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ETF Specialist

A Solid Choice for Broad Exposure to the U.S. Muni Market

This fund is the largest and most-liquid municipal-bond ETF.

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Because municipal-bond interest is exempt from federal taxes, municipal-bond funds are most appropriate for investors seeking tax-exempt income--particularly those in high tax brackets--and fit best in taxable accounts. IShares National AMT-Free Municipal Bond (MUB) offers exposure to U.S. investment-grade tax-exempt municipal bonds. It may be a suitable core holding for investors looking to diversify their bond portfolios and obtain some tax relief. The Barclays U.S. Aggregate Bond Index does not include municipal bonds, so the fund can act as a complement to an existing core bond allocation.

High-profile bankruptcy filings in Detroit, Michigan (2013), and Stockton, California (2012), and, more recently, the substantial financial stress in Puerto Rico and the state of Illinois have increased volatility in the municipal-bond market over the past several years. Widespread credit concerns have largely subsided, however, as fundamentals have improved across the muni market in 2014 and 2015. Importantly, the fund does not have exposure to Puerto Rico or Stockton, and minimal exposure to Detroit (0.02%), which reduces its actual credit-risk exposure.

Elizabeth Foos does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.