The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: kmm on May 28, 2014, 08:58:13 PM
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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?
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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.
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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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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.
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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.
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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.)
Sent from my iPhone using Tapatalk
How is that iPhone Tapatalk working out for you?
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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.)
Sent from my iPhone using Tapatalk
How is that iPhone Tapatalk working out for you?
Haha. He shoots he scores.
Well for me, not so well for those who read my entry's.
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