Mutual funds one answer for tax exemptions By JAMES W. PHILLIPS Personal Financial Planner EDS Financial Services In today's busy times, few people peo-ple have the time, the expertise or the interest to keep a careful eye on their investments. And as their in- lock in the high rates for as long as possible. Investors need to look at the yields of tax-exempt funds differently diffe-rently than they look at the yields of taxable funds. It is important to note that little or no federal income tax is paid on the income from tax-exempt tax-exempt funds. So, if you're in a high tax bracket, a six percent yield in a tax-exempt fund would equal approximately a nine percent yield in a taxable fund. Are tax-exempt funds right for you? The best way to find out is to consult your financial planner. comes increase, many families have a growing need for tax exemptions. exemp-tions. One answer could be a tax-exempt tax-exempt mutual fund. A tax-exempt mutual fund operates oper-ates much as other funds. A portfolio port-folio manager oversees the pooled investments of thousands of shareholders, share-holders, which are split among many investment options. The manager is responsible for determining deter-mining when to buy and sell the portfolio's holdings. With w tax-exempt fund, at least 80 percent and often up to 100 percent of the investment portfolio port-folio consists of municipal bonds. Municipal bonds are issued by state and local governments, and the interest is generally exempt from federal income taxes. There are two kinds of tax-exempt tax-exempt mutual funds. One seeks to maximize current income that is exempt from federal income taxes, without too much risk to the investment. invest-ment. The other, a high-yield tax-exempt tax-exempt fund, tries to provide a high return generally exempt from fed eral income taxes. (Tax-free money market funds also are available. avail-able. They invest in short-term municipal bonds and notes.) Portfolio managers who oversee tax-exempt mutual fund investments invest-ments keep several criteria in mind when investing the portfolio's assets. They keep a close watch on economic conditions in various areas of the country, looking at such factors as unemployment, economic trends, industrial diversification diver-sification and fiscal management. Portfolio managers also closely monitor tax law changes that have an impact on tax-exempt securities. secur-ities. Portfolio managers pay close attention to market changes, with new money being invested in the fund and securities maturing, they are frequently buying new issues. The types of bonds purchased are often determined by interest rate outlooks and the credit ratings of the individual bonds. For example, if it looks as if interest rates will fall, the manager may purchase bonds with longer maturities to