“Municipal bonds, whether purchased individually or as part of an investment in a mutual fund, also provide investors with additional diversification during a still-uncertain market,”Chorlton said in the article. “Investors who allocate assets to municipal bonds from corporate bonds may mitigate credit risk because municipal bond defaults have historically been very low (municipalities have the power to simultaneously cut services and raise taxes to shore up their coffers, which helps decrease the likelihood of defaults).”
Investors can take a look at a broad muni bond ETF, like the iShares National AMT-Free Muni Bond ETF (NYSEArca: MUB), which has a 6.24 year effective duration, has a 2.05% 30-day SEC yield and a 3.62% tax equivalent 30-day SEC yield for those in the highest income bracket. [Investors Flocking to High Yield Muni ETFs]
Those who are more concerned about rate risk can go down the yield curve. For instance, the iShares Short-Term National AMT-Free Muni Bond ETF (NYSEArca: SUB) and SPDR Nuveen Barclays Short Term Municipal Bond ETF (NYSEArca: SHM) come with shorter durations at 1.94 years and 2.85 years, respectively. SUB has a 0.28% 30-day SEC yield or a 0.49% tax equivalent 30-day SEC yield, and SHM has a 0.57% 30-day SEC yield or a 1.01% tax equivalent 30-day SEC yield. [Muni Nation: Second-Quarter Muni Outlook]
For more information on the munis market, visit our municipal bonds category.