VGIT vs. MUB: A Clear Choice for Conservative Investors

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The accumulation of wealth, even in modest amounts, requires a degree of vigilance. Two exchange-traded funds – the Vanguard Intermediate-Term Treasury ETF (VGIT +0.10%) and the iShares National Muni Bond ETF (MUB +0.05%) – are frequently presented as safe harbors for capital. Both offer low costs and access to the ostensibly secure world of U.S. government-backed debt. However, a closer examination reveals differences in yield, tax implications, and underlying portfolio construction that deserve careful consideration.

VGIT, in its simplicity, aims to provide income and stability through intermediate-term U.S. Treasury bonds. MUB, conversely, tracks a broad array of investment-grade municipal bonds, appealing to those seeking tax advantages. This comparison will attempt to cut through the marketing gloss and clarify which fund, if either, aligns better with specific financial objectives. The aim is not merely to present data, but to offer a reasoned judgment.

Snapshot: Costs and Scale

Metric VGIT MUB
Issuer Vanguard IShares
Expense ratio 0.03% 0.05%
1-yr return (as of 2026-01-23) 3.2% 1.5%
Dividend yield 3.8% 3.1%
AUM $44.6 billion $41.8 billion

Beta, a measure of volatility relative to the broader market, is derived from five years of weekly returns. The one-year return reflects total return over the preceding twelve months.

Both funds are commendably inexpensive, though VGIT maintains a slight edge in terms of the expense ratio. Its higher yield, however, must be weighed against the tax implications of the underlying bonds. A higher yield is meaningless if a substantial portion is lost to taxation.

Performance and Risk: A Comparative View

Metric VGIT MUB
Max drawdown (5 y) -15.13% -11.88%
Growth of $1,000 over 5 years $864 $917

The figures suggest MUB has experienced a slightly more favorable five-year growth trajectory, although the difference is not dramatic. It also exhibits a smaller maximum drawdown, indicating marginally lower risk. However, past performance is, as always, no guarantee of future results. It is a habit of mind to assume the future will mirror the past; a dangerous assumption.

The Composition of Holdings: What Lies Beneath

MUB’s portfolio comprises over 6,100 investment-grade municipal bonds, representing a high degree of diversification within that sector. Its largest holdings include Blackrock Liq Municash Cl Ins Mmf, USD Cash, and University Tex Univ Revs 08/15/2036. No single holding dominates, a characteristic generally viewed as prudent. The fund, with over eighteen years of operation, is designed to provide broad, tax-exempt exposure to U.S. municipalities and agencies. It is, in essence, a bet on the continued solvency of local governments.

VGIT, in contrast, is singularly focused on intermediate-term U.S. Treasury bonds. All assets are allocated to government debt, specifically large Treasury issues such as United States Treasury Note/Bond 4.38% 05/15/2034. This simplicity offers a very high level of credit quality and liquidity, but also a lack of diversification. The portfolio contains 76 holdings and carries no exposure to credit risk beyond that of the U.S. government – a risk that, while seemingly low, is not nonexistent.

For further guidance on ETF investing, a more comprehensive resource is available [link].

Implications for Investors: A Clearer Perspective

Not all conservative bond funds offer the same level of protection. The choice between VGIT and MUB deserves careful consideration. Both are common fixtures in conservative portfolios, but they approach stability from fundamentally different angles. VGIT offers simplicity and stability, its returns largely dictated by interest rate fluctuations. This makes it a straightforward means of gaining exposure to intermediate-term yields while maintaining high liquidity and credit quality. MUB, conversely, prioritizes federally tax-exempt income, introducing exposure to municipal credit conditions and spread risk.

For investors seeking portfolios built around liquidity and rate sensitivity, VGIT is the more logical choice. For those prioritizing tax-efficient income and willing to accept the inherent risks of municipal credit, MUB may be preferable. This distinction dictates how each ETF behaves when market conditions shift. The pursuit of wealth is rarely straightforward; understanding these nuances is paramount.

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2026-01-27 02:24