Broad Bond Exposure or Tax-Exempt Muni Income? BND vs. MUB
Written by Eric Trie for The Motley Fool -> Vanguard Total Bond Market ETF offers a lower expense ratio and higher dividend yield than iShares National Muni Bond ETF iShares National Muni Bond ETF has outperformed on a 1-year total return basis and has a smaller maximum drawdow
Vanguard Total Bond Market ETF offers a lower expense ratio and higher dividend yield than iShares National Muni Bond ETF
iShares National Muni Bond ETF has outperformed on a 1-year total return basis and has a smaller maximum drawdown over the last five years
iShares National Muni Bond ETF concentrates on tax-exempt municipal bonds while Vanguard Total Bond Market ETF tracks the broad taxable bond market
Vanguard Total Bond Market ETF (NASDAQ:BND) offers broad exposure to taxable investment-grade bonds at a lower cost, while iShares National Muni Bond ETF (NYSEMKT:MUB) focuses on tax-exempt income with historically lower volatility.
Fixed-income investors often choose between taxable and tax-exempt strategies to manage risk and income. This comparison evaluates how BND, a massive aggregate bond fund, matches up against MUB, a leading municipal bond fund, regarding costs, returns, and portfolio composition.
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
The Vanguard fund is the more affordable option with its 0.03% expense ratio. While its 4.00% dividend yield is higher than the 3.20% offered by the iShares fund, investors may want to consider the tax-exempt status of municipal bond payouts.
Vanguard Total Bond Market ETF (NASDAQ:BND) provides extensive exposure to the U.S. domestic, taxable, investment-grade fixed-income market. Its portfolio is highly diversified across 346 holdings, where no single position exceeds 0.48% of the total assets under management (AUM). It serves as a broad tool for portfolio diversification, primarily holding government and corporate bonds while excluding inflation-protected or tax-exempt securities.
