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Your thoughts please..

Posted: Tue Dec 11, 2012 7:04 pm
by poppa23
Ive posted before.. just trying to finalize how invest ...I am conservative with a large sum in calif muni individual bonds. Im trying to diversify a bit away from that for obvious reasons. My asset allocation is 70 percent fixed income and 30 percent equities. I am a higher wage earner so Vanguard has suggested Interm Term Tax Exempt Nat Muni fund, Total Stock Market and Total International in appropriate portions. Two questions.. 1. Does this look appropriate. I dont see much of any overlap. Costs appear fine.. 2. With the yield of Interm Tax Exempt at 1.49 and avg maturity at 5.5 years, what is the benefit of this as opposed to a 5 year ally cd paying 1.60 as the cd is totally secure, wont lose money etc. and minimal penalty to break it if and when rates go up. Your thoughts please..

Re: Your thoughts please..

Posted: Tue Dec 11, 2012 7:13 pm
by midareff
The Intermediate Tax Exempt Muni is paying a monthly distributio that has ranged from 3.0 to 3.1% annualized lately. Compared to many other bond funds it has higher price stability in down markets. I am using the fund for a monthly fixed redemption draw which will last from now (age 65) to my RMD at the April following my attaining 70 1/2 . What works for me may not work for you. 3% tax exempt w/ 1.9% inflation and relative price stability for this niche need in my portfolio works for me.

I consider this (and a years expenses over pension ans SS at Ally Bank) more a cash holding than bonds, which are about 50% of my portfolio.

Hope it helps

Re: Your thoughts please..

Posted: Tue Dec 11, 2012 7:16 pm
by Khanmots
My understanding is that you'll pay federal taxes on the CD interest but not on the interest paid by the municipal bond fund (capital gains/losses are still taxed though).

Also, I don't think that ally has to allow you to break the CD if they don't want to, think there's some weasel words in there, but I'm just going by hearsay as I haven't read the terms and conditions for myself.

Re: Your thoughts please..

Posted: Tue Dec 11, 2012 7:17 pm
by Call_Me_Op
Can you purchase the CD and stay within FDIC limits? If not, that makes it unattractive as an option.

Re: Your thoughts please..

Posted: Wed Dec 12, 2012 10:03 am
by ihckennedy
If you're a high wage earner, you're obviously still working (not retired), in which case I question your assertion that you're a "conservative" investor. Presumably conservative investors' main goal is to preserve the value of their capital. This means that you have to take inflation into account. Since there's a pretty high probability your bond portfolio will generate little or no return after inflation over the next five or ten years, I wouldn't call that "conservative." If you just can't deal with the equity market's short-term volatility, I would recommend you hire an investment adviser to manage your money for you. Yes, this is expensive--and you need to work hard to find the right adviser--but in the end you'll have a more appropriate portfolio and someone else to worry about it!

Re: Your thoughts please..

Posted: Wed Dec 12, 2012 10:32 am
by poppa23
Im a conservative investor because I have a conservative asset allocation. 70/30 bond stock. As far as seeing the stock market go up down Im not too concerned about that. I dont need a manager but thank you for the advise. As far as return on my bonds my average yield to maturity is 4.5 double tax free so Im ok. If you would like to actually take a stab at helping me with my specific question that would be helpful. If not thanks for your input to date..

Re: Your thoughts please..

Posted: Wed Dec 12, 2012 11:04 am
by carolinaman
If you are looking at munis another to consider is Vanguard HY Muni (VWAHX). It has yield of 2.27% and despite its name, owns mostly higher grade munis. It has 79% A or better and another 14% in BBB. You may want to limit how much you put in it, but it may be worth a slice of your FI munis.

The following is a good recent article on munis:
http://online.wsj.com/article/SB1000142 ... 29272.html

Best wishes

Re: Your thoughts please..

Posted: Wed Dec 12, 2012 11:19 am
by wwross
poppa23, where is the love? I think Ihckennedy was just trying to help.

Re: Your thoughts please..

Posted: Wed Dec 12, 2012 5:07 pm
by poppa23
No disrespect intended.. just explaining why I called myself a conservative investor. That is why I said thanks for his response to try to get the point across I wasnt trying to be disrespectful...Plenty of love my friend. I value all input. Im not that sharp on my own I can promise you that...