ETF to Buy #4 – Market Vectors High-Yield Municipal Index Fund (HYD)
Over a year ago, many analysts were steering investors away from municipal bonds suggesting a massive default by local communities. The defaults did not occur, and tax-free munis rallied.
The Market Vectors High-Yield Municipal Index Fund (NYSE:HYD) invests at least 80% in U.S. dollar-denominated, high-yield, long-term, tax-exempt bonds. The distribution yield for HYD is 6.6%, most of which is free from federal income tax. Morningstar rates HYD a “four-star” ETF.
Since the low in early 2011, HYD has traded in a tight bull channel, and this year volume has substantially increased as high-income investors seeking tax-free bonds have found it difficult to buy individual bonds at reasonable prices.