Municipal Bond Fund Law and Legal Definition

Municipal bond fund is a mutual fund that invests in bonds issued by state, city, and/or local governments. The interest obtained from these bonds is passed through to shareholders and is generally free of federal income taxes and in some circumstances from the state and local taxes. This is also known as muni bond funds. The advantages of these funds are:

1. the buyer can invest a much smaller amount; and

2. the income is paid monthly rather than semi-annually.