MTBIX - MainStay Tax-Free Bond I

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MainStay Tax-Free Bond I (MTBIX)
Expense Ratio: 0.57%
Expected Lifetime Fees: $17,751.17

The MainStay Tax-Free Bond I fund (MTBIX) is a Muni National Long fund started on 12/21/2009 and has $571.00 million in assets under management. The current manager has been running MainStay Tax-Free Bond I since 03/24/2011. The fund is rated by Morningstar. This fund does not charge 12b-1 fees.

MarketRiders Prefers The Following ETF

iShares S&P National Municipal Bond (MUB)
Expense Ratio: 0.25%
Expected Lifetime Fees: $8,051.41

The iShares S&P National Municipal Bond (MUB) is an Exchange Traded Fund. It is a "basket" of securities that index the Muni National Long investment strategy and is an alternative to a Muni National Long mutual fund. Fees are very low compared to a comparable mutual fund like MainStay Tax-Free Bond I because computers automatically manage the stocks.

The Following Muni National Long Funds Have Lower Fees Than MainStay Tax-Free Bond I (MTBIX). Why are these metrics important?
Mutual Fund Name Ticker Symbol Turnover Assets (M) Annual Fees
AllianceBern Muni Income Natl Adv ALTVX 8.0% 1,000 0.45%
Columbia Tax-Exempt Z CTE1Z 11.0% 4,700 0.56%
Columbia Tax-Exempt Z CTEZX 11.0% 4,700 0.56%
Delaware Tax-Free USA Instl DTFIX 49.0% 649 0.56%
Dreyfus AMT-Free Muni Bond Z DRMBX 22.3% 535 0.45%
DWS Managed Municipal Bonds Instl SMLIX 24.0% 5,100 0.51%
DWS Managed Municipal Bonds S SCMBX 24.0% 5,100 0.56%
Eaton Vance National Municipal Income I EIHMX 18.0% 4,800 0.43%
Fidelity Advisor Municipal Income I FMPIX 8.0% 1,200 0.54%
Fidelity Municipal Income FHIGX 11.0% 6,400 0.46%
Fidelity Tax-Free Bond FTABX 8.0% 2,300 0.25%
Franklin Federal Tax-Free Income Adv FAFTX 14.1% 11,700 0.52%
Goldman Sachs Municipal Income Instl GSMTX 9.0% 615 0.44%
Invesco Municipal Bond Y AMBYX 18.0% 557 0.45%
Legg Mason WA Managed Municipals I SMMYX 14.0% 5,500 0.49%
Lord Abbett AMT Free Municipal Bond A LATAX 55.0% 132 0.55%
MFS Municipal Income A1 MMIDX 25.0% 2,000 0.52%
Northern Tax-Exempt NOTEX 174.1% 1,200 0.45%
PIMCO Municipal Bond Instl PFMIX 76.0% 576 0.44%
Pioneer AMT-Free Municipal Y PBYMX 14.0% 918 0.55%
Putnam Tax Exempt Income Y PTEYX 9.0% 1,200 0.53%
T. Rowe Price Summit Municipal Income PRINX 21.0% 695 0.50%
T. Rowe Price Tax-Free Income Inv PRTAX 16.0% 2,900 0.52%
Vanguard Long-Term Tax-Exempt VWLTX 19.0% 7,900 0.20%
Vanguard Long-Term Tax-Exempt Adm VWLUX 19.0% 7,900 0.12%
Wells Fargo Advantage Municipal Bond I WMBIX 69.0% 2,800 0.50%

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Why Are These Metrics Important?

Turnover represents how much of a mutual fund's holdings are changed over the course of a year through buying and selling. Active mutual funds have an average turnover rate of about 85%, meaning that funds are turning over nearly all of their holdings every year. A high turnover means you could make lower returns because: 1) buying and selling stocks costs money through commissions and spreads and 2) the fund will distribute yearly capital gains which increases your taxes. Look for funds with turnover rates below 50%. For comparison, ETF turnover rates average around 10% or lower.

Generally, smaller funds do better than larger ones. The more assets in a mutual fund, the lower the chance that it will beat its index. Managers outperform an index by choosing stocks that are undervalued. In order to find these undervalued stocks, the manager has to know more than his competitors to develop an "edge." There are only a finite number of stocks a mutual fund manager can reasonably analyze and actively track to gain such a competitive edge. When the fund has more assets, the manager must analyze large companies because he needs to take larger positions. Large companies are more efficiently priced in the market and it becomes increasingly difficult to get an edge.