Uncertainty and volatility are not conditions that lead to high confidence levels in equity investing. The major concerns of low commodity prices, the Chinese economy, interest rates and global debt levels haven’t disappeared. They’re just taking a breather. This doesn’t mean one or more of these risks will become downside catalysts, but they shouldn’t be ignored. The beauty of investing in municipal bonds is that they tend to move higher over the long haul regardless of what happens with equities.

Municipal bonds are issued by state and local governments to fund projects including schools, bridges, water, healthcare, highways and more. The interest accrued from municipal bonds is exempt from federal, state and local taxes – as long as you keep your investment local. However, if you want liquidity to go along with your municipal bond investment, consider municipal bond exchange-traded funds (ETFs). (For more, see: Why You Should Invest In Municipal Bond ETFs.)

There are 21 muni bond ETFs available to investors. Below are the six most liquid.

Muni Bond ETF Basics

Here is a basic look at what each municipal bond ETF covers, followed by key metric comparisons.

  • The iShares National AMT-Free Muni Bond ETF (MUB). Purpose: Tracks the S&P National AMT-Free Municipal Bond Index, which tracks the investment-grade segment of the U.S. bond market. (For more, see: MUB: iShares National AMT-Free Muni Bond ETF.)
  • The SPDR Nuveen Barclays Short-Term Municipal Bond ETF (SHM). Purpose: Tracks the Barclays Managed Money Municipal Short Term Index, which tracks the short-term tax-exempt muni bond market.
  • The SPDR Nuveen Barclays Municipal Bond ETF (TFI). Purpose: Tracks the Barclays Municipal Managed Money Index, which tracks the long-term tax-exempt bond market. It includes state and local general obligation bonds, revenue bonds, pre-refunding bonds and insured bonds. (For more, see: Top 4 Municipal Bond ETFs.)
  • The Market Vectors AMT-Free Intermediate Muni ETF (ITM). Purpose: Tracks the Barclays AMT-Free Intermediate Continuous Municipal Index, which tracks the publicly-traded muni bonds that cover the U.S. denominated intermediate-term tax-exempt bond market.
  • The PowerShares National AMT-Free Municipal Bond Portfolio ETF (PZA). Purpose: Tracks the BofA Merrill Lynch National Long Term Care Plus Municipal Securities Index, which is composed of U.S. dollar-denominated, investment-grade, tax-exempt debt publicly issued by U.S. states and territories in the domestic market that have at least 15 years to final maturity.
  • The Market Vectors High-Yield Municipal ETF (HYD). Purpose: Aims to replicate the performance of the Barclays Municipal Custom High Yield Composite Index. (For more, see: Top 3 High-Yield Muni Bond ETFs.)

Muni Bond ETF Key Metrics


Net Assets

Average Daily Trading Volume

Expense Ratio

1-Year Performance

Dividend Yield


$6.43 billion






$2.90 billion






$1.78 billion






$1.43 billion






$1.14 billion






$1.99 billion





Remember that the higher the yield, the higher the risk. (For more, see: The Top 10 High-Grade Bond ETFs for 2016.)

The Bottom Line

The above muni bond ETFs are worth looking into. This is especially the case if you’re an investor of the slow and steady variety. These muni bond ETFs will not make you rich overnight, but they should help you reduce risk in an uncertain economic environment while also providing liquidity. Remember, municipal bonds typically tend to move higher over the long haul regardless of how equities perform. (For more, see: The Top 5 Municipal Bond ETFs for 2016.)

Dan Moskowitz does not have any positions in MUB, SHM, TFI, ITM, PZA or HYD. 

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