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Learning, Sharing, and Teaching => Investor Alley => Topic started by: MsPeacock on February 01, 2016, 12:54:05 PM

Title: Parking medium to long-term money...
Post by: MsPeacock on February 01, 2016, 12:54:05 PM
I have incomed out of IRAs and I max my 401K. I would like to move some of my cash - about $20,000 into another fund and use also use the account as a place to put monthly contributions that aren't going into a IRA any more. Most of my money is in S&P index funds and/or target retirement (TSP and Vanguard). I have some in a IRA bond fund as well that has averaged about 5% for the past 20 years or so.

So - my question is - where? My temptation is another bond fund (the current is mostly US treasury fund). If so, any recommendations or should I stick w/ the current fund that has done pretty well. This money is being taken from my "emergency stash" to a longer term account. I'm leaving enough money for emergency in the current savings account. I would like a lower risk (than stocks) profile for this particular pot of money.

Also - tax exempt funds ??? - is there a reason to invest in these? I don't have millions of dollars (yet!?!) so I don't earn much taxable interest at this point. There are some funds that look like they have pretty good returns (consistent with other bond funds). I just don't really understand the tax exempt issue - is this just when you sell or tax on the dividends or ?

I am pretty noob at all of this - forgive me if these are overly basic questions or should be obvious. I did reading on Vanguard and other sources online and I am still confused, so I wanted to ask the experts there.
Title: Re: Parking medium to long-term money...
Post by: Interest Compound on February 02, 2016, 07:23:00 AM
You should look at your portfolio as a whole. The retirement accounts and the taxable accounts together, with a single asset allocation. That way, you can place each component for maximum tax efficiency. Here's a good resource that explains it:

https://www.bogleheads.org/wiki/Principles_of_tax-efficient_fund_placement

(https://i.sli.mg/2RP22F.png)

(https://www.bogleheads.org/w/images/thumb/0/03/Slide2.JPG/650px-Slide2.JPG)

(https://www.bogleheads.org/w/images/thumb/4/4a/Slide5.JPG/650px-Slide5.JPG)

Regarding municipal bonds, here's a thread on how to calculate if it makes sense for you:

When to use Municipal (tax-exempt) bonds (http://forum.mrmoneymustache.com/investor-alley/when-to-use-municipal-(tax-exempt)-bonds/msg855768/#msg855768)

Good luck!
Title: Re: Parking medium to long-term money...
Post by: MsPeacock on February 02, 2016, 07:57:25 AM
Thank you!