Vanguard New Jersey Long-Term Tax-Exempt Fund Investor Shares

VNJTX's 7.51-year effective duration and high-quality municipal bond holdings have historically delivered strong risk-adjusted returns, outperforming its category benchmark by 64 basis points annualized over 10 years with a Sharpe ratio superior to the index, suggesting the duration risk is well-compensated.

With an effective duration of 7.51 years and a portfolio weighted toward 10- to 15-year maturities, VNJTX remains extensively sensitive to interest rate movements. As seen with comparable long-duration bond funds like VBTLX, which lost 18.1% in 2022, rising rates could severely erode principal value.

VNJTX maintains an overweight in A-rated bonds and holds a diversified portfolio of 936 municipal securities across New Jersey state and local issuers, including transportation and turnpike authorities, supporting steady income with a TTM yield of 3.55% and consistent monthly dividend distributions.

As a non-diversified fund investing at least 80% of assets in New Jersey municipal securities, VNJTX is heavily exposed to a single state's fiscal health. Any deterioration in New Jersey's budget position or credit conditions could disproportionately impact the fund's NAV and income stream.

VNJTX's 30-day SEC yield of 3.7% and TTM yield of 3.55% — well above its average peer's 3.1% — provide compelling after-tax income for high-income New Jersey residents, who benefit from both federal and state tax exemptions, significantly enhancing the fund's tax-equivalent yield versus taxable bonds.

VNJTX posted a 1-year total return of -0.63% and a YTD return of -2.51%, suggesting that despite its tax-exempt income, principal losses have eroded total returns. Taxable money market and short-duration alternatives may deliver comparable or superior after-tax outcomes with meaningfully lower volatility.