I've been looking at these two short bond ETFs lately and they're actually pretty different despite both targeting similar duration. SMB focuses purely on municipal bonds while ISTB is all over the place with Treasuries, corporates, and mortgage stuff.

Here's what caught my eye though - ISTB has way more assets (4.8B vs 302M) and yields higher at 4.1% versus SMB's 2.6%. Sounds like an easy win for ISTB right? Not so fast. The tax situation completely flips the script. Every dollar you make from ISTB gets taxed as regular income. SMB's income is federal tax-exempt, which for anyone in a higher bracket could actually make the after-tax returns better despite that lower headline yield.

Performance-wise they're pretty close. Both gave similar 1-year returns (SMB 4.2%, ISTB 5.6%) but ISTB took a bigger hit during downturns - max drawdown of 9.34% vs SMB's 7.44% over five years. So you're trading stability for yield.

The real question is your tax situation. If you're in a high tax bracket and have taxable accounts, SMB's short bond strategy might actually win after taxes even with the lower nominal yield. ISTB makes more sense for IRAs or if you're in a lower bracket where that higher yield matters more. Pretty interesting how the math changes depending on where you sit.