Why are muni funds taking a beating?

Other answer:

When interest rates are expected to increase, the price of existing bonds drops, so returns for those will be the same in relation to the lower price of the bond. That does not affect you much if you hold actual bonds to maturity, other than getting less than current interest rates.

But if you are in a bond "fund" or ETF and people pull their money out of the fund to buy rallying stocks, the fund has to sell bonds at an unfavorable price, driving the fund price down even more, leaving people still in the fund holding the empty bag. I learned that long ago during the Jimmy Carter years when I thought a bond fund was conservative and I was losing 2.5% per year for years in my 401k. But we did not have Internet access to our account then, so I did not know that until I got quarterly or annual reports.

Since then I diversified into other funds that did much better. And since I lost my job after 40 years I am mostly investing in ETF's, stocks, and options with the 401k transferred to IRA.

It's not just muni funds, but all longer duration bond funds. The election upset has changed expectations. The market is sorting out winners and losers, which usually takes a while.

Some winners so far: bank stocks, biotech, defense

Interest rates are going up. Value of lower interest bonds drops.

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