Top 3 Municipal Bond ETFs for Q2 2020

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Top 3 Municipal Bond ETFs for Q2 2020

Municipal bond exchange-traded funds (ETFs) provide investors with diversified access to the municipal bond market. In addition to the usual muni bond advantages of tax-free monthly income and returns, these ETFs generally provide broad exposure, including in their portfolio a variety of states issuing debt securities. All of these bonds are rated “investment grade” by Standard and Poor’s, indicating a relatively low degree of credit risk, which may be attractive to many investors in today’s hugely volatile and uncertain market. There are approximately 30 funds in the municipal bond ETF universe, not including leveraged and inverse funds.

The best municipal bond ETF for Q2 2020 is the Invesco VRDO Tax-Free Weekly ETF (PVI). Below, we take a closer look at the top 3 municipal bond ETFs in greater detail. All figures are as of March 25, 2020.

  • Performance over 1-Year: 1.3%
  • Expense Ratio: 0.25%
  • Annual Dividend Yield: 1.04%
  • 3-Month Average Daily Volume: 7,969
  • Assets Under Management: $51.1 million
  • Inception Date: Nov. 15, 2007
  • Issuing Company: Invesco

PVI provides exposure to the ultrashort side of maturities with a focus on Variable Rate Demand Obligations (VRDOs). VRDOs are reset every week, essentially eliminating interest rate risk and making PVI a popular choice among investors during volatile markets. PVI’s top holdings include VRDOS for Missouri; Houston, Texas; and Arizona.

  • Performance over 1-Year: 0.3%
  • Expense Ratio: 0.35%
  • Annual Dividend Yield: 1.66%
  • 3-Month Average Daily Volume: 34,431
  • Assets Under Management: $52.6 million
  • Inception Date: Nov. 1, 2018
  • Issuing Company: First Trust

FUMB invests at least 80% of its net assets in municipal debt securities paying interest, which is exempt from federal income taxes. It focuses on U.S. municipal debt with a duration of less than a year. This fund’s largest holdings include a cash component, accounting for 10.7% of assets invested; and bonds for Florida and Noblesville, Indiana.

  • Performance over 1-Year: -0.5%
  • Expense Ratio: 0.45%
  • Annual Dividend Yield: 2.34%
  • 3-Month Average Daily Volume: 31,374
  • Assets Under Management: $34.4 million
  • Inception Date: Nov. 1, 2018
  • Issuing Company: First Trust

The First Trust Short Duration Managed Municipal ETF is an actively managed fund consisting of U.S. municipal debt. This fund targets debt with a duration of 1 to 3 years and, like FUMB above, seeks tax-exempt income when possible. The top 3 holdings for FUMB include a cash component, accounting for 12.8% of assets; and bonds for the states of Massachusetts and California.