ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Active ETF
    • Beyond Basic Beta
    • China Insights
    • Climate Insights
    • Commodities
    • Core Strategies
    • Crypto
    • Direct Indexing
    • Disruptive Technology
    • Energy Infrastructure
    • ETF Building Blocks
    • ETF Education
    • ETF Strategist
    • Financial Literacy
    • Fixed Income
    • Gold/Silver/Critical Minerals
    • Innovative ETFs
    • Institutional Income Strategies
    • Leveraged & Inverse
    • Managed Futures
    • Market Insights
    • Modern Alpha
    • Multifactor
    • Night Effect
    • Portfolio Strategies
    • Responsible Investing
    • Retirement Income
    • Richard Bernstein Advisors
    • Tax Efficient Income
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
  • Research
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Index Education
    • Index Insights
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Multimedia
    • ETF 360 Video Series
    • ETF of the Week Podcast
    • ETF Prime Podcast
    • Video
  • Company
    • About VettaFi
    • Get VettaFi’ed
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Core Strategies Channel
  2. Tax Season Reminder: Try Diversified Muni Bonds
Core Strategies Channel
Share

Tax Season Reminder: Try Diversified Muni Bonds

Nick Peters-GoldenMar 21, 2023
2023-03-21

Spring is just around the corner, and with it comes a much less exciting event — tax season. Still, advisors have to be aware of the best ways to mitigate the impact of the tax bill for clients, whether in the near term or looking ahead to the end of 2023 itself. That presents an opportunity to revisit diversified muni bonds in an ETF like the American Century Diversified Municipal Bond ETF (TAXF B), which has performed well despite a volatile year so far.

Before getting into the benefits of muni bonds themselves, it’s important to note the value of the ETF wrapper in tax season compared to mutual funds. Mutual funds tend to incur more capital gains year over year, while the ETF wrapper limits those gains until the shares are sold.

That offers ETF shareholders more time to compound their gains before facing that tax bill, and with the transparency and active management offered in an ETF, managers can apply strategies like tax-loss harvesting to minimize distributions.

Combine that with diversified municipal bonds, and the ability to mitigate tax impacts grows. Muni strategies have performed well as they’ve bounced back from a tough 2022, with local governments flush with cash thanks to strong revenues and Federal government support. According to YCharts, muni national long and muni national intermediate term ETFs have returned 2% and 1.6% respectively on a YTD basis.

For more on muni ETFs, read: Bull vs. Bear: A Town Hall On Muni ETFs

Thanks to the tax free nature of most muni bonds on top of those returns, they make for a solid and stable investment amid such an uncertain U.S. market defined by an ongoing fight against inflation and a simmering banking crisis. TAXF, which actively invests in both investment-grade and high-yield municipal bonds, uses these tax-free or tax-limited and diversified municipal bonds in such a way that makes it appealing especially to higher earners.

TAXF charges 29 basis points for its exposures, and has outperformed its ETF Database Category Average and its Factset Segment Average on a YTD basis, outperforming the pair by 82 and 26 basis points respectively.

Advisors have options to consider right now in the ever-growing world of ETFs, but bonds have been a standout, and by looking to diversified muni bonds, they can offer clients tax mitigation strategies worth flagging. With strategies focused on income coming down the pipe that can also help buoy portfolios, now may be a good time to keep an eye on TAXF and how it performs in the weeks and months ahead.

For more news, information, and analysis, visit the Core Strategies Channel.

Loading Articles...
Our Sites
  • VettaFi
  • Advisor Perspectives
  • ETF Trends
Tools
  • ETF Screener
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Database Pro
More Tools
  • Financial Advisor & RIA Center
Explore ETFs
  • ETF News
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Information
  • Contact Us
  • Terms of Use and Privacy Policy
  • © 2023 VettaFi LLC. All rights reserved.

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X