A Tax-Free Bond Fund is a mutual fund that seeks to provide consistent prudent portfolio management. The Maryland Tax-Free Bond Fund has the highest level of income exempt from federal, Maryland state, and local income taxes by investing primarily in investment-grade Maryland Municipal Bonds. This bond fund has high risk, high returns, and little, if any tax implications.

The main risk one may have to face when investing in a tax-free bond fund is t he interest rate risk, credit risks, non-diversified risks, money fund risk, graphical risk, political risk, and derivatives risks. The bond price that accompanies a rise in overall level of interest rates decline; therefore, the longer maturity of the fund the greater the interest rate risk. One may be taking the chance of their credit rating being downgraded or default, which potentially can reduce the fund’s income level and share price. Because the fund’s non-diversified, it can invest more of its assets in a smaller number of issuers, ultimately, resulting in a greater potential loss. The Maryland Tax-Free Bond Fund is a single state investment that is less diversified; therefore it has a greater exposure to adverse economic and political changes within Maryland. From a political stand-point, one risk municipal bond prices to fall due to significant restructuring; one reduces the advantage of owing municipals because of lower income tax rates. Bond funds especially use future, swaps, and other derivatives that are exposed to additional volatility and potential losses. Because tax –free bond funds are money funds, they are not insured or guaranteed by a government agency; the income level of the fund will fluctuate with the change market conditions and interest rate levels, and bonds share prices will also fluctuate. Basically, when one sells their shares, money will be lost.

The tax-free bond fund returns are