Muni ETFs And Political Risk
Because of the very broad diversification, investors in muni ETFs should be much less exposed to political risk than investors in individual bonds. In addition, the index-based portfolio management methodology means that issuers with increasing political risk would likely become ineligible for inclusion in most funds before there is an actual default.
Investors who remain concerned about political risk can take advantage of the daily transparency of ETFs to easily review all of the holdings in their funds.
Possible core holdings could be any of the investment-grade general market (nonstate-specific) muni ETFs with an intermediate average duration (approximately 5.0 to 10.0), such as:
- VanEck Vectors AMT-Free Long Municipal Index ETF (MLN | B-94)
- Deutsche X-trackers Municipal Infrastructure Revenue Bond ETF (RVNU | D-73)
- VanEck Vectors AMT-Free Intermediate Municipal Index ETF (ITM | B-94)
- SPDR Nuveen Barclays Municipal Bond ETF (TFI | B-62)
- iShares National Muni Bond ETF (MUB | B-79)
- Columbia Intermediate Municipal Bond ETF (GMMB | D-46)
- Vanguard Tax-Exempt Bond Index Fund ETF (VTEB | D)
- PowerShares National AMT-Free Municipal Bond Portfolio (PZA | B-59)
- First Trust Managed Municipal ETF (FMB)
For more on fund selection, read my recent piece, “How to Pick the Right Muni Bond ETF.”
Patrick Luby is a fixed-income portfolio strategy specialist and the author of www.IncomeInvestorPerspectives.com. He has helped many of the industry’s best advisors and their investor clients understand and navigate the municipal bond market for many years. This is not a recommendation to buy, sell or hold any of the securities or strategies mentioned. The author does not provide investment, tax, legal or accounting advice. Investors should consult with their own advisor and fully understand their own situation when considering changes to their strategy, tactics or individual investments. Information is based on sources believed to be reliable, but its accuracy is not guaranteed. Additional information is available upon request.