Muni-Bond ETF 101 | ETF Trends

How would you like to own a piece of your state or city, through an exchange traded fund (ETF) investment? The path to take is with a muni-bond ETF. Through a traditional municipal bond, you loan the state or city money for roads, hospitals etc., and over time you get back interest on your money.

Tom Anderson for Marketplace reports that the attraction of a muni-bond ETF investment is low costs. Average cost of a traditional muni-bond is 1%, while an ETF is 25 basis points. And with ETFs there is no manager to pay, nor do you need to pick a particular bond because the fund tracks an index of bonds. The average is around 60 bonds within an ETF basket. If you have one lump sum to invest they’re cost efficient, but if you want to put money in in increments, the fees could add up. Also, the muni-bond ETF should be held in a taxable account so that you get the biggest benefit from holding them.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.