Want Over $1000 per Month in Tax-Free Income? Buy These 8 Municipal Bond ETFs
These eight national high-yielding municipal bond ETFs trade below net asset value, which means the price of the funds is less than the value of the bonds in the fund.
One of the only downsides to passive income from stocks and bonds is that the revenue generated from those investments is subject to federal and state income tax. The significant advantage of owning municipal bonds is that the interest from municipal bonds is usually exempt from federal taxes and sometimes from state and local taxes. State and local governments issue municipal bonds to finance public projects and services.
Unlike open-end mutual funds, exchange-traded funds (ETFs) trade on major exchanges like stocks. They own financial assets such as stocks, bonds, currencies, debts, futures contracts, and commodities such as gold bars. One massive advantage ETFs have is that they can be bought or sold anytime the markets are trading. In addition, there is a large market and demand from investors for municipal bond exchange-traded funds. Some are national funds that own bonds from all over the United States, and some are state funds that only own the bonds from their specific state.
Investors looking to generate $1,000 or more monthly in tax-free income would need approximately $160,000 to invest in high-yielding leverage municipal bond ETFs. These funds use borrowed money to buy additional bonds, increasing the potential for higher returns. However, leverage also significantly increases the risk of loss when rates increase dramatically. Experienced portfolio managers can use leverage to help investors maximize tax-exempt income and total returns.
We selected eight national high-yielding municipal bond ETFs. All of these trade below net asset value, which means the price of the funds is less than the value of the bonds in the fund. By investing $20,000 in each fund, investors can generate at least $1000 per month in tax-free income. The funds are offered and run by companies with a long history of success in the municipal bond industry. As a caveat, these ETFs are better suited for those with much higher risk tolerance.
Why we recommend municipal bond ETFs
Municipal bond ETFs are generally free from federal and state taxes if they hold only tax-exempt bonds. However, if the municipal bond ETF has a combination of tax-free and taxable interest, taxes may be due at the federal and state levels. Here are the eight high-yielding national municipal bond exchange-traded funds to deliver over $1,000 monthly tax-free income.
DWS Municipal Income Trust (NYSE: KTF)
- 7.75% yield
- 32.16% leverage
- Net asset value $9.81–3.67% discount
Invesco Advantage Municipal Income Trust II (NYSE: VKI)
- 7.68% yield
- 36.19% leverage
- Net asset value $9.44–7.42% discount
Invesco Municipal Trust (NYSE: VKQ)
- 7.71% yield
- 35.03% leverage
- Net asset value $10.58–7.56% discount
Invesco Value Municipal Income Trust (NYSE: IIM)
- 7.75% yield
- 32.28% leverage
- Net asset value $11.94–8.15% discount
Nuveen Municipal Credit Income Fund (NYSE: NZF)
- 7.72% yield
- 39.94% leverage
- Net asset value $12.25–6.58% discount
Nuveen Quality Municipal Income Fund (NYSE: NAD)
- 7.78% yield
- 41.20% leverage
- Net asset value $11.64–7.40% discount
RiverNorth Flexible Municipal Income Fund (NYSE: RFM)
- 8.70% yield
- 39.08% leverage
- Net asset value $15.25–9.11% discount
RiverNorth Opportunistic Municipal Income Fund (NYSE: RMI)
- 8.51% yield
- 38.84% leverage
- New asset value $15.46–8.36% discount
Want Almost $14,000 per Year in Dependable Passive Income? Invest $25,000 in These 4 Stocks
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Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad, diverse career, including a stint as creative services director at an NBC affiliate in Austin, Texas, gives him unique insight into the financial industry.
Lee Jackson's journey in the financial industry spans more than 30 years, including nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career spanned pivotal sell-side Wall Street events, from the dot-com rise and bubble to the Long-Term Capital Management debacle, 9/11, and the Great Recession of 2008. This reflects his resilience and adaptability amid market volatility.
Lee Jackson’s practical financial industry experience, gained through a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing across various platforms. This unique combination allows him to shed light on the intricacies of Wall Street in a way only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.
Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.
