Since the bond crisis looks less and less violent, but interest rates remain elevated by historical standards, it’s time to look around beyond low risk/low yield government bonds and tap into the muni’s universe. One of the most comfortable ETFs for a muni novice investor is VanEck CEF Municipal Income ETF that offers intelligent index weighting rules that underweight CEFs trading at higher premiums and overweight those trading at wider discounts.

Interestingly, XMPT is a “fund of closed-end funds” that provides broad exposure to municipal bonds that are exempt from US federal tax exposure through the lens of US-listed closed end funds (CEFs). The ETF’s underlying funds fall into 4 categories, depending on whether they are leveraged and/or high-yield.

In terms of XMPT’s governance, a committee maintains a list of CEFs that are divided into sectors, based on the CEF’s stated investment style. After review, the committee selects CEFs based on their overall standards for risk and sound business practice. Weighting is based on total net assets of the CEFs, adjusted for each CEFs average discount for the previous 90 days. Effectively, overweighting CEFs trading at discount.

Fees on investment vehicles do matter of course since they affect an investor's ultimate return. As of December 31, 2022, the average net expense ratio of municipal bond ETFs was 43 basis points lower than municipal bond mutual funds and 131 basis points lower than closed-end municipal bond funds. Many investors may prefer municipal bond ETFs for this reason.