Boston — Roller coasters are usually found in amusements parks, but many investors riding the roller-coaster bond market lately have not been amused at all.
One group investing in bonds has survived the ride without feeling too dizzy -- the tax-exempt mutual funds investing in municipal bonds. These funds have raised their assets slightly, from $2.9 billion in 1980 to $3.1 billion at the end of last year, according to the United Mutual Fund Selector, a mutual fund newsletter.
Another mutual fund watcher, the Weisenberger Investment Companies Service, found that for the six-month period ending in late February the tax-exempt mutuals showed a 1 percent improvement in performance. While a 1 percent gain may seem modest, Weisenberger pointed out, it does reverse 17 months of negative performance by these funds. Of the 43 funds in this group, 27 showed positive six-month performances, the service said.
The top three of these 27 funds, says the Weisenberger report, were Vance Sanders Municipal Bond Fund, up 6.6 percent; SteinRoe Tax-Exempt Bond Fund, up 5 .5 percent; and Elfun Tax-Exempt Income Fund, up 4.8 percent.
Like any mutual fund, the ''muni mutuals'' pool investors' money to buy shares in a wide variety of bonds. In this case, they are buying the bonds of state and local governments. These managed funds can move in and out of the bonds as economic conditions change.
Similarly, demand for unmanaged unit investment trusts, which are packages of bonds held intact until the bonds mature, has also been high. Sales of these trusts, reports John Nuveen & Co., totaled $5.4 billion last year, up from $4.4 billion in 1980, and $3 billion in 1979.
''Short-term bond funds are selling better right now,'' said Ian MacKinnon, vice-president of the fixed income investment division at the Vanguard Group. Vanguard has five bond funds, Mr. MacKinnon said, and reflecting their concerns about ''the recent volatility in interest rates,'' investors have been favoring the firm's short-term fund.
The muni mutuals have also been selling well to the upper tax bracket trade. For people in higher brackets even a relatively modest yield can be the the same as a much higher return. In recent weeks, for instance, one fund, the Dreyfus Tax Exempt Bond Fund, was paying 10.86 percent. For someone in a 29 percent tax bracket (on a joint return, that would equal earnings from $24,600 to $29,900), this kind of interest would equal a taxable yield of 15.29 percent.
For a couple in a 39 percent bracket, earning between $35,200 and $45,800, that 10.86 percent tax-free return is equal to a taxable yield of 17.8 percent. (To find how similar yields are translated in a variety of tax brackets, see the accompanying table.)
Municipal bond funds have also been attractive to investors scared away from a declining stock market. ''People are being shell-shocked in the markets,'' says Paul Reed, editor of the Mutual Fund Selector. ''So they (municipal bond funds) are perceived as a safe harbor.''
Part of the reason for this, Mr. Reed notes, is that ''in the first part of the year, this is the only fund group that has been in the plus column for overall performance.''
Like any investment with a rosy appearance, there are some thorns investors need to be aware of. For instance, Vanguard's Mr. MacKinnon says, ''There is a strong temptation among portfolio managers to buy lower-grade bonds paying higher yields in an effort to keep interest rates up.'' This temptation is particularly strong when interest rates are dropping and a fund wants to keep ahead of the competition.
A fund, for instance, may trade some its AAA-rated bonds for A- or BBB-rated bonds paying higher interest to compensate for added risk.
The drawback, however, is that while the interest may be high, the overall value of the portfolio is dropping. And if the investor wants to get out of the fund, MacKinnon said, ''he may not be able to get back 100 cents of every dollar invested.''
While a certain amount of this - known as ''sector swapping'' - is done by all the funds, a good portfolio manager can avoid getting into trouble with it if he keeps in mind the dual goals of ''maintenance of income and protection of principal,'' Mr. MacKinnon says.
Critics of the funds also argue that because they are so large, municipal bond funds do not have the flexibility to switch into different types of bonds quickly and prudently when economic conditions change.
This can be a problem, Mr. MacKinnon admitted. But investors can protect themselves, he added, by purchasing shares in a fund that is part of a large mutual fund ''family,'' and switching their money from one fund to another when the need arises. Some mutual fund companies, including Vanguard, even have several different muni-funds investing in a variety of long and short-term bonds.
Comparing tax-exempt and taxable yields To equal a tax exempt yield of Taxable income: 10.50% 11% 11.50% Joint Single Tax A taxable investment would return return bracket have to earn a yield of: $18,000--23,500 31% 15.22 15.94 16.67 $23,500--28,800 35% 16.15 16.92 17.69 $28,800--34,100 40% 17.50 18.33 19.17 Dreyfus Service Corporation