The Fed has largely let inflation run higher for the time being. If you aren't earning 3-4% a year, you're guaranteed to lose purchasing power by the time you call in your capital. Why do that? asks Todd Shaver, editor of Bull Market Report.

With a well-diversified portfolio of US municipal bonds, the Invesco Municipal Trust (VKQ), along with being exempt from U.S. federal taxes, comes with a perfect record of capital preservation for those seeking secure current income without having to compromise on yields.

The municipal bond market continued to experience positive returns despite the pandemic that forced most cities across the US into a lockdown.

With numerous coronavirus aid and relief programs, and the Municipal Liquidity Facility by the Federal Reserve, instilled further confidence among investors, looking for alternatives to the equity markets that were in turmoil during the 1st half of last year.

Municipal bonds have a long history of absolutely no defaults. Even though speculations and downgrades do have an impact on valuations, the interest and principal payments will stay on-course irrespective of broader market conditions.

The Invesco Municipal Trust uses leverage to magnify returns for investors, which can also magnify declines in the prices of securities held. However, for long term common shareholders this can bring in additional income, despite increased volatility. Investors looking for yields and current income need not be concerned with the volatility.

The trust is, however, significantly vulnerable to interest rate risks, especially the low-interest rate environment at the moment.

How this plays out with the demand and supply for individual securities held by the trust, along with the direction, speed and magnitude of interest rate changes is to be seen, however, here again, it's the volatility and liquidity that stand to be impacted.

If you’re after high yields with a significantly low-risk profile, the Invesco Municipal Trust is the perfect place to park your funds. We expect it to reach out Target Price of $15 shortly, and our Sell Price remains at $10.

The Nuveen AMT-Free Municipal Credit Fund (NVG) is an actively managed leveraged investment fund that provides tax-free income to investors, along with capital appreciation, by deploying capital in underrated or undervalued municipal sectors.

Like most municipal bonds and funds, NVG experienced a major sell-off during the first few months of 2020, but managed to generate positive returns for the 12 months, mainly owing to increased government stimulus and financial aid for local governments.

The fund uses leverage to magnify investor earnings, mainly by borrowing at short term rates and investing in long-term bonds with higher interest rates. This can, however, magnify either positive or negative impacts of the net asset value of the underlying securities.

Given the high levels of leverage the fund uses, it remains vulnerable to interest rate fluctuations, especially the low-interest rates at the moment, but here again, the main impacts are short term volatilities and liquidity issues, but the company has rewarded long term investors with consistent dividends over the years with shrewd financial management.

The fund invests mainly in municipal bonds, which are known to be very secure, with rare instances of default, making it a secure investment for those seeking to preserve capital.

The fund has strong and experienced management dedicated towards driving returns for investors. Given their reputation and track record, we continue to remain invested in this fund with a Target Price of $19, and Sell Price at $14.

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