Add Tax Exempt ETF Exposure

Investors and advisors have numerous goals to meet with their portfolios. Some investors full send their portfolios to produce as much capital appreciation as possible. Others, especially those at or near retirement age, look for current income and ballast to steady their financial ships. Almost all investors, however, can benefit from adding tax-exempt munis to their holdings. Tax-exempt ETF options like TAXE, for example, can prove a shrewd addition, especially as one year turns to another.

See more: Stagflation Worries? This Active ETF May Benefit

The T. Rowe Price Intermediate Municipal Income ETF (TAXE) charges just 24 basis points for its active approach. The strategy launched in 2024 and brings T. Rowe Price’s fundamental research capabilities to the tax-exempt muni space, targeting debt securities across a range of credit qualities in the intermediate maturity area. 

That active approach assesses issuers for metrics like prices and yields, while also considering junk bonds where prudent. Together, that has helped the active tax exempt ETF return 5.8% YTD according to ETF Database data. As of November 30, the strategy provided a 3.9% yield to maturity and a 3.16% 30-day SEC Standardized Yield according to T. Rowe Price data.

Where specifically might investors slot the fund within their portfolios, then? The strategy could make for a strong fixed income addition to reduce tax exposure overall. Such benefits may compound over time as portfolios save more and can reinvest monies otherwise expended on taxes. 

While many investors are familiar with tax exempt ETF offerings, fewer may have experience with active options therein. Active bond ETFs have some important structural advantages over their passive counterparts. Passive funds that attempt to replicate an index may sometimes struggle to adapt if certain bonds are called early, for example. Active fixed income strategies, by contrast, can replace bonds as needed. Where a passive strategy may be required to match the holdings of an index, active strategies like TAXE can use a more discerning eye toward credit quality and yield.

Entering 2026 proper, investors will have plenty of ETFs to consider. Tax exempt ETF strategies can help almost any investor portfolio, and with active offerings like TAXE, they can get the flexibility and adaptability they need.

For more news, information, and strategy, visit the Active ETF Content Hub.