Core Viewpoint - Invesco National AMT-Free Municipal Bond ETF (NYSEARCA:PZA) generates income through interest collected from municipal bonds it holds [1] Group 1 - The ETF focuses on municipal bonds, which are debt securities issued by local and state governments [1] - The income generated is tax-exempt, making it attractive for investors seeking tax-efficient investment options [1]

Core Viewpoint - The combination of portfolio diversification and reliable income through municipal bonds and related ETFs suggests that 2026 could be an optimal time for investors to consider funds like the ALPS Intermediate Municipal Bond ETF (MNBD) [1] Group 1: Performance and Comparison - The actively managed MNBD has shown impressive performance in 2025, achieving a year-to-date return of over 5%, significantly outperforming the largest ETF in the category, which is essentially flat for the year [2] - Investors should be cautious and understand the characteristics of municipal bonds before investing in MNBD in 2026 [2] Group 2: Characteristics of Municipal Bonds - Municipal bonds are debt instruments issued by state and local governments to finance public projects, providing tax-free income through interest payments [3] - Investors often utilize individual municipal bonds for tax benefits, including the ability to deduct accrued interest from federal and state taxes [4] Group 3: Advantages of MNBD - MNBD is beneficial for enhancing diversification in equity portfolios, making it a suitable option for non-taxable accounts like retirement vehicles [4] - Diversification helps minimize investment risk, as municipal bonds have different risk and reward profiles compared to Treasurys and corporate bonds [5] - The intermediate-term nature of MNBD means it is less correlated to stocks than long-dated fixed income assets, further enhancing its diversification properties [6] Group 4: Active Management Benefits - MNBD's status as an active ETF allows it to respond more efficiently to varying financial conditions of municipal bond issuers, unlike passive rivals [7] - Bond funds like MNBD benefit from experienced fund managers who monitor municipalities and associated risks, providing an additional layer of oversight for investors [8]

Core Insights - The Vanguard California Tax-Exempt Bond ETF (VTEC) has achieved $1 billion in year-to-date inflows, which is significant given its niche focus compared to larger funds like the Vanguard Total Bond Market ETF (BND) [1] - Inflows into VTEC increased in April 2025 as demand began to outpace heavy supply in the municipal bond market, aided by California munis' role in rebuilding efforts after the Los Angeles wildfires [2] Fund Characteristics - VTEC tracks the S&P California AMT-Free Municipal Bond Index, providing exposure to the investment-grade California municipal bond market through a sampling technique that aligns with key benchmark characteristics [3] - The fund primarily invests in fixed income securities that are exempt from federal and California state income taxes, making it attractive for California residents seeking tax-free income [4] Broader Market Context - The municipal bond market has garnered attention due to strong credit fundamentals and competitive yields, with federal tax-free income being a key feature [5] - Vanguard offers additional municipal bond options, including the Vanguard Tax-Exempt Bond ETF (VTEB), which tracks the Standard & Poor's National AMT-Free Municipal Bond Index, providing exposure to various state or local government debt [5] Tailored Investment Options - Vanguard provides three tailored options for investors looking for exposure across the yield curve: 1. Vanguard Short-Term Tax-Exempt Bond ETF (VTES) [8] 2. Vanguard Intermediate-Term Tax-Exempt Bond ETF (VTEI) [8] 3. Vanguard Long-Term Tax-Exempt Bond ETF (VTEL) [8]