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USSTX -
USAA Tax Exempt Short-Term Fund
| USSTX Invests In: Short-term municipal bonds. Key Statistic: Low average duration. |
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Lately, conservative investors are trying to find the most "safe" investment with the best yield. This can be very frustrating with bank CD and money market rates at 25-year lows ( bankrate.com as of 1/25/10).
So, how can conservative investors find a reasonable investment with a strong yield?
One great alternative to bank CD's and money markets is the USAA Tax Exempt Short-Term mutual fund. USSTX invests in short-term municipal bonds. This strategy has three major advantages:
- Municipal bonds are issued by local or state government agencies, which generally carry less risk than a bond issued by a private company.
- Short-term bonds are generally less affected by interest rates than long-term bonds. USSTX has a very low duration. So when interest rates go up, investors should not worry about the stability of their returns.
- The earnings on this fund are usually tax-free. That means dividends are free from federal income tax and possibly state taxes, depending on your tax situation.
USAA's bond funds generally keep their expenses low and score great performance ratings. The Tax Exempt Short-Term fund is no exception. In fact, the fund's low standard deviation, low beta, and low expenses are all characteristics of a well-budgeted mutual fund.
Clifford A. Gladson is the lead portfolio manager with over 10 years of experience managing investments. He has earned excellent ratings as a fund manager with his experience investing in municipal bonds.
The USAA Tax Exempt Short-Term Fund also performed well against other short-term bond funds when comparing risk-adjusted returns. The fund squeezed as much tax-free performance as it can from its short term munibonds, especially considering the low risk.
Most investors use this type of fund as a tax-free alternative to a CD or savings account, and so far investors in this fund have not been disappointed.
Fund information is provided by Morningstar.
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