SMB vs VTES: Which Is the Best Municipal Bond ETF to Buy Right Now?
2026-07-22 17:35
•John Ballard •The Motley Fool
•• •• Axe Capital view
SMB vs VTES: Which Short-Term Muni Bond ETF Makes Sense Now?
A close look at how VanEck’s SMB stacks up against Vanguard’s VTES for tax-efficient income.
Municipal bond ETFs aren’t front-page news in South Africa, but for those holding dollars offshore or with US exposure, picking the right muni ETF matters. SMB has been around since 2008 and delivered a neat 3% return last year, a bit better than VTES's 2.7%. But SMB’s $313 million asset base is small, which can hurt liquidity. VTES, with $2.1 billion under management, offers way more diversification and lower fees—0.05% versus 0.07%—which matters over time. Its marginally longer duration means it might do better if US interest rates start falling. If you have to choose, VTES looks like the better all-round pick. But if you prize a longer track record and a slightly higher yield, SMB is worth a look. For South Africans, the USD/ZAR rate impacts any offshore bond returns, and with the rand poised for volatility, keep an eye there. this is just my opinion and not financial advice
I’d lean towards VTES given its bigger size, lower fees, and diversification. Keep SMB on watch if you want a possibly higher yield and don’t mind less liquidity.
- USD/ZAR
- VTES
- US interest rates rising further, hurting bond prices
- rand weakening, reducing offshore returns
6/10
VanEck Short Muni ETF (SMB) and Vanguard Short-Term Tax-Exempt Bond ETF (VTES) are compared as options for tax-efficient municipal bond investing. VTES offers a lower expense ratio (0.05% vs 0.07%), larger assets under management ($2.1B vs $312.7M), and greater diversification with 3,373 holdings. SMB delivered slightly higher 12-month returns (3.00% vs 2.70%) and has a longer track record since 2008. Both funds have similar risk profiles with identical maximum drawdowns of -1.80% over three years.
This article was originally published by The Motley Fool and has been adapted here for Axe Capital Trading News.
Publisher: The Motley Fool
Author: John Ballard
Categories: Rates, Equities
Tickers: SMB, VTES
Sentiment: Positive - SMB shows competitive performance with higher 12-month returns (3.00%) and longer operational history since 2008, but has a slightly higher expense ratio (0.07%) and significantly smaller asset base ($312.7M), which may limit liquidity compared to VTES. VTES is presented as the more attractive option for most investors due to its lower expense ratio (0.05%), substantially larger AUM ($2.1B), superior diversification with 3,373 holdings, and potential for better returns if interest rates decline due to its slightly longer duration (2.6 years vs 2.38 years).
Keywords: municipal bonds, ETF comparison, tax-exempt income, short-duration bonds, expense ratio, interest rate sensitivity
Insights:
- SMB: Neutral: SMB shows competitive performance with higher 12-month returns (3.00%) and longer operational history since 2008, but has a slightly higher expense ratio (0.07%) and significantly smaller asset base ($312.7M), which may limit liquidity compared to VTES.
- VTES: Positive: VTES is presented as the more attractive option for most investors due to its lower expense ratio (0.05%), substantially larger AUM ($2.1B), superior diversification with 3,373 holdings, and potential for better returns if interest rates decline due to its slightly longer duration (2.6 years vs 2.38 years).