Vanguard Muni Bond ETF Investing Made Easy

Vanguard's Muni Bond ETFs are a low-cost way to invest in tax-exempt municipal bonds.

These ETFs provide broad diversification by investing in thousands of individual bonds from various issuers.

Investors can choose from a range of Vanguard Muni Bond ETFs, each with its own unique focus, such as short-term or long-term maturities.

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A Tax-Exempt Bond ETF is a type of investment that tracks the performance of municipal bonds issued by state or local governments.

These bonds are exempt from U.S. federal income taxes and the federal alternative minimum tax (AMT).

The Vanguard Tax-Exempt Bond ETF, specifically, is a passively managed fund that seeks to track the Standard & Poor's National AMT-Free Municipal Bond Index.

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Vanguard Tax-Exempt Bond ETF (VTEB) is a passively managed ETF that tracks the Standard & Poor's National AMT-Free Municipal Bond Index.

The ETF was launched in 2015 and seeks to track the performance of the investment-grade segment of the U.S. municipal bond market. The index includes municipal bonds from issuers that are primarily state or local governments or agencies whose interest is exempt from U.S. federal income taxes and the federal alternative minimum tax (AMT).

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VTEB has 10,096 securities in its portfolio, but the top 10 holdings constitute only 1.0% of the ETF’s assets. This suggests that the ETF is well-diversified and not heavily concentrated in any particular securities.

VTEB is classified as a diversified fund by the SEC, which means that it meets the requirements for diversification. The ETF has an investment selection and management process that is not focused on Environmental, Social, and Governance (ESG) factors.

Vanguard has also launched two active municipal bond ETFs, Vanguard Core Tax-Exempt Bond ETF (VCRM) and Vanguard Short Duration Tax-Exempt Bond ETF (VSDM). These ETFs are managed by Vanguard Fixed Income Group and offer diversified exposure to municipal bonds across sectors, states, and credit quality.

Vanguard Core Tax-Exempt Bond ETF has an expense ratio of 0.12%, which is lower than the average expense ratio for competing funds of 0.36%. This suggests that investors may be able to save money by investing in this ETF compared to other similar funds.

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Tax-Exempt Bond ETF Grades are a key consideration when evaluating the performance of a Tax-Exempt Bond ETF.

The Vanguard Tax-Exempt Bond ETF (VTEB) has earned a D grade over the past year, with a return of 1.4%, which is 0.6 percentage points lower than the category average.

The ETF has consistently underperformed the category over the past three years, earning a D grade, with a return of -0.4%. Over the past five years, VTEB has earned a D grade, with a return of 1.0%.

Here's a summary of VTEB's grades over different time periods:

VTEB's performance is not only reflected in its grades, but also in its returns compared to the Muni National Interm Avg. Over the past year, VTEB's return was 1.4%, while the Muni National Interm Avg. returned 1.9%.

The ETF's performance is also influenced by its Tax-Cost Ratio, which has been 0.0% over the past three years.

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VTEB has a relatively low portfolio turnover rate of 23%, which means it holds its assets for around 0.0 years. This is lower than the average portfolio turnover of 41% for the Muni National Interm category.

In December 2024, VTEB returned -1.2%, which earned it a grade of D, as it matched the average return of the Muni National Interm category.

VTEB's expenses and fees are worth noting, but the article doesn't provide specific details, so we can't say much about that.

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Vanguard launched the Vanguard Tax-Exempt Bond ETF (VTEB) in 2015.

The investment seeks to track the Standard & Poor's National AMT-Free Municipal Bond Index.

This index measures the performance of the investment-grade segment of the U.S. municipal bond market.

Municipal bonds from issuers that are primarily state or local governments or agencies are included in the index.

These issuers have interest that is exempt from U.S. federal income taxes and the federal alternative minimum tax (AMT).

At least 80% of the fund's assets will be invested in securities held in the index.

The fund's investments are selected through the sampling process.

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Vanguard has been a leader in the investment management industry for a long time, with a track record that's hard to beat.

Vanguard Fixed Income Group is one of the world's largest managers of bond mutual funds and ETFs, overseeing more than $2.4 trillion in fixed income assets globally.

The new ETFs, Vanguard Core Tax-Exempt Bond ETF and Vanguard Short Duration Tax-Exempt Bond ETF, are actively managed by experienced portfolio managers, Stephen McFee and Adam Ferguson, respectively.

With more than 20 years of experience at Vanguard, Stephen McFee has successfully managed several active mutual funds and indexed ETFs in their fixed income offerings.

Adam Ferguson has also had a successful career at Vanguard, managing municipal funds for over 20 years.

The new ETFs have an estimated expense ratio of 0.12%, significantly lower than the average expense ratio for competing funds.

These new ETFs are designed to provide diversified exposure to municipal bonds across sectors, states, and credit quality, with the potential to outperform their benchmarks over the long term.

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Vanguard Core Tax-Exempt Bond ETF offers broad exposure to high-quality municipal bonds, while Vanguard Short Duration Tax-Exempt Bond ETF is designed for investors seeking tax-exempt municipal income at the short end of the yield curve.

Vanguard's active fixed income funds have a strong track record, with 95% of them outperforming their peer group averages over the past ten years.

For another approach, see: Vaneck Short High Yield Muni Etf