Municipal debt and bond-related exchange traded funds have been used as a relatively stable fixed-income stream for many investment portfolios. Since muni bond interest is exempt from federal taxes, muni ETFs are a good way for investors seeking tax-exempt income, especially those in higher tax brackets.

Due to its tax-exempt status, the asset category is also best utilized in taxable accounts.

The tax-exempt status also creates high demand for municipal bonds. Consequently, the perceived bond yields are typically lower than their taxable counterparts. For instance, the iShares National AMT-Free Muni Bond ETF NYSEArca: MUB , the largest muni-related ETF, has a 1.

Munis also help diversify fixed-income portfolios.

Investors who typically follow the Barclays U. Aggregate Bond Index will not have municipal bond exposure, so a muni bond ETF can complement core fixed-income positions. An Alternative Muni Bond ETF Strategy. As the economy continues to improve and employment expands, the growth in personal, corporate and sales tax will help bolster state finances.

iShares California Muni Bond ETF | CMF

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Muni Bond ETFs: The Diversified Option | ETF Trends

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