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ETF Specialist

Broad Muni-Bond Exposure at a Modest Fee

This ETF is a solid option for comprehensive exposure to the investment-grade municipal-bond market.

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 IShares National Muni Bond (MUB) provides representative exposure to the investment-grade, tax-exempt U.S. municipal-bond market at an attractive price. It efficiently tracks the S&P National AMT-Free Municipal Bond Index and enjoys a sustainable cost advantage over its peers. But its market-cap-weighting approach leads to a geographically concentrated portfolio, exposing the fund to state-specific risks. And there is an even cheaper alternative tracking the same index. That said, this is still a solid offering that earns a Morningstar Analyst Rating of Bronze.

Because the fund weights its holdings by the amount of outstanding debt, the portfolio skews to the most-indebted regions. As a result, negative regional events, such as Detroit’s bankruptcy (2013) and Hurricane Sandy (2012), can have an outsize impact on the fund’s performance. At the end of December 2016, the fund had greater exposure to California and New York than its municipal national intermediate Morningstar Category peers.

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