Income Investing: First Muni Bond ETF Debuts

Ulli Uncategorized 2 Comments

On September 10, Barclays Global Investors debuted the first ETF to track the U.S. municipal bond market, which will provide investors a different way to invest in municipal issues as reported by Bloomberg.

My preference for investors with after-tax money wishing to generate income has always been the use of closed end muni funds, the benefits which have been detailed in my free e-book. This will offer investors another opportunity, and I will track pricing and yield of the new iShares S&P; National Municipal Bond Fund (MUB) to see how it compares to old fashioned muni CEFs.

One obvious advantage is the instant diversification this $294 million ETF would provide. Income is distributed monthly and throughout the day pricing provides more transparency than individual bonds. The expense ratio is pegged to be $25 for every $10,000 of assets.

Not to be outdone, State Street announced a similar offering to be available around September 13. Another player in that field is the SPDR Lehman Municial Bond ETF, with the ticker symbol TFI which will track the three-year old Lehman Brothers Municipal Managed Money Index.

With other offerings in the pipeline, it is the individual investor who will benefit by having more and better choices, which is a development I applaud.

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Comments 2

  1. So would this be something that would protect your downside, or provide a benefit to your tax position ?
    Would this be a retirement fund holding or an individual investment account holding ?
    What percentage of either would be a recommending ?

  2. It has nothing to do with protection to the downside. It’s simply antother tool to use for those who are looking to generate tax-free income.
    There is no recommendation as to how much to invest in this fund, it strictly depends on the individual.


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