Treasuries or Munis: VGIT vs. MUB for Conservative Portfolios
Key Points
VGIT and MUB both focus on high-quality U.S. government-backed bonds but differ in tax treatment and sector exposure
MUB holds thousands of municipal bonds with a lower beta and slightly lighter drawdown than VGIT
VGIT offers a higher yield, while both funds are highly liquid and low cost.
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Vanguard Intermediate-Term Treasury ETF (NASDAQ:VGIT) and iShares National Muni Bond ETF (NYSEMKT:MUB) both keep costs low and provide broad exposure to U.S. government-backed debt, but differ in yield, tax efficiency, and portfolio makeup.
Vanguard Intermediate-Term Treasury ETF (NASDAQ:VGIT) aims for income and stability by holding intermediate-term U.S. Treasury bonds, while iShares National Muni Bond ETF (NYSEMKT:MUB) tracks a broad basket of investment-grade municipal bonds, appealing to those seeking potential tax advantages. This comparison explores cost, performance, risk, and portfolio composition to help clarify which fund may better fit specific fixed-income goals.
Snapshot (cost & size)
| Metric | VGIT | MUB |
|---|---|---|
| Issuer | Vanguard | IShares |
| Expense ratio | 0.03% | 0.05% |
| 1-yr return (as of 2026-01-23) | 3.2% | 1.5% |
| Dividend yield | 3.8% | 3.1% |
| AUM | $44.6 billion | $41.8 billion |
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year weekly returns. The 1-yr return represents total return over the trailing 12 months.
VGIT and MUB are both highly affordable, with VGIT carrying a slightly lower expense ratio. VGIT also offers a higher yield, which may appeal to those prioritizing income over after-tax returns.
Performance & risk comparison
| Metric | VGIT | MUB |
|---|---|---|
| Max drawdown (5 y) | -15.13% | -11.88% |
| Growth of $1,000 over 5 years | $864 | $917 |
What's inside
MUB holds over 6,100 investment-grade municipal bonds, making it one of the most diversified funds in its category. Its top exposures include Blackrock Liq Municash Cl Ins Mmf (NYSE:MMF), USD Cash (NASDAQ:USD), and University Tex Univ Revs 08/15/2036 (NYSE:UTX), with no single holding dominating the portfolio. The fund, with more than 18 years of history, is designed to provide broad, tax-exempt exposure to U.S. municipalities and agencies, and is suitable for those seeking income with potential tax advantages.
VGIT, by contrast, is laser-focused on intermediate-term U.S. Treasury bonds, with all assets allocated to government debt. Its top holdings are large U.S. Treasury issues, such as United States Treasury Note/Bond 4.38% 05/15/2034 (NASDAQ:UST), providing a very high level of credit quality and liquidity. VGIT’s portfolio is simpler, with 76 holdings and no exposure to credit risk beyond the U.S. government.
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What this means for investors
Not all conservative bond funds protect portfolios the same way. That is why the decision between the Vanguard Intermediate-Term Treasury ETF and the iShares National Muni Bond ETF deserves closer attention. Both are common fixtures in conservative portfolios, but they approach stability from fundamentally different angles.
The Vanguard Intermediate Term Treasury ETF is often chosen for its simplicity and stability. It holds only U.S. government bonds, so returns rise and fall mainly with interest rates. That makes it a straightforward way to gain exposure to intermediate-term yields while maintaining high liquidity and credit quality. The iShares National Muni Bond ETF takes a different approach. By holding thousands of investment-grade municipal bonds, it prioritizes federally tax-exempt income while introducing exposure to municipal credit conditions and spread risk.
For investors, the Vanguard Intermediate Term Treasury ETF fits portfolios built around liquidity and rate sensitivity, while the iShares National Muni Bond ETF suits those seeking tax-efficient income with municipal credit risk. That distinction drives how each ETF behaves when markets shift.
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Eric Trie has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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