Author Topic: Bonds in taxable accounts?  (Read 4032 times)

kmm

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Bonds in taxable accounts?
« on: May 28, 2014, 08:58:13 PM »
I'm curious as to what bond funds (if any) people hold in taxable accounts.

I generally try to follow the 3-fund portfolio model, so for my 401K at Fidelity and my IRA at Vanguard I hold Spartan US Bond Index Advantage Class (FSITX) and Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX). 

But I'm in the 28% tax bracket so these fund are inefficient in taxable accounts. I was thinking of investing in either the Vanguard Intermediate-Term Tax-Exempt fund (VWITX) or, since I live in MA, the Vanguard MA Tax-Exempt Fund (VMATX). Returns are a little higher on the latter, but maybe not enough to make up for the narrower diversification.

How do you deal with bonds in taxable accounts?

Joel

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Re: Bonds in taxable accounts?
« Reply #1 on: May 28, 2014, 09:53:59 PM »
I keep my bonds in my tax deferred accounts like IRAs and 401ks. You should be looking at your asset allocation as a whole and not each account individually.

butchmonkey

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Re: Bonds in taxable accounts?
« Reply #2 on: May 28, 2014, 10:59:52 PM »
Placing Muni bond funds in your taxable accounts is very reasonable.

I preferentially place text me efficient funds with big-time growth potential in my tax-sheltered accounts (like reit's and small-cap value funds.)



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kmm

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Re: Bonds in taxable accounts?
« Reply #3 on: May 29, 2014, 05:46:50 AM »
I keep my bonds in my tax deferred accounts like IRAs and 401ks. You should be looking at your asset allocation as a whole and not each account individually.

Good point. I have thought about that but do like the notion of a relatively stable but liquid part of my portfolio as well.

Scandium

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Re: Bonds in taxable accounts?
« Reply #4 on: June 02, 2014, 08:44:52 AM »
I keep bonds in my 401k account, but been thinking about having some in my taxable account as well. As sort of a 2nd emergency reserve, that's more secure than my equities. Not much, maybe just ~10k or so. Would muni bonds or a tax-free bond fund be best for this? What about a treasuries ETF or TIPS?

I use Schwab and see they have:
SWNTX   Schwab Tax-Free Bond Fund ER=0.49%
SCHO   schwab short-Term U.S. treasury ETF ER=0.08
SCHP   schwab U.S. tips ETF ER=0.07%

The ER on the tax-free fund is really high so not so keen on that, and the two others would incur income tax. But for the amounts I'm putting in maybe not such a big deal (a guesstimate show maybe $100/year or less?)
Other option seems to be buying muni bonds outright.
« Last Edit: June 02, 2014, 09:44:31 AM by Scandium »

TreeTired

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Re: Bonds in taxable accounts?
« Reply #5 on: June 02, 2014, 08:49:58 AM »
Placing Muni bond funds in your taxable accounts is very reasonable.

I preferentially place text me efficient funds with big-time growth potential in my tax-sheltered accounts (like reit's and small-cap value funds.)



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butchmonkey

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Re: Bonds in taxable accounts?
« Reply #6 on: June 02, 2014, 09:00:47 AM »

Placing Muni bond funds in your taxable accounts is very reasonable.

I preferentially place text me efficient funds with big-time growth potential in my tax-sheltered accounts (like reit's and small-cap value funds.)



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