New Jersey municipal bond mutual funds provide exposure to municipal bonds of issuers in New Jersey. By design, New Jersey municipal bond mutual funds provide federal tax-exempt and New Jersey state tax-exempt income, while preserving capital, to investors residing in New Jersey. This type of mutual fund generally invests in investment-grade municipal bonds, and therefore, carries a low degree of credit risk.

New Jersey municipal bond funds offer steady tax-exempt monthly income with a low to moderate degree of price fluctuation, which is appealing to long-term, high-income and high-net-worth investors. However, New Jersey municipal bond mutual funds typically invest in intermediate- and long-term bonds, and therefore, may carry a moderate to high degree of interest rate risk. Additionally, the risks inherent to New Jersey municipal bond funds include call risk, state-specific risk, extension risk, income risk, liquidity risk and nondiversification risk.

Vanguard New Jersey Long-Term Tax-Exempt Fund Investor Class A Shares

Issued on Feb. 3, 1988, with the sponsorship of Vanguard, the Vanguard New Jersey Long-Term Tax-Exempt Fund Investor Class A Shares provides exposure to the New Jersey municipal bond market by investing a substantial amount of its net assets in debt securities exempt from New Jersey state and federal taxes. As one expects from a Vanguard fund, VNJTX charges an expense ratio of 0.20%, which is 78% lower than the average expense ratio of New Jersey municipal bond funds with similar holdings. As of June 30, 2015, VNJTX has generated an average annual return of 5.98% since its inception.

VNJTX normally invests 80% of its total net assets in high-quality municipal bonds issued by New Jersey local governments, and state and regional governmental and public financing authorities. As of July 31, 2015, the fund holds 480 bonds in its portfolio, which is heavily weighted toward medium- to long-term New Jersey municipal bonds.

VNJTX has a yield to maturity of 2.90%; an average coupon of 4.60%; an average stated maturity of 14.70 years; and an average effective duration of 6.40 years. To compensate for the fund's moderately high effective duration and interest rate risk, it offers an attractive 30-day SEC yield of 2.94%, as of Sept. 8, 2015.

Based on trailing three-year data, VNJTX has a standard deviation, or volatility, of 4.26%; an R-squared, against its benchmark index the Barclays New Jersey Municipal Bond Index, of 0.99; and a beta, against its benchmark index, of 1.06. In terms of modern portfolio theory, 99% of VNJTX's price fluctuations can be explained by price movements in its benchmark index over this period. Moreover, VNJTX is highly correlated to, but theoretically more volatile than, its benchmark index.

In terms of modern portfolio theory, VNJTX carries a moderate degree of risk and may be appropriate for investors with a long-term investment horizon. VNJTX is best suited for investors residing in New Jersey who are in high tax brackets seeking to generate tax-free monthly income.

Franklin New Jersey Tax-Free Income Class A Shares

Issued on May 12, 1988, by Franklin Templeton Investments, the Franklin New Jersey Tax-Free Income Class A Shares seeks to provide long-term exposure to the New Jersey municipal bond market. FRNJX is managed by Franklin Advisers, Inc., which charges a low expense ratio of 0.64% when compared to the average expense ratio of municipal front-load funds. As of July 31, 2015, FRNJX hold 162 bonds in its portfolio, which has total nets assets of $839.90 million, while all shares classes have amalgamated net assets of approximately $1.15 billion.

Under normal market conditions, FRNJX invests at least 80% of its portfolio in investment-grade municipal bonds tax-exempt from federal and New Jersey state income taxes. Although FRNJX aims to invest a substantial portion of its assets in tax-exempt debt securities, it may invest up to 20% of its assets in securities subject to the federal alternative minimum tax. Additionally, FRNJX may invest a maximum of 35% of its total net assets in municipal securities issued by U.S. territories.

As of July 31, 2015, FRNJX top geographic exposures are 82.24% New Jersey; 10.39% New York; 3.90% Puerto Rico; 2.87% Pennsylvania; and 0.60% Delaware. FRNJX has an average coupon rate of 5.21%; an average effective duration of 3.93 years; a portfolio turnover rate of 4.81%; and an average weighted maturity of 19 years. FRNJX's average effective duration indicates it carries a moderately low degree of interest rate risk, which is appealing to investors. Although the fund has a moderately low effective duration, it offers an enticing 30-day standardized SEC yield of 2.33%, as of Aug. 31, 2015.

Based on trailing three-year data, FRNJX experienced a moderate degree of volatility and underperformed its benchmark index, the Barclays Municipal Bond Index, by -2.23%. Due to its low returns and moderate degree of volatility, FRNJX may be considered as an intermediate- to long-term satellite holding in a well-diversified portfolio. The fund is best suited for high-income investors living in New Jersey seeking tax-free monthly income with a portfolio of municipal bonds diversified across many sectors.

Dreyfus New Jersey Municipal Bond Fund, Inc. Class A Shares

Launched on Nov. 6, 1987, by Dreyfus Investments, the Dreyfus New Jersey Municipal Bond Fund, Inc. Class A Shares aims to provide investors with a high level of income exempt from New Jersey and federal taxes. DRNJX is advised by The Dreyfus Corporation and charges an annual net expense ratio of 0.85%.

Like most New Jersey municipal bond mutual funds, DRNJX pursues its investment goal by normally investing at least 80% of its net assets in investment-grade municipal bonds exempt from federal and New Jersey state income taxes. DRNJX is heavily weighted toward bonds with remaining maturities greater than six years, and has an average effective duration of 4.90 years, as of July 31, 2015. To compensate for its moderately high effective duration, DRNJX offers a 30-day subsidized SEC yield of 2.12%, as of Sept. 9, 2015.

As of Aug. 31, 2015, based on trailing-three data, DRNJX has an average annual volatility of 4.40% and a beta, against its standard index the Barclays Municipal Bond Index, of 1.20. DRNJX experiences an average level of volatility when compared to the average standard deviation of municipal bond funds. Due to its lack of diversification across many states, DRNJX is theoretically 20% more volatile than its benchmark index. Therefore, DRNJX is best suited as a long-term, tactical holding in a diversified fixed-income portfolio. The fund is best suited for New Jersey investors with a moderately high degree of risk tolerance seeking to gain exposure to the New Jersey municipal bond market while receiving steady, tax-free monthly income.

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