- Tax Exempt Income: Income generally exempt from federal taxes and the Alternative Minimum Tax (AMT).
- Targeted Interest Rate Risk: Designed to track an index of short-duration municipal bonds.
- Quality: Investment-grade index constituents with high overall credit quality.
The municipal bond space is already seeing heightened interest thanks to a Joe Biden presidential victory, which has debt market analysts forecasting more gains for municipal bonds due to future tax hikes. ETF investors looking to get on the short end of the yield curve for munis can look at funds like the VanEck Vectors Short Muni ETF (SMB).
The fund seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Bloomberg Barclays AMT-Free Short Continuous Municipal Index. The fund normally invests at least 80% of its total assets in fixed income securities that comprise the index.
The index is comprised of publicly traded municipal bonds that cover the U.S. dollar denominated short-term tax-exempt bond market. ETF investors can get access to short duration, quality munis with SMB by way of a low expense ratio of 0.20%.
Overall, SMB gives investors access to:
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