Help with Tax Free Bond Fund

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Topic Author
simpatico
Posts: 85
Joined: Thu Jan 19, 2012 11:20 am

Help with Tax Free Bond Fund

Post by simpatico »

Hello, I am trying to prepare for the next year tax increases. I've sold all the stocks in my Schwab brockerage account. Will increase stock exposure in my tax-deffered accounts to keep the ballance. Now I have $150000 to invest. I am looking at getting tax free bond fund for 3/4 of the money and international fund for the rest.
Questions:
1. Is it a good strategy? If not - what to do then?
2. Which fund can you recomend?
Thanks a lot in advance!
Occupier
Posts: 284
Joined: Wed Feb 01, 2012 9:21 pm

Re: Help with Tax Free Bond Fund

Post by Occupier »

Just holding an international stock fund and a muni fund is not a good strategy. Basically your just taking two eggs from a basket of many. If you said a total market US and a total market international and a muni bond fund, then fine, you have diversity. For the muni fund take a look at the etf TFI. Dave
Topic Author
simpatico
Posts: 85
Joined: Thu Jan 19, 2012 11:20 am

Re: Help with Tax Free Bond Fund

Post by simpatico »

Thank you! The only reason that I didn't want to include the total market stock fund is that I already have it in 401K. So I was trying to implement the allocation based on the portfolio as a whole... Thank you for the tip on TFI. It looks good. Do you have any suggestions for the international and stock funds?
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jjunk
Posts: 957
Joined: Fri Aug 24, 2012 9:52 pm
Location: Seattle

Re: Help with Tax Free Bond Fund

Post by jjunk »

I'd personally recommend you do a little more reading on asset allocation before you invest this money so you understand what you're investing in and why you're investing in it. That said, VTI/Vanguard Total Stock (or Fidelity Total Stock) and their corresponding International (VXUS for Vanguard ETFs) are the generally recommended funds.
Topic Author
simpatico
Posts: 85
Joined: Thu Jan 19, 2012 11:20 am

Re: Help with Tax Free Bond Fund

Post by simpatico »

Well, I did some reading, may be not enough...:)) I want to invest in muni fund in a taxable account to pay avoid paying taxes on dividends. And I wanted international fund in taxable account to utilize foreign creadi if possible. Is something wrong with that strategy?
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jjunk
Posts: 957
Joined: Fri Aug 24, 2012 9:52 pm
Location: Seattle

Re: Help with Tax Free Bond Fund

Post by jjunk »

For the two specific asset classes, no, there's nothing wrong with that. I think the point overall is that you'd need to figure out your asset allocation first and then fill your "buckets" based on tax advantages from there (see: http://www.bogleheads.org/wiki/Principl ... _Placement)

So for example and simplicity, say you have 100k and you want a 60/40 stocks to bonds split. You'd want to fill as much tax advantaged space (401k, Roth, etc) with bonds. If you only have 25k of tax advantaged space, then you'd still need 15k in bonds to complete your allocation. In this case, you'd want to use muni-bonds for that 15k because it would be in taxable and would minimize your taxes. All of your stock holdings would be in taxable and you'd split that 60k between which equity classes you'd chosen (US/Intl/REIT/etc)
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