PZA vs VTEB

PZABInvesco National AMT-Free Municipal Bond ETF

VTEBAVanguard Tax-Exempt Bond ETF

In short

PZA Most muni ETFs hand you the whole yield curve. PZA goes long on purpose: its index only takes bonds with at least 15 years left to maturity, all screened to stay out of the alternative minimum tax. Income lands monthly.

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

PZA The fund seeks to track an index of tax-exempt municipal debt that is not subject to the alternative minimum tax.

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

• PZA The long-end specialist. The index takes only investment-grade munis with at least 15 years to final maturity, so duration is the design choice, not a leftover.invesco.com
• Holdings are screened to be AMT-free, aimed at filers who need tax-exempt interest that does not get pulled back in by the alternative minimum tax.invesco.com
• Trading since 2007, now a multi-billion-dollar fund that changes hands actively, with tracking that has stayed tight to its benchmark.
• Pays monthly, spreads across thousands of individual bonds, and the index is rebalanced and reconstituted every month.invesco.com

• 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

• PZA At 0.28% it sits just under the typical muni ETF, but broad-market rivals VTEB and SCMB charge 0.03%. The long-maturity focus is what carries the premium.
• Long bonds swing harder when rates move, in both directions. This is the most rate-sensitive stretch of the muni market, by construction.invesco.com
• The fund samples its index instead of buying every bond in it, so the portfolio can differ modestly from the benchmark it follows.invesco.com

• 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 PZA profile⁠

Full VTEB profile⁠