FMUN vs VTEB

FMUNAFidelity Systematic Municipal Bond Index ETF

VTEBAVanguard Tax-Exempt Bond ETF

In short

FMUN Fidelity's muni index fund runs on its own rules-based benchmark and charges 0.05% a year, a fraction of what the typical muni fund costs. Roughly 1,200 bonds, monthly payouts, all pointed at income the federal government doesn't tax.

VTEB Vanguard's national muni index fund, running since 2015 at three basis points, a tenth of what the typical muni ETF charges. Its benchmark screens for investment-grade bonds whose income is exempt from federal tax and the AMT.

Stated mandate

FMUN The fund seeks high current income that is exempt from federal income tax. It normally invests at least 80% of assets in municipal securities whose interest is federally tax-exempt.

VTEB VTEB seeks to track an index measuring the investment-grade segment of the U.S. municipal bond market. It uses passive sampling to approximate the index and generally invests in federally tax-exempt municipal securities.

Why people hold it

• FMUN 0.05% a year against a roughly 0.30% median for muni bond funds. On tax-exempt income, that gap is the part you keep.
• Roughly 1,200 municipal bonds, so no single issuer or project carries the portfolio.
• Pays monthly, with at least 80% of assets in municipal securities whose interest is exempt from federal income tax.
• One of the stronger builds in the muni ETF group: passive, broad, and squarely inside its stated mandate.

• VTEB Three basis points a year against a 0.30% muni-ETF median. On tax-exempt bonds, where coupons are modest, that fee gap is a real slice of the payout.
• The index holds only investment-grade munis whose interest is exempt from federal income tax and the alternative minimum tax, so the income carries no AMT surprise.vanguard.com
• A multi-billion-dollar fund and one of the most heavily traded in the muni category, which tends to show up as tight bid-ask spreads. Income is paid monthly.
• It has tracked its benchmark closely and sits among the strongest implementations in a crowded muni bond peer group.

Worth knowing

• FMUN Thinly traded and modest in size next to the category's giants, so bid-ask spreads can run wider.
• The benchmark is Fidelity's own Systematic U.S. Municipal Bond Index, not a licensed outside yardstick.fidelity.com
• Muni prices move with interest rates, and the tax break targeted here is federal. State-specific relief is a different product, like NYF for New York.

• VTEB Federal exemption, not blanket coverage. Income can still be taxable in your home state, which is why single-state funds like NYF exist alongside it.vanguard.com
• Credit quality is investment grade, so rates are the main swing factor: when muni yields rise, bond prices and the fund's share price fall.vanguard.com
• Sampling, not full replication. The fund owns a representative slice of a very large index rather than every bond in it.vanguard.com

Full FMUN profile⁠

Full VTEB profile⁠