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Municipal bonds offer tax-free income, attractive for investors seeking tax-efficient diversification. VTEB and other municipal bond ETFs, as well as tax-free municipal bond funds, provide exposure to this asset class. Municipal bonds are issued by state and local governments, often used for infrastructure projects. While their safety depends on the issuer, they are generally considered a relatively low-risk investment. Including them in your portfolio can help reduce tax burden and diversify risk.

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