Invesco BulletShares 2027 Municipal Bond ETF (BSMR) seeks to track an index of investment-grade municipal bonds that mature in 2027. This target-date municipal bond ETF provides tax-free income from state and local government debt securities, with the entire portfolio maturing and liquidating in 2027.
How It Works
BSMR uses a passive, buy-and-hold approach focused exclusively on municipal bonds with 2027 maturity dates. The fund purchases investment-grade municipal securities at inception and holds them to maturity, creating a defined endpoint when the ETF will liquidate and distribute proceeds to shareholders. No active trading or duration management occurs, as bonds naturally decrease in duration as they approach the 2027 maturity target date.
Key Features
- Target-date structure eliminates interest rate risk by 2027 as all bonds mature and ETF liquidates
- Tax-free income at federal level and potentially state level for residents of issuing municipalities
- Zero expense ratio makes it one of the lowest-cost ways to access municipal bond income
Risks
- This ETF can lose value if municipal issuers default or face credit downgrades, though investment-grade focus limits this risk
- Rising interest rates before 2027 will cause temporary price declines, though losses diminish as maturity approaches
- Tax law changes could reduce municipal bond tax advantages, making taxable bonds relatively more attractive to investors
Who Should Own This
Best suited for conservative investors with specific 2027 liquidity needs and medium-to-high tax brackets seeking tax-free income. Appropriate as satellite holding (5-15% of fixed income allocation) for those wanting defined maturity dates. Requires low-to-medium risk tolerance due to credit and interest rate sensitivity until maturity.