Historically, gaining access to municipal bonds through an index strategy has been difficult because the muni bond market is much more fragmented and expensive to trade than other fixed-income markets. But process improvements over the past several years, combined with a deeper knowledge of the market, have provided asset management firms like Vanguard with an advantage. An index-tracking fund like Vanguard Tax-Exempt Bond ETF (VTEB) now features exceptionally low tracking error, making it a solid choice for exposure to the broader municipal-bond market.
VTEB offers broad exposure to investment-grade municipal bonds and is one of the cheapest funds in the muni national intermediate Morningstar Category, earning a Morningstar Analyst Rating of Silver.
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Daniel Sotiroff does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.