Recommendation for Tax Efficient Investments for Home and Car (3-10 Year Time Frame)

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JohnWild
Posts: 18
Joined: Mon Aug 03, 2015 9:22 am

Recommendation for Tax Efficient Investments for Home and Car (3-10 Year Time Frame)

Postby JohnWild » Mon Mar 20, 2017 12:27 pm

SHORT VERSION:

Please recommend a Vanguard product(s) that are tax efficient (they will be held in a taxable account) that would be a good place to put money needed for:
-(1) Part of a downpayment for a home in the next 3-8 years
-(2) Part of a downpayment for a car in the next 5-10 years

I am willing to take some risk with this money as it would not be the end of the world if I had lost a substantial portion of it when it came time to use it. I envision the allocation being approximately 40-60% bonds and 60-40% equities. I am comfortable with that allocation.

LONG VERSION:

-I have a fully paid off home that is worth approximately 280k (give or take 20k-30k)
-I have a fully paid off car that I plan on driving for at least another 5 years. Any car I purchase thereafter will be no more than $25,000 (and likely closer to $18k-$22k). I try to keep cars for 10 years.
-I foresee purchasing a new home in the next 3-8 years. I do not know how much it will be. I will most likely sell my current home and use that as a substantial downpayment (I am unlikely to keep it as a rental property).
-I am relatively young at 29 years old.
-I have a relatively high income (approximately 250k)

Presently, I have two separate investments in Wellesley (VWINX): 25.7k for the home and 10.3k for the car. Initially, I liked VWINX (and still do), but I think it would be prudent to move to something more tax efficient given my high income.

I am willing to take some risk with this money as it would not be the end of the world if I lost a substantial portion of it when it came time to use it. I envision the allocation being approximately 40-60% bonds and 60-40% equities. I am comfortable with that allocation.

What would you recommend? I am open to using multiple investments to achieve a tax efficient allocation. I like VTMFX (Vanguard Tax-Managed Balance Fund), but I have read about a 5 year holding period (which would be a nonstarter at least for the home). I cannot find any reference to a 5 year holding period on Vanguard’s website though.

I appreciate all help and recommendations.

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ray.james
Posts: 765
Joined: Tue Jul 19, 2011 4:08 am

Re: Recommendation for Tax Efficient Investments for Home and Car (3-10 Year Time Frame)

Postby ray.james » Mon Mar 20, 2017 1:40 pm

vanguard limited term tax exempt is what I use for 2-4 year horizon on my house purchase.
When in doubt, http://www.bogleheads.org/forum/viewtopic.php?f=1&t=79939

aristotelian
Posts: 1592
Joined: Wed Jan 11, 2017 8:05 pm

Re: Recommendation for Tax Efficient Investments for Home and Car (3-10 Year Time Frame)

Postby aristotelian » Mon Mar 20, 2017 2:00 pm

You could try to create a DIY version of Wellesley except with some amount of muni's on the bond side. Something like:

35% Vanguard Total Stock Market
20% Vanguard Long Term Tax Exempt
20% Vanguard Intermediate Term Tax Exempt
25% Vanguard Short Term Corporate

You could also save in ibonds, which are tax deferred (although you would have to pay when you cash them in).


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