The Vanguard High-Yield Tax-Exempt fund, rated five stars by Morningstar, invests at least 80% of its assets in investment-grade municipal bonds.
The Vanguard High-Yield Tax-Exempt fund is "one of the best more adventurous" offerings for long-term municipal bonds, according to Morningstar Yet for Vanguard's Mat Kiselak, the fund's name doesn't necessarily do it justice — and he disagrees with the term "adventurous." Instead, it's more of a hybrid product, he said. The fund invests at least 80% of its assets in investment-grade municipal bonds, and only up to 20% in those below investment grade.
mountain Vanguard High-Yield Tax-Exempt fund The fund, which trades under the ticker , currently has a 30-day SEC yield exceeding 4%. Add in the tax advantage for those in the 37% federal income tax bracket, and the yield gets closer to 7%, he said. The fund has earned a five-star rating from Morningstar. "Vanguard High Yield Tax-Exempt Bond continues to be one of the strongest candidates for straightforward exposure with slightly more risk to the long end of the municipal market," Morningstar associate analyst Elizabeth Templeton wrote in March.
has a total of $14.6 billion in net assets as of May 31 and an expense ratio of 0.17%. It has a total return of 3.87%, according to FactSet. Its minimum initial investment is $3,000. While it has no limitations on the maturity of individual securities, it is expected to maintain a dollar-weighted average maturity of 10 years to 25 years. "It gets really, really attractive to be out on the curve," Kiselak said.
had exited the Puerto Rico trade eight years ago after analysts felt they couldn't do their due diligence due to lack of information and lack of trust. Now, Kiselak says the fundamentals, like the reduction in debt, are much better than they used to be. "At this point we feel we are being compensated for the risk and then some," he said. "We expect it at some point to make investment grade.
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