spsbo1 wrote:Hi guys,
OK, I've spoken to our 401K guy and he said I have the following options for bonds if I want them:
EVGOX ER 1.14%
IPFIX ER 0.96%
Either of these a contender do you think?
I don't think those are good options. Currently the yields on most bonds are in the 1.5-3% range, unless you take a lot of risk, which kind of defeats the purpose of owning bonds. A fund with an expense ratio of 1% reduces the 1.5-3% yield to 0.5-2%, or (more typically) the fund has to take a lot more risk to achieve a competitive return. So basically by investing in those funds, the fund is taking 30-70% of the return (or making you invest in risky bonds).
I like the Vanguard rep's advice, but would recommend modifying it slightly
Convert Total Bond Market to a 50/50 mixture of NY Long-term Tax Exempt Admiral shares (VNYUX
) and Intermediate Term Tax Exempt Admiral shares (VWIUX
). Both of these funds have expense ratios of 0.12%, minimum investments of $50K for the Admiral shares, and durations of 5-6 years (the NY fund is called "long term" but this is a misnomer).
The NY fund will be free of federal, state, and city taxes. The national fund will be free of federal taxes only. Both are free from AMT.
The NY fund gives a better deal tax-wise. But if there were to be a downturn in the local economy, this might impact your business as well as the credit rating (and price) of the NY fund's bonds. So that's why I would advise putting some of the money in the national fund.
Most of my posts assume no behavioral errors.