which bond fund should I use?

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hudson4351
Posts: 307
Joined: Fri Aug 10, 2007 8:30 pm

which bond fund should I use?

Post by hudson4351 » Mon Oct 13, 2014 11:09 am

I am opening a taxable account that will contain ~40% bonds and am trying to determine which of the following bond funds I should use:

Vanguard Intermediate Term Treasury: https://personal.vanguard.com/us/funds/ ... INT#tab=1a
Vanguard Intermediate Term Tax-Exempt: https://personal.vanguard.com/us/funds/ ... INT#tab=1a
Vanguard Total Bond Market Index: https://personal.vanguard.com/us/funds/ ... INT#tab=1a

All 3 seem to have similar duration and Morningstar style boxes. I am in the 28% tax bracket, which is why I am considering the tax-exempt fund, which seems to give better after-tax performance than the other two based on historical data. Yes, I realize past performance is not an indicator of future results, but isn't the conventional wisdom around here that anyone > 25% tax bracket should consider the tax exempt fund? Also I live in a state with no state income tax, if it matters.

Also I am putting bonds in taxable because this portfolio may not necessarily be used for retirement and therefore has its own AA that is separate from my retirement accounts.

Are there any other factors I should consider here when deciding which of the above 3 funds to choose? What would be a reason for me to choose the intermediate term treasury or total bond market index over the intermediate term tax exempt?

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steve roy
Posts: 1583
Joined: Thu May 13, 2010 5:16 pm

Re: which bond fund should I use?

Post by steve roy » Mon Oct 13, 2014 11:29 am

Vanguard Intermediate Tax Exempt is my bond fund of choice in taxable space. Like the duration, quality and performance a lot.

poker27
Posts: 728
Joined: Mon Apr 01, 2013 2:48 pm

Re: which bond fund should I use?

Post by poker27 » Mon Oct 13, 2014 11:36 am

I also use the tax exempt fund in my taxable space for the same reasons.

hudson4351
Posts: 307
Joined: Fri Aug 10, 2007 8:30 pm

Re: which bond fund should I use?

Post by hudson4351 » Tue Oct 14, 2014 10:43 am

Bump - any other comments?

malloc
Posts: 459
Joined: Sat Dec 01, 2007 10:14 am

Re: which bond fund should I use?

Post by malloc » Tue Oct 14, 2014 10:55 am

If you live in a state with high state income tax (cf California) you might consider the state tax exempt fund.

Billyboy
Posts: 204
Joined: Mon Mar 24, 2008 2:21 pm
Location: California

Re: which bond fund should I use?

Post by Billyboy » Tue Oct 14, 2014 2:15 pm

Because I live in California and have a 9.3% state tax bracket and the fact I received quite a bit of feedback from Bogleheads on a separate thread, I chose the Vanguard California Intermediate-Term Tax-Exempt Fund Admiral Shares (VCADX) .12 ER for my taxable account.
Bill

Billyboy
Posts: 204
Joined: Mon Mar 24, 2008 2:21 pm
Location: California

Re: which bond fund should I use?

Post by Billyboy » Tue Oct 14, 2014 2:19 pm

Don't think I would use all 40% in the above though!

nobsinvestor
Posts: 302
Joined: Sat Jul 19, 2014 1:36 pm

Re: which bond fund should I use?

Post by nobsinvestor » Tue Oct 14, 2014 2:37 pm

You should probaby split your taxable bond allocation 50/50 between the CA muni fund and the national muni fund. I wouldn't feel comfortable either putting most/all of it in a state fund

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