Choosing between IGIB and MUB requires balancing IGIB's higher corporate yields against MUB's federal tax-exempt status, with the investor's tax bracket serving as the primary determinant for net returns.
The article compares IGIB's corporate bond yield and lower expense ratio, favoring it for lower tax bracket and retirement accounts.
The article highlights MUB's federal tax-exempt municipal income, which can produce better after-tax returns for high-bracket investors in taxable accounts.
Investors choosing between the iShares 5-10 Year Investment Grade Corporate Bond ETF (IGIB) and the iShares National Muni Bond ETF (MUB) must prioritize tax status over headline yield. While IGIB offers a higher 4.9% dividend yield, MUB provides federal tax-exempt income that often benefits high-bracket investors in taxable accounts. The optimal choice depends on the investor's specific tax bracket and the type of account holding the assets.
Because IGIB distributions are fully taxable, high-bracket investors may find that MUB's tax-exempt municipal income results in a higher after-tax return, despite MUB's lower headline yield.
IGIB is slightly more affordable with an expense ratio of 0.04%, compared to 0.05% for MUB.