Invesco BulletShares 2035 Municipal Bond ETF (BSMZ)

What exactly is BSMZ?

BSMZ is an exchange-traded fund that holds municipal bonds—debt issued by states, cities, counties, and other government entities—all scheduled to mature in 2035. The fund trades on the NASDAQ like a stock, so you can buy or sell it through any brokerage account. When you own BSMZ, you own a slice of a diversified portfolio of hundreds of municipal bonds from across the United States. In 2035, the bonds mature, the fund closes, and shareholders receive the final return of their principal plus any accrued interest.

Why is it called a bullet fund?

The term “bullet” refers to the single maturity date. Instead of a bond fund that holds bonds with staggered maturities and continuously buys and sells to maintain a target average duration, BSMZ holds bonds that all fire at once—they all mature in 2035. This creates a bullet-shaped payoff: you know exactly when you will get your money back. The fund has a defined lifespan. No perpetual management, no constant rebalancing, no guessing about when to exit.

What kind of bonds does BSMZ hold?

The fund focuses on investment-grade municipal bonds, meaning bonds rated A or better by rating agencies like Moody’s or S&P. These are bonds issued by states, cities, counties, school districts, housing authorities, water districts, and other public entities. Some bonds are general-obligation bonds backed by the full taxing power of the issuer. Others are revenue bonds backed by the cashflows from specific projects—toll roads, airports, hospitals, parking lots, or utilities. The fund holds hundreds of these bonds spread across many different issuers and geographies, which means a problem at one municipality does not tank the whole portfolio.

Are the interest payments taxed?

The interest BSMZ pays out is generally exempt from federal income tax. This is the defining feature of municipal bonds and why they exist as a distinct asset class. For investors in high federal tax brackets, tax-free municipal bond income can deliver better after-tax returns than higher-yielding taxable bonds. The math depends on your marginal tax rate, but for anyone paying 22 percent or more in federal tax, the advantage is clear.

Some of BSMZ’s holdings may also qualify for state income-tax exemption if you live in the state that issued the bond. However, BSMZ is a national fund, so most of its holdings will not give you state tax breaks unless they happen to be from your home state. Investors in high-tax states like California, New York, or Massachusetts can look for state-specific municipal bond ETFs if they want both federal and state tax breaks.

What happens if I sell before 2035?

You can sell BSMZ anytime you want by placing an order through your brokerage account, just like a stock. But if interest rates have risen since you bought the fund, the bond prices inside it will have fallen, and you will take a capital loss. Conversely, if rates have fallen, you will see a capital gain. This is interest-rate risk—the uncertainty in the market value of the fund between now and 2035.

The practical implication: BSMZ is best suited for investors who plan to hold until 2035. If you have a financial goal arriving in 2035—a major expense, a life transition, a desired amount of savings—BSMZ lets you time the maturity to that goal and know that you will receive your principal back on schedule, interest-rate moves notwithstanding.

What are the main risks?

Credit risk is the possibility that one or more bond issuers will struggle or default on their obligations. BSMZ limits this by holding investment-grade bonds from many different issuers, but it does not eliminate it. In a severe recession, even investment-grade municipalities can face cash shortfalls.

Inflation risk means that the fixed interest rate locked in by BSMZ’s bonds may not keep pace with rising prices. If inflation accelerates over the next decade, the purchasing power of both the interest payments and the principal return will erode.

Interest-rate risk is the main concern if you sell before maturity. If rates rise, bond prices fall. If rates fall, bond prices rise. Holding to 2035 eliminates this risk because you will receive par value when the bonds mature.

How do I research BSMZ?

Start with Invesco’s fund website, where you will find the prospectus, fact sheet, and complete list of holdings. The prospectus is the authoritative legal document explaining what the fund is allowed to hold, what it costs, and what risks it carries. The fact sheet provides a quick snapshot: the current distribution rate, average credit quality, duration (a measure of how sensitive the bonds are to interest-rate changes), and trading volume.

To understand the individual bonds in the portfolio, you can consult the Municipal Securities Rulemaking Board’s public database, which shows pricing, credit ratings, and issuer information for municipal bonds. This gives you a granular view of what you actually own. Many municipal issuers also publish financial statements and budgets publicly, so if a particular bond in the fund concerns you, you can dig into that issuer’s credit story.

Who is BSMZ for?

BSMZ is for investors with a financial goal or timeline near 2035 who want federal-tax-free income and certainty about when they will receive their principal back. It is well suited to someone planning for a major expense in 2035, building a ladder of bonds across multiple maturity years, or seeking a simple, low-cost way to own a diversified portfolio of municipal debt without the complexity of buying individual bonds. It is not for investors who need liquidity before 2035 or who expect to trade in and out of the position based on market conditions.