Author Topic: Liquid investment: Munic bond VNYTX?  (Read 553 times)

Greatoutdoors

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Liquid investment: Munic bond VNYTX?
« on: June 16, 2019, 08:28:09 PM »
I just recent sold a property and now sitting on a reasonably amount of cash.  Not feeling optimistic of putting it all in the stock market at this stage despite the advice of not timing the market.

Instead I'm considering liquid investment options over the next 12-18 months and have considered Vanguard NY Municipal bonds VNYTX. I believe the average duration is around 6 year and seems like the interested rate forecast to the end of 2020 is most like a rate decrease which should mitigate some of the risk. 

Thoughts on whether this makes sense? 

secondcor521

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Re: Liquid investment: Munic bond VNYTX?
« Reply #1 on: June 17, 2019, 03:15:13 PM »
Vanguard's description of the fund is:

"This low-cost municipal bond fund seeks to provide federally tax-exempt and New York state tax-exempt income and typically appeals to investors in higher tax brackets who reside in New York. The fund holds high-quality long-term New York municipal bonds with an average duration of approximately 610 years, making its share price considerably more susceptible to changes in interest rates than shorter-term bond funds. Investors who are looking for a fund that may provide federal and New York state tax-exempt interest income and can tolerate interest rate risk may wish to consider this fund."

(https://investor.vanguard.com/mutual-funds/profile/VNYTX)

So at a minimum I would think you would need to be a resident of New York state and have a high marginal tax rate.

Interest rate predictions are currently for a cut or two the rest of this year.  However, as recently as January of this year, the interest rate predictions were for three increases this year.  So as the economic forecast changes, the interest rate predictions change, and these can happen pretty regularly.  In other words, I wouldn't count on them.

If you invest in this fund, you're concentrating your bet on the health of New York municipalities, rather than public companies across the entire country.  That may turn out to be a good or a bad bet, but the concentration makes it inherently riskier one.  As an example of this risk, the prospectus mentions some interactions between New York bonds and the TCJA that would affected the funds' returns.

Greatoutdoors

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Re: Liquid investment: Munic bond VNYTX?
« Reply #2 on: June 17, 2019, 07:33:28 PM »
Thanks for the feedback, I am a NY state resident and currently earning in the highest margin tax bracket.   In addition, I only  have flexibility in the tax investment account which is what made this investment more appealing.

MustacheAndaHalf

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Re: Liquid investment: Munic bond VNYTX?
« Reply #3 on: June 18, 2019, 01:07:43 AM »
Is this money for retirement, or money to buy another house in the next year or two?

Maybe you could invest the sale proceeds in chunks, instead of all at once.  You mentioned a 12-18 month time frame.  What about dividing the sale proceeds into 4 or 6 chunks, and investing one chunk per quarter.  Then it will take you 12-18 months to go from 100% cash to 100% equities.

MoneyGoatee

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Re: Liquid investment: Munic bond VNYTX?
« Reply #4 on: June 18, 2019, 12:44:54 PM »
I have the Admiral Share VNYUX and it is essentially printing money for me due to tax exemption and 4.8% historical gains, better than the pre-tax gains of some of my taxable bonds.  I'm so glad I went all in on this N years ago, which has now turned into $110k.