For example, the RBS US Large Cap Trendpilot ETN (TRND) tracks the RBS US Large Cap Trendpilot Index — an index that offers the S&P 500® Total Return Index in a long-term technical uptrend or the yield on 3-month U.S. Treasury bills in a stock downtrend. In essence, one has exposure to the S&P 500 when the price of the S&P 500 Total Return Index closes above a 200-day moving average for five consecutive sessions. If the price closes below the 200-day for five sessions, exposure moves into cash via T-bills.
What’s important to recognize here is that, while trend-following is often easy to implement by one’s self using SPDR S&P 500 (SPY) and Vanguard Short-Term Bond (BSV), moves could incur trading fees, taxes and potential penalties. In contrast, TRND is an exchange-traded note; TRND does not actually hold the underlying stock securities, so there are no tax liabilities for the shift from stocks to cash. While the strategy of trend-following is not for everyone, one can see how TRND avoided capital gains taxes in the 2011 euro-zone crisis when the ETF called for a shift to short-term Treasuries.
Whereas TRND is a tax saver on capital gains, muni bond ETFs are savers on cap gains as well as income. Consider a fund like Market Vectors Long-Term Muni (MLN) over the last six years. Investors have 54% in total returns, none of which are taxable until sold. And since only 1/3 of those gains are attributable to price growth, only 1/3 would be subject to long-term cap gains if the position were closed out.
There are other popular muni bond ETFs to consider. One of the premier year-over-year performers has been Market Vectors High Yield Muni (HYD), chiming in with approximately 12.5%.