Need Suggestions: taxable portfolio, modest risk

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blood_donor
Posts: 119
Joined: Sun May 27, 2007 9:36 pm
Location: Metro Detroit, MI

Need Suggestions: taxable portfolio, modest risk

Post by blood_donor » Sun Sep 30, 2012 3:59 pm

I have about $100k that I need to allocate in a taxable portfolio. Goals for this money: keep up with inflation, maybe throw off a little income which can be shunted into Roth IRA and kids 529s. I would say we are "moderate" in terms of tolerance to fluctuation.

My initial thought was a 50/50 split, bonds (TIPs and Corp) and Stocks (slanted towards income, e.g. DVY type fund).
Am I wrong to be nervous about municipal bond funds?

What do you guys suggest? Specific suggestions appreciated.

P.S. I already have 6-9months of emergency cash in a different account.

sport
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Joined: Tue Feb 27, 2007 3:26 pm
Location: Cleveland, OH

Re: Need Suggestions: taxable portfolio, modest risk

Post by sport » Sun Sep 30, 2012 4:47 pm

Take a look at Vanguard Tax Managed Balanced Fund VTMFX. It is 50/50 stocks/bonds.

Jeff

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grabiner
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Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: Need Suggestions: taxable portfolio, modest risk

Post by grabiner » Sun Sep 30, 2012 8:55 pm

blood_donor wrote:I have about $100k that I need to allocate in a taxable portfolio. Goals for this money: keep up with inflation, maybe throw off a little income which can be shunted into Roth IRA and kids 529s. I would say we are "moderate" in terms of tolerance to fluctuation.

My initial thought was a 50/50 split, bonds (TIPs and Corp) and Stocks (slanted towards income, e.g. DVY type fund).
Am I wrong to be nervous about municipal bond funds?
Corporate bonds are just as risky as munis, and in a high tax bracket, munis earn more than corporate bonds of comparable risk. High-dividend stocks also lead to higher tax bills, particularly if the tax break on qualified dividends is allowed to expire at the end of 2012. The three funds I would normally recommend in a taxable portfolio are Total Stock Market, Total International, and either Intermediate-Term Tax-Exempt or a muni fund for your state. IBonds are better than TIPS in a taxable account, although the amount you can buy is limited.

I would recommend viewing everything as one portfolio. If you want to have 50% stock, then your total retirement holdings should be 50% stock, but your taxable portfolio could be 100% stock if it is less than half your total portfolio, or 67% stock (and your retirement accounts 100% bonds) if the taxable account is 3/4 of your portfolio and thus 67% of the taxable account is your whole stock allocation.
Wiki David Grabiner

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