Line

Overall, Nuveen High Yield Municipals Bond A has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Nuveen High Yield Municipals Bond A looks like a good potential choice for investors right now.

Don't stop here for your research on Muni - Bonds funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare NHMAX to its peers as well for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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