Municipal Bond ETFs for Tax-Advantaged Income: What Retail Investors Should Know

A Major Institutional Move Signals Market Interest

On November 7, 2025, Frisch Financial Group, Inc. made a significant move in the tax-exempt bond space, expanding its position in First Trust Managed Municipal ETF (FMB) by purchasing 75,648 additional shares. This transaction, valued at approximately $4.02 million, brought the firm’s total holdings to 288,013 shares worth $14.60 million—cementing FMB as a meaningful 3.4% allocation within the firm’s $430+ million in managed assets.

Understanding the Appeal of Municipal Bond ETFs

For investors seeking steady, tax-free income, municipal bond ETFs have become increasingly attractive. FMB invests predominantly in debt securities issued by U.S. cities, states, and counties. The key advantage: interest payments to bondholders are exempt from federal income taxes, making this structure particularly valuable for high-income earners looking to optimize after-tax returns.

As of November 7, 2025, FMB shares traded at $51.23, having gained 3.9% year-over-year, though they trailed the S&P 500 by roughly 9 percentage points over the same timeframe. The fund currently offers a dividend yield of 3.4%, supported by an actively managed portfolio approach emphasizing credit quality and capital preservation.

How FMB Stacks Up: The Fee Question

While FMB’s 3.4% dividend yield appears competitive, the fund’s 0.65% expense ratio warrants closer examination. When comparing municipal bond ETF options, Vanguard Tax-Exempt Bond ETF (VTEB) emerges as a compelling alternative. VTEB delivers a similar 3.3% yield but charges only 0.03% annually—a 62-basis-point advantage that compounds significantly over decades.

Historical performance between these two funds shows virtually identical results over five-year periods, suggesting that lower costs may provide the deciding factor for long-term investors. Over 20 years, the fee differential could translate to meaningful outperformance for VTEB, even if both funds track comparable municipal bond indices.

The Bottom Line for Retail Investors

Institutional confidence in municipal bond ETFs—evidenced by Frisch Financial Group’s recent expansion—reflects the growing recognition of tax-advantaged income strategies. However, retail investors shouldn’t automatically follow institutional purchases without conducting their own analysis.

For those seeking tax-exempt income through an ETF structure, comparing cost structures should be priority. While both FMB and VTEB serve similar purposes, the 62-basis-point fee difference between them highlights why expense ratios deserve careful scrutiny. Municipal bonds themselves remain valuable portfolio components, but choosing the lowest-cost vehicle to gain exposure can meaningfully enhance net returns over time.