SpringMan wrote:Since you live in a state with a state income tax you could avoid state tax by holding a treasury fund in your taxable account instead of short term investment grade which is corporate. Treasuries don't pay as much as corporates so it may not make much difference.
The yield on ST Treasury is a mere 0.22%, which manages to make the 1.20% on ST Investment Grade looks generous. I always take state taxes into consideration. It was a consideration several years back when I used to own ST Bond Index which holds a substantial amount of treasuries.
Actually, I can't figure out any reason a rational being would buy ST Treasury at current yields. They could instead go with ST Tax-Exempt (which is really an ultra-short bond fund, despite the name) and get a 0.42% yield. That's a better deal even before you considers taxes! As I said above, I did move half the GNMA money into ST TE. I'm willing to make the wild & crazy bet that high-grade munis won't default within the average of one year they have till maturity. Unless one expects doomsday where state & local governments all go belly up, I can't figure out why ST Treasury has any assets at all, other than the inertia of investors not paying attention or deceased investors.