! Seeking Tax-Free Income From Closed-End Funds
John Deysher is president and portfolio manager of the Pinnacle Value Fund, a diversified, SEC-registered mutual fund specializing in the securities of small and micro-cap firms. He is a CFA charterholder and has managed equity portfolios for over 30 years. He lives and works in New York City and may be reached at deysher@pinnaclevaluefund.com.
Michael Walters is an analyst with the Pinnacle Value Fund, a diversified, SEC-registered mutual fund specializing in the securities of small- and micro-cap companies. He is a CFA charterholder, and he lives and works in New York City.


Joseph from WA posted over 6 years ago:

I have owned several tax free closed end bond funds all of which are currently below purchase price ranging from 5% to 20%. Although the income averages around 6%, they do fluctuate rapidly at times. I'm concerned that rising interest rates which appear inevitable may cause further declines in NAV.

I have been slowly consolidating these holdings as they ecompass approximaely 65% of our total assets.

Mark from NY posted over 6 years ago:

Closed end funds can be an excellent income producing vehicle, but you should always take the time to perform your due diligence....remember you are never married to any fund.

Tyler from CA posted over 6 years ago:

Thanks for the article; I had not heard of the leverage in closed end funds having the effect of lengthening the bond duration. It makes sense and will help me next time I look at closed end funds.

It would have been helpful to include some explanation of how the AMT relates to muni income--with some funds being AMT free.

Michael from CA posted over 6 years ago:

I would also like to hear about which ETFs and CEFs avoid AMT.

Charles from DC posted over 6 years ago:

How do you calculate the change in duration due to leverage?

Joseph from KS posted over 6 years ago:

Why would anyone want to purchase muni bonds through a fund?

Bob from Maine posted over 4 years ago:

Thanks for an informative article. Been into single state (my own) individual bonds with great success until they started getting called the last couple of years. I find it difficult to find munis with no call provisions. I may just have to go national.

Sridhar from CA posted over 4 years ago:

I purchased MUE recently and already down by 5%. Should I buy more to average it should I cut loss and exit? Tomorrow is FOMC meeting and not sure of short term and long term impact on MUE.

Please advice. Thanks.

DAVE from WASHINGTON posted over 4 years ago:

With the uncertainty of the fiscal policy under the Obama Administration Municipal bonds are likely to eventually loose their tax free status. The great society as proposed by Obama need a greater and greater source of income. All tax free binds are fair game. Remember this is a president who pledged NO NEW TAXES. We are no seeing a subtle 17% raise in every persons' taxes.

Charles Rotblut from IL posted over 4 years ago:

Hi Sridhar,

We cannot give out personalized investment advice.

All bond funds are susceptible to downward moves over the short-term when interest rates rise. But, the timing and magnitude of interest rate changes is unknown and bond funds will experience different return characteristics than stocks over the long-term, giving you diversification benefits.


Brenda from Illinois posted over 2 years ago:

I was thinking about making an investment in a short term municipal bond fund. Is this a good time to make this investment or should I wait to see what is going to happen with interest rates?

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