This Bond ETF Has a Special Tax Advantage Over One of Fidelity's Top Bond Fund

Core Viewpoint - Fidelity's bond market investments are compared with iShares' municipal bond ETF, highlighting differences in risks and tax profiles for income-seeking investors [1] Cost & Size Comparison - MUB has an expense ratio of 0.05% while FBND has a higher expense ratio of 0.36% - As of January 25, 2026, MUB's 1-year return is 1.22% compared to FBND's 2.6% - MUB offers a dividend yield of 3.13%, whereas FBND provides a higher yield of 4.7% - MUB has an AUM of $41.85 billion, significantly larger than FBND's $23.91 billion [2] Performance & Risk Comparison - Over the past five years, MUB experienced a max drawdown of -11.88%, while FBND had a larger drawdown of -17.23% - An investment of $1,000 in MUB would have grown to $922, compared to $862 for FBND over the same period [4] Fund Composition - FBND, launched in 2014, holds 4,459 assets with 67% rated AAA, but also invests up to 20% in lower-quality debt securities like BBB-rated bonds [5] - MUB tracks a mix of investment-grade U.S. municipal bonds with 6,163 holdings, holding no U.S. government bonds and approximately 61% rated AA [6] Investor Implications - Bond ETFs like FBND and MUB behave differently from stock ETFs, with a slow recovery from the 2022 market crash - FBND may yield higher returns over time due to its inclusion of riskier B-rated bonds, while MUB offers tax benefits due to its municipal bond structure [7][9]