Concerned about a Rate Hike? Stay on the Low End of the Yield Curve

Author: USGI
Date Posted: March 25, 2015 Read time: 5 min

Money Morning’s Jim Bach invites Director of Research John Derrick, portfolio manager of our Near-Term Tax Free Fund (NEARX), to share his thoughts on how investors concerned about potential interest rate volatility can use municipal bonds to meet their long-term financial goals. Despite munis’ reputation as an “overlooked asset class,” John says that over time they have tended to perform “phenomenally”—especially when they’re on the low end of the yield curve, or have a short-term maturity.

Besides offering income, municipal bonds have granted investors with relative stability. Their returns are also tax-free at the federal level and often at the state level.

To read John’s full comments and find out why Money Morning Chief Investment Strategist Keith Fitz-Gerald has written about NEARX’s history of no drama, click here.

Also be sure to check out our latest infographic, which highlights the benefits of including short-term munis in your portfolio:

Why Investing in Short-Term Municipal Bonds Makes Sense Now

Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.

Total Annualized Returns as of 12/31/2014
  One-Year Five-Year Ten-Year Gross Expense Ratio Expense Cap
Near-Term Tax Free Fund 3.07% 2.64% 2.98% 1.21% 0.45%
S&P 500 Index 13.69% 15.45% 7.67% n/a n/a

Expense ratio as stated in the most recent prospectus. The expense cap is a contractual limit through December 31, 2015, for the Near-Term Tax Free Fund, on total fund operating expenses (exclusive of acquired fund fees and expenses, extraordinary expenses, taxes, brokerage commissions and interest). Performance data quoted above is historical. Past performance is no guarantee of future results. Results reflect the reinvestment of dividends and other earnings. For a portion of periods, the fund had expense limitations, without which returns would have been lower. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance does not include the effect of any direct fees described in the fund’s prospectus which, if applicable, would lower your total returns. Performance quoted for periods of one year or less is cumulative and not annualized. Obtain performance data current to the most recent month-end at www.usfunds.com or 1-800-US-FUNDS.

Morningstar Rating

Overall/173
3-Year/173
5-Year/142
10-Year/103

Morningstar ratings based on risk-adjusted return and number of funds
Category: Municipal National Short-term funds
Through: 12/31/2014

Morningstar Ratings are based on risk-adjusted return. The Morningstar Rating for a fund is derived from a weighted-average of the performance figures associated with its three-, five- and ten-year (if applicable) Morningstar Rating metrics. Past performance does not guarantee future results. For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating? based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund’s monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.)

The chart illustrates the performance of a hypothetical $1,000,000 investment made in the fund during the depicted time frame. Figures include reinvestment of capital gains and dividends, but the performance does not include the effect of any direct fees described in the fund’s prospectus which, if applicable, would lower your total returns. Past performance doesn’t guarantee future results, and you shouldn’t reasonably expect the fund to keep pace with an index of equity securities like the S&P 500 over the next 10, 15 and 20 years.

Bond funds are subject to interest-rate risk; their value declines as interest rates rise. Though the Near-Term Tax Free Fund seeks minimal fluctuations in share price, it is subject to the risk that the credit quality of a portfolio holding could decline, as well as risk related to changes in the economic conditions of a state, region or issuer. These risks could cause the fund’s share price to decline. Tax-exempt income is federal income tax free. A portion of this income may be subject to state and local taxes and at times the alternative minimum tax. The Near-Term Tax Free Fund may invest up to 20% of its assets in securities that pay taxable interest. Income or fund distributions attributable to capital gains are usually subject to both state and federal income taxes.

The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies.

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