The advent of exchange-traded funds (ETFs) has given fixed income investors access to corners of the bond market that were once only accessible to the wealthy. With municipal bond ETFs, investors can now reap the benefits of these local government debt issues, such as quality and less susceptibility to rate fluctuations.
“The perception that muni bonds are an appropriate investment vehicle solely for the wealthy was illustrated by a recently conducted national research study from BNY Mellon Investment Management that found nearly half (44%) of Americans surveyed believe muni bonds are primarily intended only for high-net worth or ultra-high-net-worth individuals,” an article in Financial Advisor noted.
“The ‘munis are only for the wealthy’ misconception resonated even more so with younger investors and those with fewer assets,” the article added “For example, 47% of those with investible assets of less than $50,000 (including retirement savings, not including value of primary residence) believe munis are intended as an asset only for the wealthy compared with just 39% of those with over one million dollars in investments. And 54% of millennials (defined by the study as those between the ages of 21-38) held the same belief vs. 35% of their baby boomer (defined by the study as those between the ages of 55-73) counterparts.”
Enter ETFs and now anyone, irrespective of net worth, can get in on the municipal bond market. Here are three municipal bond funds to consider:
- Franklin Liberty Municipal Bond ETF (NYSEArca: FLMB): seeks a high level of current income that is exempt from federal income taxes. Although the fund tries to invest all of its assets in tax-free securities, it is possible that up to 20% of the fund’s net assets may be in securities that pay interest that may be subject to the federal alternative minimum tax and, although not anticipated, in securities that pay interest subject to other federal or state income taxes.
- VanEck Vectors AMT-Free Long Municipal Index ETF (BATS: MLN): seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Bloomberg Barclays AMT-Free Long Continuous Municipal Index. The index is comprised of publicly traded municipal bonds that cover the U.S. dollar-denominated long-term tax-exempt bond market.
- Xtrackers Municipal Infrastructure Revenue Bond ETF (NYSEArca: RVNU): seeks investment results that correspond generally to the performance, before fees and expenses, of the Solactive Municipal Infrastructure Revenue Bond Index. The fund will invest at least 80% of its total assets (but typically far more) in instruments that comprise the underlying index. The underlying index is comprised of tax-exempt municipal securities issued by states, cities, counties, districts, their respective agencies, and other tax-exempt issuers.
For more relative market trends, visit ETF Trends.