Author Topic: VWIUX in Taxable Account: 3 fund portfolio?  (Read 483 times)

Phinance

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VWIUX in Taxable Account: 3 fund portfolio?
« on: April 15, 2019, 03:43:43 PM »
Is VTSAX/VTIAX/VWIUX in a taxable account considered a sufficient 3 fund portfolio? Specifically re the bond (VWIUX) portion, is there a better alternative in a taxable account for high-income?

My understanding is that bond funds are highly tax inefficient and need to be in tax deferred accounts and so if having one in a taxable account, itís best to elect a tax-exempt (VWIUX) one? Is this true?

Thanks.

Bobberth

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Re: VWIUX in Taxable Account: 3 fund portfolio?
« Reply #1 on: April 18, 2019, 11:07:54 AM »
Unless you're in the highest tax bracket, usually taxable bonds still have a higher after tax yield. State taxes can factor into that and some single state muni funds exist to help with that. However, there is something to be said about corporate bonds vs. municipalities in regards to safety.

Probably your best route is to own taxable bonds in your tax advantaged account. Bonds throw off taxable income. Withdrawals from tax advantaged accounts are treated as income. So you come out equal. Most of the returns from equities are due to capital gains. Capital gains are taxed less than income. But all capital gains in a tax advantaged account will be taxed as income at the higher rate. So it's better to make room for your bond holdings in a tax advantaged account and hold equities in a taxable account.

If you do choose to own a muni bond fund, VWIUX is an excellent fund.