Investors must choose between the 4% yield of the Vanguard Intermediate-Term Treasury ETF and the tax-advantaged benefits of the iShares National Muni Bond ETF based on their specific tax bracket.
MUB is a tax-advantaged municipal bond ETF with a 3.3% yield and 0.05% expense ratio, appealing primarily to higher-tax-bracket investors.
VGIT provides federal credit safety and a higher 4% yield with a low 0.03% expense ratio, but carries duration risk reflected in its 16% five-year max drawdown.
Investors weighing fixed-income options are comparing the iShares National Muni Bond ETF (MUB) and the Vanguard Intermediate-Term Treasury ETF (VGIT). While VGIT offers a higher 4% yield and federal credit safety, MUB provides tax-exempt income that may benefit those in higher tax brackets. Choosing between the two requires balancing individual tax situations against the distinct risk profiles of municipal versus government debt.
Income from MUB (municipal bonds) is generally exempt from federal income taxes, whereas income from VGIT (Treasuries) is generally exempt from state and local taxes but subject to federal income tax.
The Vanguard Intermediate-Term Treasury ETF (VGIT) has a lower expense ratio of 0.03%, compared to 0.05% for the iShares National Muni Bond ETF (MUB).