Why an ETF May Make Sense for Munis Exposure | ETF Trends

When looking into the municipal bond market, fixed-income investors may be better off with a muni bond exchange traded fund, instead of trading individual debt securities.

Brokers typically mark up the price of municipal bonds they sell to individual investors, writes Aaron Kuriloff for the Wall Street Journal.

However, the markups that funds pay are typically lower since fund companies buy in bulk and are more familiar with the market.

Consequently, Christine Benz, director of personal finance at investment researcher Morningstar, argues that most people should use munis-related bond funds, adding that reducing fees is “absolutely crucial” to efficiently maximize gains from a low-yielding asset like munis.

For instance, the iShares National AMT-Free Muni Bond ETF (NYSEArca: MUB) has a 0.25% expense ratio and a 1.62% 30-day SEC yield and the iShares Short-Term National AMT-Free Muni Bond ETF (NYSEArca: SUB) has a 0.25% expense ratio and a 0.31% expense ratio. [Muni Bond ETFs: Considerations & Factors to Watch]

The SPDR Nuveen Barclays Municipal Bond ETF (NYSEArca: TFI) has a 0.23% expense ratio and a 1.84% 30-day SEC yield, and the SPDR Nuveen Barclays Short Term Municipal Bond ETF (NYSEArca: SHM) has a 0.20% expense ratio and a 0.54% 30-day SEC yield.