SHM vs VTES

SHMAState Street SPDR Nuveen ICE Short Term Municipal Bond ETF

VTESAVanguard Short-Term Tax-Exempt Bond ETF

In short

SHM A 2007-vintage muni fund that deliberately stays short: roughly a thousand AMT-free municipal bonds, none of them maturing past five years. Federally tax-exempt income, paid monthly, with far less rate whiplash than the full muni market.

VTES Vanguard's muni ETF on a short leash: an AMT-free tax-exempt index, but capped at seven years to trim interest-rate sensitivity. Five basis points, roughly 2,700 bonds, income paid monthly.

Stated mandate

SHM The fund seeks to generally match, before fees and expenses, the price and yield performance of the ICE 1-5 Year AMT-Free Broad Municipal Index.

VTES The Fund seeks to track an index representing investment-grade U.S. municipal bonds with remaining maturities from one month through seven years.

Why people hold it

• SHM Runs 0.20% a year, below the 0.30% median for muni bond ETFs in its peer group.
• Spreads across roughly a thousand individual municipal bonds, so no single issuer's problems dominate the portfolio.
• Trading since 2007, one of the elder statesmen of muni ETFs, now a multi-billion-dollar fund that distributes monthly.
• Sits in the upper tier of a crowded muni ETF field on our review, helped by steady day-to-day trading and a deep bond bench.

• VTES Costs 0.05% a year, a fraction of what the typical muni-bond fund in its category charges. One of the cheapest ways into tax-exempt bonds.
• Maturities run one month to seven years, so the portfolio moves less on rate swings than long-dated muni funds. Short duration is the whole point here.vanguard.com
• The index is AMT-free national investment-grade munis, so interest is federally tax-exempt and not caught by the alternative minimum tax.vanguard.com
• Roughly 2,700 bonds via index sampling, run by Vanguard's fixed income group, with distributions paid monthly. It tracks its benchmark closely.vanguard.com

Worth knowing

• SHM Cheap for a muni fund, but not the cheapest shelf: broad muni index trackers like VTEB and SCMB charge 0.03%.
• The index stops at five years, so long-maturity muni exposure has to come from somewhere else in the portfolio.ssga.com
• Short bonds cut both ways: smaller price moves when rates climb, and smaller ones when rates drop.

• VTES Short maturities cut both ways. Vanguard's own materials describe moderate current income, the trade-off for less rate sensitivity than longer muni portfolios.vanguard.com
• It's a national fund, so it isn't structured to shelter state income tax the way single-state muni ETFs such as NYF are.
• Launched in 2023, it has a shorter live record than muni ETFs that have been trading for over a decade, including its broader sibling VTEB.

Full SHM profile⁠

Full VTES profile⁠