Does MUB's Tax Exemptions Give It the Edge Over IEI?

Offering vulnerability to the fixed-income market, the iShares National Muni Bond ETF (NYSEMKT:MUB) and iShares 3-7 Year Treasury Bond ETF (NASDAQ:IEI) some person a beardown portfolio of authorities bonds. This examination highlights however each money stacks up connected cost, yield, performance, and risk.

Beta measures terms volatility comparative to the S&P 500; beta is calculated from five-year play returns. The 1-yr instrumentality represents full instrumentality implicit the trailing 12 months.

IEI has a higher yearly interest but delivers a modestly higher output and one-year instrumentality than MUB. But due to the fact that MUB holds implicit 70 times much assets successful its portfolio, it’s a broader concern with a higher AUM.

IEI holds 87 positions focused exclusively connected U.S. Treasury bonds that mature successful 3 to 7 years, providing axenic authorities vulnerability with minimal recognition risk. The money is astir 2 decades aged and holds AA-rated bonds, the second-best rating.

MUB spreads its assets crossed much than 6,000 investment-grade municipal bonds, with astir of its holdings successful bonds issued by authorities and section governments, dissimilar IEI, which focuses much connected federally issued bonds. Interest earned from this ETF is exempt from U.S. income taxation and the Alternative Minimum Tax (AMT).

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Over the past 12 months and passim its existence, IEI’s terms has performed amended and with little risk, with 100% of its holdings being federally-backed bonds. However, 1 can’t disregard MUB’s taxation exemptions.

While AMT taxes mostly use to high-income investors, not having to wage income taxation connected involvement means investors bash not person to wage the IRS connected the involvement they earn. However, the ETF is not exempt from authorities taxes, truthful investors should cheque with their section authorities to spot however taxes apply.

Another imaginable vantage for MUB is that, by design, it should beryllium much volatile due to the fact that it holds nary national bonds and consists of lower-rated assets than IEI.

This comes with risk, arsenic little ratings summation the likelihood of default by enslaved issuers. But if investors are consenting to instrumentality connected the risk, the accrued volatility and taxation exemptions whitethorn marque MUB an enactment to consider.

Before you bargain banal successful iShares Trust - iShares 3-7 Year Treasury Bond ETF, see this: