Generate $5,600 per Year in Tax Free Income Paid Monthly With Our Low-Cost Muni ETF Portfolio
One of the few downsides of passive income from stocks and bonds is that the income generated by those investments is subject to federal and state income tax.
HYMB: Solid High-Yield Muni Bond ETF, Above-Average Tax-Advantaged Income
HYMB is a high-yield municipal bond ETF. It focuses on riskier non-investment grade and unrated securities, with sizable investments in quality investment-grade securities. It offers investors a tax-advantaged 4.5% yield. After-tax income should be higher than that of most bonds for investors in the higher tax brackets.
Municipal Bonds: I'm Choosing HYMB Over HYD
State Street® SPDR® Nuveen ICE High Yield Municipal Bond ETF (HYMB) is rated a buy, while VanEck High Yield Muni ETF (HYD) is rated hold. HYMB offers higher yields and better risk-adjusted returns despite a slightly higher expense ratio and increased volatility compared to HYD. Current stabilizing interest rates and resilient municipal fundamentals create a favorable outlook for high-yield municipal bonds.
HYMB: A Good Attempt But Not Quite Right
SPDR Nuveen ICE High Yield Municipal Bond ETF offers exposure to lower-rated and unrated municipal bonds, aiming for higher tax-exempt yields. HYMB tracks an index, resulting in broad diversification but limited selectivity, which may cap potential returns compared to more actively managed muni funds. The ETF's current yield of 4.53% is not compelling vs. alternatives like SHYM and NMCO, which offer similar or better returns with less interest rate risk.
Unleveraged Options In The Tax-Exempt Sector
Fund-level leverage is only attractive when carry or capital gains potential is high; current tight spreads and an inverted yield curve make it less appealing. For tax-exempt CEFs, higher yields often come from longer duration, not leverage; unleveraged long-duration funds or ETFs can offer similar or better yields. Investors should not assume more leverage is always better; careful, situation-specific exposure to fund-level leverage is key to balancing risk and return.
HYMB: An Interesting Alternative For Tax-Free Income
Muni bonds have recently declined, but HYMB offers a compelling 4.5% tax-free yield, making it an option for parking cash. HYMB's lack of leverage reduces risk, especially if interest rates remain stable, and offers potential for price appreciation alongside monthly tax-free dividends. The ETF's good trading volumes and no-leverage structure make it a safer, more liquid choice compared to leveraged CEFs in the current rate environment.
