1-Star ETFs Poised to Plunge: PowerShares VRDO Tax-Free Weekly?

Market-lagging returns could be written in this one star.

Brian D. Pacampara, CFA
Brian D. Pacampara, CFA
Sep 21, 2012 at 12:00AM

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, PowerShares VRDO Tax-Free Weekly (NYSE: PVI) has received the dreaded one-star ranking.

With that in mind, let's take a closer look at PVI and see what CAPS investors are saying about the ETF right now.


Inception November 2007
Total Net Assets $336.2 million
Investment Approach Seeks investment results that correspond to the price and yield of the Bloomberg US Municipal AMT-Free Weekly VRDO Index. The fund generally invests at least 80% of its total assets in variable rate demand obligation bonds that are exempt from federal income tax with interest rates that reset weekly.
Expense Ratio 0.25%
Year-to-Date / 1-Year / 3-Year Returns 0% / 0.2% / 0.4%
Dividend Yield 0.3%

SPDR Nuveen Barclays Capital Short Term Municipal Bond ETF

iShares S&P Short Term National AMT-Free Municipal Bond Fund

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 59% of the 29 members who have rated PVI believe the ETF will underperform the S&P 500 going forward.

Just last month, one of those Fools, All-Star TerryHogan, succinctly summed up the PVI bear case for our community:

All this ETF will ever produce is an equivalent to short-term rates paid by municipalities. Since they're tax-free yields, I'd imagine the rates will be even lower than short-term corporate rates. So basically you're getting nothing after the management fee. I can't believe anyone buys this.

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