Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
User avatar
SanityCheck
Posts: 31
Joined: Thu Feb 19, 2015 9:40 am

Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by SanityCheck » Fri Mar 31, 2017 10:28 am

It is interesting to read the member contributions over the years about this fund; from a safety and security standpoint. There are certainly folks with concerns about any NAV movement, underlying security duration / credit risk etc. But then there are quite a few folks with this type of attitude; where they are happy to continual get their monthly distibutions - and don't seem to care about their overall balance fluctuating.


"Personally, I too have a substantial amount in the fund.
I rarely to never pay attention to the NAV."

"I never pay attention to the NAV."
[/b

If you own this fund; and have this later attitude.......can you provide some more insight into your thoughts ? Is it because you have so little money in this fund that any NAV losses don't matter ? Or is it that you have such a large amount in this fund that the monthly distributions are all you really need to comfortably live currently or in retirement ? And is there ANY level of NAV descrease that would make you re-think your attitude ?
Thanks!

User avatar
Sandtrap
Posts: 3614
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii😀 Northern AZ.😳

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by Sandtrap » Fri Mar 31, 2017 10:32 am

I would be very interested in the fund that has the "higher sleep factor", Vanguard Total Bond . . or. . . Vanguard Intermediate Term . . or Vanguard Intermediate Term Tax-Exempt. :?:

goingup
Posts: 2865
Joined: Tue Jan 26, 2010 1:02 pm

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by goingup » Fri Mar 31, 2017 10:55 am

Your question makes me think that you're not comfortable with all bond NAV fluctuation. All bond prices fluctuate. This is a great fund for folks in higher tax brackets who want an intermediate muni fund. It's a high-quality and low cost.

25% of our bond/cash portfolio is in this fund. I don't worry about NAV fluctuation, though did tax-loss harvest in the 4th quarter last year. Monthly distributions are reinvested. I will only rethink owning it if our tax situation changes.

User avatar
Steelersfan
Posts: 3380
Joined: Thu Jun 19, 2008 8:47 pm

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by Steelersfan » Fri Mar 31, 2017 11:08 am

I use this in my taxable account (and have for at least a decade) since I don't have enough room in my retirement account to hold all the bonds I need to meet my desired asset allocation.

I pay little attention to the NAV. If interest rates suddenly start climbing I might pay more attention to it, but likely won't do anything since I'm investing for the very long term.

keystone
Posts: 471
Joined: Tue Aug 28, 2012 12:34 pm

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by keystone » Fri Mar 31, 2017 11:13 am

I keep my "emergency" fund in this fund and I don't care about changes in NAV. I'm in it for the long haul and if rates start to go up, I'll start to earn more interest. This fund has an acceptable level of risk for me.

dbr
Posts: 25355
Joined: Sun Mar 04, 2007 9:50 am

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by dbr » Fri Mar 31, 2017 11:26 am

My view, though I don't hold this particular fund, is that fluctuating value is the nature of the beast regarding most investments most of us would hold. To somehow avoid fluctuating value means that it is hardly possible to invest in any practical sense. That being the case one faces the issue head on and determines how much trade-off suits one between risk and return.

I don't think fluctuating value in and of itself translates into "safe" or "unsafe." I think the word "safe" as often used by investors tends to be a somewhat meaningless concept. A better approach is to consider how well suited one's investing is to one's needs and objectives and to consider the likelihood and severity of undesired consequences to those objectives. The possible fluctuating value of most reasonable bond funds does not usually loom large for most people. If there is a possibility of something that does loom large, that that needs to be taken seriously, of course.

GMT-8
Posts: 124
Joined: Fri Mar 26, 2010 5:11 pm

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by GMT-8 » Fri Mar 31, 2017 1:36 pm

Dear SanityCheck,

The ability to sleep well at night comes with experience, and practice.

As a portfolio grows over the years, it means that the size of the nightly fluctuation in value grows. I was first troubled by a daily variation of $5k, then got used to it and could be happy with $10k, then eventually $50k per day, etc. I am basically in the 3-fund strategy, with a couple others from 401(k) and 403(b) accounts, so there aren't too many moving pieces.

I tend to check the entire portfolio once or twice a week, only when I am nearing a threshold like $1M, $2M, etc. just to see when I go over (if only for 1 day, it still gives me something to celebrate, even if the next day it drops again).

The rest of the time it's too boring to bother and so I don't check. I don't have this particular fund but I do have a bunch in the California tax-exempt municipal funds.

GMT-8

harvestbook
Posts: 385
Joined: Sat Mar 18, 2017 7:12 pm

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by harvestbook » Fri Mar 31, 2017 1:49 pm

I hold intermediate tax-exempt in my taxable portfolio as well as a total bond (which of course I will be shifting over to IRA when I get some room there). I've noticed they perform slightly differently but I really don't care that much--that's ballast to keep me from doing something stupid and I'm at least 15 years from tapping it. So yes it all helps me sleep better because I'm less likely to get flushed out in a crash/correction.
I'm not smart enough to know, and I can't afford to guess.

Naikansha
Posts: 252
Joined: Tue Nov 09, 2010 8:32 pm

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by Naikansha » Fri Mar 31, 2017 2:33 pm

I currently transfer monthly income from this fund to my savings account. Together with unused sums from my pension (also in the savings account) I can prepare easily for one or more large payments in 1-3 years. When I don't anticipate any such payments, I return to reinvesting the monthly income payments. Over time, I have been able to tax-loss harvest twice from the fund (rotating between intermediate and short term tax-exempt). Tax-advantages and overall flexibility with regard to my shifting financial needs makes Vanguard Intermediate-Term Tax Exempt far more useful than my I-bonds and cds.

User avatar
Kenkat
Posts: 3931
Joined: Thu Mar 01, 2007 11:18 am
Location: Cincinnati, OH

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by Kenkat » Fri Mar 31, 2017 2:47 pm

I have owned this fund since 1994 and I think it has only actually had a negative return in two or maybe three of those years. So, I do not worry about the NAV of this fund at all.

jdb
Posts: 1266
Joined: Wed Dec 05, 2012 8:21 pm

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by jdb » Fri Mar 31, 2017 4:19 pm

This Vanguard intermediate tax exempt fund together with the long term tax exempt fund and the short term tax exempt fund are the three legs of our FI taxable portfolio stool. I also reluctantly did tax loss harvesting on the intermediate and long term but got back in as soon as 30 day window expired. In my opinion these are all great Vanguard funds for taxable accounts especially if in higher income tax brackets. And do not pay much attention to NAV fluctuations, to paraphrase the old Jamaican song, why worry? Good luck.

User avatar
Toons
Posts: 12473
Joined: Fri Nov 21, 2008 10:20 am
Location: Hills of Tennessee

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by Toons » Fri Mar 31, 2017 4:49 pm

I own Vanguard Intermediate Term Tax Exempt.
I invest in it for the tax free income it produces.
I pay no attention to the NAV.
I have no control over that.
It produces tax free income,
I sleep well
Owned it for years.
:happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

pkcrafter
Posts: 12390
Joined: Sun Mar 04, 2007 12:19 pm
Location: CA
Contact:

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by pkcrafter » Fri Mar 31, 2017 5:18 pm

The fund was down 1.5% in 2013 and in the big stock crash of 2008, it was down 0.1%. Volatility over the past 5 years was 3.3. Total stock market was 15. It's A rated, so I don't know why anyone would be concerned with holding it.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

Geologist
Posts: 1157
Joined: Fri Jan 02, 2009 7:35 pm

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by Geologist » Fri Mar 31, 2017 6:07 pm

I have bought shares as low as about $12.80 so I'm not concerned about the fluctuations of NAV that are likely. If it should fall, then this creates a tax loss harvesting opportunity as well.

User avatar
dratkinson
Posts: 4075
Joined: Thu Jul 26, 2007 6:23 pm
Location: Centennial CO

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by dratkinson » Fri Mar 31, 2017 6:15 pm

SanityCheck wrote:...
If you own this fund; and have this later attitude.......can you provide some more insight into your thoughts ? Is it because you have so little money in this fund that any NAV losses don't matter ? Or is it that you have such a large amount in this fund that the monthly distributions are all you really need to comfortably live currently or in retirement ? And is there ANY level of NAV descrease that would make you re-think your attitude ?
Thanks!
Data point. During a crash, stocks can lose 50-90%, bonds can lose 5-15%. Stock/bond crashes not typically coincidental.
Bottom line. Don't sweat owing good bonds.


Another option. If you LBYM (live below your means) and have enough income (salary, pension, SS, inheritance, lottery winnings,...), then you also don't worry about any loss in (IT muni) NAV. Instead you hold it because you need bonds, taxable is your only available space, are in the 25%+ fed tax bracket, and are thankful for the muni's tax-efficient dividends.

In my case, I've extended above to believe that more TE dividends (within reason) are preferable to less, so have extended my muni ownership to include both LT national and IT single-state muni funds. (I've drawn the line at HY munis.)

Naikansha wrote:... Over time, I have been able to tax-loss harvest twice from the fund (rotating between intermediate and short term tax-exempt). Tax-advantages and overall flexibility with regard to my shifting financial needs makes Vanguard Intermediate-Term Tax Exempt far more useful than my I-bonds and cds.
+1. I now also prefer munis to CDs/savings bonds. As a visual learner and new investor, it required several years before I too realized that I preferred muni funds over CDs and savings bonds. Why? It took that long for the hassle* of chasing CD rates/rollovers, non-refillable annual savings bond contribution limits, lower after-tax income, and needing to login to manage another account... to sink in. I came to this realization in 2013, didn't play the "IRS paper ibond tax refund game" in 2014, and sold all my (paper/electronic) savings bonds in 2015. Haven't missed them since. (*You can also add the hassle of trying to redeem paper savings bonds locally: original bank seller wouldn't redeem them, multiple phone calls to find bank/CU that would, 2hrs for paperwork + sitting politely though personal banker's sales pitch, 1wk to cash in hand. Others report having an easier time.)


Bank teaser rates. I've since learned that munis make me immune to bank teaser rates. Why? My single-state muni has a TEY (taxable-equivalent yield) north of 3%. And my national munis are "daily accrual" so can be sold at anytime without loss of tax-preferential dividend treatment (no early withdrawal penalty).


TLH. I'm looking forward to my first muni TLH this year. I've noticed that I'm (again) being greedy and hoping for a single TLH of $3K, so it's "one and done" for the year. But if I'm not careful, I'll wait too long, lose the loss and end up with another profit... like I did last year.


Behavioral investing: cognitive dissonance. Once you begin looking to maximizing a TLH, you begin to cheer it on. And it's impossible to worry about something you're cheering for.


I generally sleep well. Though I did wake up during the night recently... worrying about a home improvement project.
Last edited by dratkinson on Mon Apr 03, 2017 8:53 am, edited 1 time in total.
d.r.a, not dr.a. | I'm a novice investor, you are forewarned.

hudson
Posts: 1274
Joined: Fri Apr 06, 2007 9:15 am

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by hudson » Fri Mar 31, 2017 6:58 pm

You've probably already read Larry Swedroe's Bond Book. He recommends AAA/AA bonds. VWIUX (Vanguard Intermediate-Term Tax-Exempt Fund Admiral Shares) doesn't meet that standard.
Baird's BMBIX (Baird Quality Intermediate Municipal Bond Fund Class Institutional) comes pretty close to AAA/AA.

I like VWIUX and BMBIX and wouldn't hesitate to buy either. I realize that you can lose principal. Dratkinson already said that if the value drops, you can tax loss harvest.

CDs make for better sleeping...but they are as you already know taxable.
Last edited by hudson on Sun Apr 02, 2017 7:56 pm, edited 1 time in total.

JD
Posts: 197
Joined: Fri Jul 18, 2008 11:19 pm
Location: TN

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by JD » Fri Mar 31, 2017 7:37 pm

SanityCheck wrote:It is interesting to read the member contributions over the years about this fund; from a safety and security standpoint. There are certainly folks with concerns about any NAV movement, underlying security duration / credit risk etc. But then there are quite a few folks with this type of attitude; where they are happy to continual get their monthly distibutions - and don't seem to care about their overall balance fluctuating.


"Personally, I too have a substantial amount in the fund.
I rarely to never pay attention to the NAV."

"I never pay attention to the NAV."
[/b

If you own this fund; and have this later attitude.......can you provide some more insight into your thoughts ? Is it because you have so little money in this fund that any NAV losses don't matter ? Or is it that you have such a large amount in this fund that the monthly distributions are all you really need to comfortably live currently or in retirement ? And is there ANY level of NAV descrease that would make you re-think your attitude ?
Thanks!

I used to own this fund and sold it several years ago. I did not sell because it's not a good fund but the State, where we live, has 6% tax rate on dividend and interest (called "Hall Tax"). When (if) this tax is repealed or reduced, then will buy again. I believe this fund is a keeper unless your State collect taxes from investment and if it does then you may want to do your calculation before buying.

User avatar
SanityCheck
Posts: 31
Joined: Thu Feb 19, 2015 9:40 am

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by SanityCheck » Sat Apr 01, 2017 11:32 am

Thanks for all the insightful feedback !.....the different perspectives were very helpful !

radiowave
Posts: 1459
Joined: Thu Apr 30, 2015 5:01 pm

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by radiowave » Sat Apr 01, 2017 12:14 pm

I had VG intermediate TE VWTIX in taxable for a couple years but exchanged it for Total Bond VTSAX. My reason is similar to JD . . . VWITX spits out a lot of dividends over 2.5% and that gets taxed at the state level.I'm in my final decade before retirement, I'm using unrealized gains in my VTSAX funds with the assumption that I'll be in the 15% tax bracket and hopefully will be able to cash out some of those funds at 0% capital gains when I do retire.
Bogleheads Wiki: https://www.bogleheads.org/wiki/Main_Page

scotthal
Posts: 162
Joined: Wed Nov 06, 2013 9:20 pm
Location: Portland, Oregon

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by scotthal » Sun Apr 02, 2017 7:30 pm

I'm retired, living off the portfolio, & trying to stay in the 25% bracket. Hold $200k+ VWIUX in taxable as 2nd tier emergency (or <3year spending bucket); toggling to:from VBTLX to harvest short term losses. Changes in fund NAV don't muck with my sleep schedule, & can be an opportunity.
Growtch, grinch; paranoid contrarian

Gnirk
Posts: 730
Joined: Sun Sep 09, 2012 3:11 am
Location: Western Washington

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by Gnirk » Sun Apr 02, 2017 10:04 pm

Retired for ten years, and DH and I have this fund in our taxable accounts; our tax advantaged accounts are small, just 10% of our total portfolios. So bonds in taxable need to be tax exempt. Nearly all of my bond allocation (65%) is in TE funds. We also have some high quality individual muni bonds which we don't trade, but keep until maturity or when they are ( unfortunately) called. I look at my TE bond funds the same way: I'll only sell them if I need to rebalance.

I invest most of my individual bond muni interest into the intermediate TE fund, and DH uses his as part of our income stream.

hudson
Posts: 1274
Joined: Fri Apr 06, 2007 9:15 am

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by hudson » Mon Apr 24, 2017 8:03 pm

I bolded the parts that I like. LT munis....hmmmm...tempting...a reach for yield :)
dratkinson wrote:
SanityCheck wrote:...
If you own this fund; and have this later attitude.......can you provide some more insight into your thoughts ? Is it because you have so little money in this fund that any NAV losses don't matter ? Or is it that you have such a large amount in this fund that the monthly distributions are all you really need to comfortably live currently or in retirement ? And is there ANY level of NAV descrease that would make you re-think your attitude ?
Thanks!
Data point. During a crash, stocks can lose 50-90%, bonds can lose 5-15%. Stock/bond crashes not typically coincidental.
Bottom line. Don't sweat owing good bonds.


Another option. If you LBYM (live below your means) and have enough income (salary, pension, SS, inheritance, lottery winnings,...), then you also don't worry about any loss in (IT muni) NAV. Instead you hold it because you need bonds, taxable is your only available space, are in the 25%+ fed tax bracket, and are thankful for the muni's tax-efficient dividends.

In my case, I've extended above to believe that more TE dividends (within reason) are preferable to less, so have extended my muni ownership to include both LT national and IT single-state muni funds. (I've drawn the line at HY munis.)

Naikansha wrote:... Over time, I have been able to tax-loss harvest twice from the fund (rotating between intermediate and short term tax-exempt). Tax-advantages and overall flexibility with regard to my shifting financial needs makes Vanguard Intermediate-Term Tax Exempt far more useful than my I-bonds and cds.
+1. I now also prefer munis to CDs/savings bonds. As a visual learner and new investor, it required several years before I too realized that I preferred muni funds over CDs and savings bonds. Why? It took that long for the hassle* of chasing CD rates/rollovers, non-refillable annual savings bond contribution limits, lower after-tax income, and needing to login to manage another account... to sink in. I came to this realization in 2013, didn't play the "IRS paper ibond tax refund game" in 2014, and sold all my (paper/electronic) savings bonds in 2015. Haven't missed them since. (*You can also add the hassle of trying to redeem paper savings bonds locally: original bank seller wouldn't redeem them, multiple phone calls to find bank/CU that would, 2hrs for paperwork + sitting politely though personal banker's sales pitch, 1wk to cash in hand. Others report having an easier time.)


Bank teaser rates. I've since learned that munis make me immune to bank teaser rates. Why? My single-state muni has a TEY (taxable-equivalent yield) north of 3%. And my national munis are "daily accrual" so can be sold at anytime without loss of tax-preferential dividend treatment (no early withdrawal penalty).


TLH. I'm looking forward to my first muni TLH this year. I've noticed that I'm (again) being greedy and hoping for a single TLH of $3K, so it's "one and done" for the year. But if I'm not careful, I'll wait too long, lose the loss and end up with another profit... like I did last year.


Behavioral investing: cognitive dissonance. Once you begin looking to maximizing a TLH, you begin to cheer it on. And it's impossible to worry about something you're cheering for.


I generally sleep well. Though I did wake up during the night recently... worrying about a home improvement project.

Theseus
Posts: 343
Joined: Sat Jan 23, 2016 9:40 am

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by Theseus » Mon Apr 24, 2017 8:16 pm

dratkinson wrote: Data point. During a crash, stocks can lose 50-90%, bonds can lose 5-15%. Stock/bond crashes not typically coincidental.
Bottom line. Don't sweat owing good bonds.
I have heard this mentioned before that stocks can loose 50-90%. Is there any historical data that can back this up? It seems a very bold claim and would be great if I can find some historical data to back it up.

User avatar
Kenkat
Posts: 3931
Joined: Thu Mar 01, 2007 11:18 am
Location: Cincinnati, OH

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by Kenkat » Mon Apr 24, 2017 8:20 pm

Thesues wrote:
dratkinson wrote: Data point. During a crash, stocks can lose 50-90%, bonds can lose 5-15%. Stock/bond crashes not typically coincidental.
Bottom line. Don't sweat owing good bonds.
I have heard this mentioned before that stocks can loose 50-90%. Is there any historical data that can back this up? It seems a very bold claim and would be great if I can find some historical data to back it up.
Stocks lost 86.1% from September 1929 to June 1932. 56.4% from October 2007 to March 2009. Here's some additional data points:

http://www.nbcnews.com/id/37740147/ns/b ... P6ju1QpChA

Theseus
Posts: 343
Joined: Sat Jan 23, 2016 9:40 am

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by Theseus » Mon Apr 24, 2017 8:44 pm

Kenkat wrote:
Thesues wrote:
dratkinson wrote: Data point. During a crash, stocks can lose 50-90%, bonds can lose 5-15%. Stock/bond crashes not typically coincidental.
Bottom line. Don't sweat owing good bonds.
I have heard this mentioned before that stocks can loose 50-90%. Is there any historical data that can back this up? It seems a very bold claim and would be great if I can find some historical data to back it up.
Stocks lost 86.1% from September 1929 to June 1932. 56.4% from October 2007 to March 2009. Here's some additional data points:

http://www.nbcnews.com/id/37740147/ns/b ... P6ju1QpChA
Thank you. Additional data point that can be useful is how long did it take for stock market to recover to the level prior to the crash.

I could use these data points to determine my level of comfort in staying the course in different scenarios.

random_walker_77
Posts: 485
Joined: Tue May 21, 2013 8:49 pm

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by random_walker_77 » Mon Apr 24, 2017 9:15 pm

Thesues wrote:
Kenkat wrote:
Thesues wrote:
dratkinson wrote: Data point. During a crash, stocks can lose 50-90%, bonds can lose 5-15%. Stock/bond crashes not typically coincidental.
Bottom line. Don't sweat owing good bonds.
I have heard this mentioned before that stocks can loose 50-90%. Is there any historical data that can back this up? It seems a very bold claim and would be great if I can find some historical data to back it up.
Stocks lost 86.1% from September 1929 to June 1932. 56.4% from October 2007 to March 2009. Here's some additional data points:

http://www.nbcnews.com/id/37740147/ns/b ... P6ju1QpChA
Thank you. Additional data point that can be useful is how long did it take for stock market to recover to the level prior to the crash.

I could use these data points to determine my level of comfort in staying the course in different scenarios.
The thing is, the 20th century was also known as the American Century. The recovery times for the US market haven't been that bad, but we're also talking about a limited data set on the top performing country. When things get rough, you'll start hearing about the things that could've happened or can happen. 2008 ended well for those who held. If more companies had been allowed to collapse, then that might not necessarily be true. There are examples of other countries where buy and hold didn't work out well, and during a depression, you're likely to see a lot more press about the worst cases. Markets don't always bounce back. See the lost decade in Japan, which later became the lost 2 decades. https://en.wikipedia.org/wiki/Lost_Decade_(Japan)

You've got to be ok with this going in... or you shouldn't have so much in stocks.

(PS, according to this, it was 8 years to recover from 1974: http://www.nytimes.com/2009/04/26/your- ... 6stra.html
Unclear if this took into account inflation. If not, then it was even longer.)

User avatar
wintermute
Posts: 179
Joined: Mon Mar 15, 2010 10:36 pm

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by wintermute » Sun Apr 30, 2017 10:12 pm

This fund has significant interest rate risk. Its duration is currently 5.2 and maturity is 8.7 years, for just 1 point more than savings accounts. And some CDs are 3%, if you are patient.

SGM
Posts: 2489
Joined: Wed Mar 23, 2011 4:46 am

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by SGM » Sun Apr 30, 2017 11:14 pm

I own some of the intermediate tax exempt fund and others in retirement. I don't sweat any change in NAV. I might tax loss harvest and it put it in another tax exempt bond fund. Dividends are not reinvested but cycle through my checking account either to be spent or if not then reinvested where I please.

KyleAAA
Posts: 6427
Joined: Wed Jul 01, 2009 5:35 pm
Contact:

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by KyleAAA » Mon May 01, 2017 8:35 am

Thesues wrote:
Kenkat wrote:
Thesues wrote:
dratkinson wrote: Data point. During a crash, stocks can lose 50-90%, bonds can lose 5-15%. Stock/bond crashes not typically coincidental.
Bottom line. Don't sweat owing good bonds.
I have heard this mentioned before that stocks can loose 50-90%. Is there any historical data that can back this up? It seems a very bold claim and would be great if I can find some historical data to back it up.
Stocks lost 86.1% from September 1929 to June 1932. 56.4% from October 2007 to March 2009. Here's some additional data points:

http://www.nbcnews.com/id/37740147/ns/b ... P6ju1QpChA
Thank you. Additional data point that can be useful is how long did it take for stock market to recover to the level prior to the crash.

I could use these data points to determine my level of comfort in staying the course in different scenarios.
Going back to 1993 because it's really easy using portfolio visualizer, it took 4 years, 5 months to recover from a 50% drawdown starting in 2007 and 5 years, 8 months to recover from a 44% drawdown starting in 2000.

https://www.portfoliovisualizer.com/bac ... ion1_1=100

User avatar
midareff
Posts: 5290
Joined: Mon Nov 29, 2010 10:43 am
Location: Biscayne Bay, South Florida

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by midareff » Mon May 01, 2017 9:08 am

Let's compare VWIUX (IT Tax Ex Admiral) vs. VBTLX (Total Bond Market Admiral) over the last ten years. A $10K starting investment in VWIUX would have resulted in $14,928.56 today per M* vs. $15,170.22 for VBTLX. Total ten year difference is $241.66. ... roughly a .15% annual differential. Virtually any marginal tax rate would make VWIUX the winner. As far as volatility ... generally speaking, the longer the duration the greater the volatility. I believe it was Larry Swedroe who wrote that for a year of duration he looked for 20-25 basis points as compensation. Total twelve month dividends for these two (per M*) is 2.62% for the IT Tax-Ex and 2.25% for Total Bond. Duration is 5.21 years (again per M*) for the Tax-Ex vs. 6.09 years for Total Bond.

I sleep very well with near mid six figures in the IT Tax-Ex fund in taxable and a conservative 44% equity portfolio, retired. IMHO, if you are getting a bit edgy owning this fund you might want to reconsider your risk profile and asset allocation.

User avatar
midareff
Posts: 5290
Joined: Mon Nov 29, 2010 10:43 am
Location: Biscayne Bay, South Florida

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by midareff » Mon May 01, 2017 9:34 am

Thesues wrote:
dratkinson wrote: Data point. During a crash, stocks can lose 50-90%, bonds can lose 5-15%. Stock/bond crashes not typically coincidental.
Bottom line. Don't sweat owing good bonds.
I have heard this mentioned before that stocks can loose 50-90%. Is there any historical data that can back this up? It seems a very bold claim and would be great if I can find some historical data to back it up.
Most recently, an investment in VFIAX (Vanguard S&P500 Index Admiral) of $10,000 on 10/5/2007 would have been worth $4589 on 3/6/2009. That's a decline of slightly more than 54%, which includes reinvested dividends. From 8/31/2000 to 9/30/2002 the decline was greater than 44%. There is nothing at all bold about this other than the courage of those staying the course and following their re-balancing guidelines. They made great money on the way back up. This stuff happens, and happens more regularly than you would think over your investing lifetime.

You can read about some others here. http://www.buzzle.com/articles/worst-st ... years.html as a guideline they say about the 1973-1974 crash .. "Several factors contributed to this stock market crash, including the collapse of the Bretton Woods system, USD devaluation, and the 1973 oil crisis. The DJIA lost 45% of its value - the seventh worst fall. The period also saw a major fall in GDP growth, going down to around -2% from 7.2%, from just two years, back and a rise in inflation to 12.3%.

The UK took the worst hit, with the London Stock Exchange's FT 30 falling by 73%. It was also accompanied by banking and property market crisis, pushing UK to recession. All the major stock markets were also affected, and many losing over 43% of their market value." Keep in mind that was the (only) 7th worst. If you are working and saving for retirement it is extremely psychologically stressful. If you are retired it is worse.

It's why they call it RISK.

alfaspider
Posts: 1107
Joined: Wed Sep 09, 2015 4:44 pm

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by alfaspider » Mon May 01, 2017 10:13 am

KyleAAA wrote:
Thesues wrote:
Kenkat wrote:
Thesues wrote:
dratkinson wrote: Data point. During a crash, stocks can lose 50-90%, bonds can lose 5-15%. Stock/bond crashes not typically coincidental.
Bottom line. Don't sweat owing good bonds.
I have heard this mentioned before that stocks can loose 50-90%. Is there any historical data that can back this up? It seems a very bold claim and would be great if I can find some historical data to back it up.
Stocks lost 86.1% from September 1929 to June 1932. 56.4% from October 2007 to March 2009. Here's some additional data points:

http://www.nbcnews.com/id/37740147/ns/b ... P6ju1QpChA
Thank you. Additional data point that can be useful is how long did it take for stock market to recover to the level prior to the crash.

I could use these data points to determine my level of comfort in staying the course in different scenarios.
Going back to 1993 because it's really easy using portfolio visualizer, it took 4 years, 5 months to recover from a 50% drawdown starting in 2007 and 5 years, 8 months to recover from a 44% drawdown starting in 2000.

https://www.portfoliovisualizer.com/bac ... ion1_1=100
When considering stocks vs. bonds, I do think it's important to remember that most investors do not invest in a single lump sum, nor do they sell all at once. Yes, if you had a given value of your portfolio in 2007, it took over 4 years to recover, but that value in 2007 was probably made up of a lot of investment gains over the preceding years. Someone who had been investing monthly for the prior 25 years likely still had significant gains in their portfolio over the amount of their cash contributions even at the bottom of the crash.

User avatar
Ged
Posts: 3418
Joined: Mon May 13, 2013 1:48 pm
Location: Roke

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by Ged » Mon May 01, 2017 10:26 am

These large drawdowns are much more of a concern during retirement when you are no longer contributing.

User avatar
Kevin M
Posts: 8972
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by Kevin M » Mon May 01, 2017 12:15 pm

Maximum drawdown for monthly total returns for VWITX (investor shares--has more history) was -6.79% from Mar 1987 - May 1987, with a recovery time of 11 months. The most recent drawdown was -4.59% from Sep 2016 - Nov 2016, and the recovery is still ongoing.

SEC yield for VWIUX (Admiral shares) is 2.01%. If we assume this is priced to be equivalent on a risk adjusted basis to a taxable bond fund at a 25% marginal tax rate, the taxable equivalent yield is 2.68% (=2.01%/0.75). I can buy a 5-year CD at 2.75% with an early withdrawal penalty of six months of interest, so a maximum downside of about -1.38%. So the CD has higher taxable-equivalent yield and less risk, thus I generally would prefer the CD.

I used to own this fund, but now only own the CA tax-exempt funds. VCADX (CA int-term Admiral) has SEC yield of 1.95%. At marginal tax rates of 25% and 8% without itemizing deductions, this is taxable-equivalent yield of 2.91% ( =1.95%/(1-0.25-0.08) ). This is more competitive with a good CD, but still involves more term risk and some credit risk.

Most recent drawdown for VCADX was -5.09% for Sep-Nov 2016, about 2/3 of which has been recovered.

Backtest Portfolio Asset Allocation

This fund and the long-term version, VCLAX, are included in the roughly 20% of my fixed income that's in bond funds (with about 75% in CDs). I continue to hold some bond funds for some exposure to term risk (rates could go lower) and credit risk (which has been rewarded over the last 6+ years).

Some volatility comes with exposure to term risk and credit risk, so I expect it and don't worry about it. I sometimes tax loss harvest to get some tax benefit from it. If the price fell far enough, I might buy more. If it rises enough, I'll probably sell more and move more into CDs.

Having something in muni funds allows me to do relatively small Roth conversions to the top of the 15% bracket, but of course muni funds aren't as competitive in the 15% bracket, so I'm not sure holding them makes a lot of sense.

Kevin
||.......|| Suggested format for Asking Portfolio Questions (edit original post)

SpideyIndexer
Posts: 264
Joined: Thu Apr 02, 2015 10:13 pm

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by SpideyIndexer » Tue May 02, 2017 1:04 am

I would probably sleep best if my bonds were all treasuries. One really shouldn't look at the return of bonds in isolation, but rather a stock/portfolio close to your AA. Treasuries, probably because of the flight to safety reflex of investors, tend to go up most when equities plunge. So rebalancing from treasury bonds into stocks gives you more bang for your buck than from other bond types.

Having said that, munis aren't bad...much better than investment grade corporates, and a heck of a lot better than junk.

Backtesting with PV can give erroneous results because it doesn't factor in taxes, masking the tax benefits of munis. I've been working on this myself and it is a work in progress.

If you are dyed-in-the-wool market weight believer, some food for thought is that munis are only about 9% of the total debt market, even lower than corporate bonds. Swensen does not consider muni bonds a core investment, FWIW.

User avatar
Kevin M
Posts: 8972
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Rebalancing bonus is overhyped

Post by Kevin M » Tue May 02, 2017 11:54 am

SpideyIndexer wrote:I would probably sleep best if my bonds were all treasuries. One really shouldn't look at the return of bonds in isolation, but rather a stock/portfolio close to your AA. Treasuries, probably because of the flight to safety reflex of investors, tend to go up most when equities plunge. So rebalancing from treasury bonds into stocks gives you more bang for your buck than from other bond types.
This benefit is overhyped. Look at a 60/40 portfolio of total stock (VTSMX) and intermediate-term Treasuries (VFITX) for 2007-2009 (inclusive). Rebalancing with 5/25 bands got you a CAGR of 0.58%, vs 0.10% with no rebalancing. So during a 2-year span with the biggest rebalancing bonus we've seen in recent years, you only earned an extra 48 basis points from rebalancing. Compare that to my average CD yield premium of 115 basis points for CDs bought in the last 6.5 years.

Expand the time period to five years (2007-2011) and the rebalancing bonus shrinks to 30 bps (3.74% - 3.44%)

Rebalancing: Backtest Portfolio Asset Allocation

No rebalancing: Backtest Portfolio Asset Allocation

Kevin
||.......|| Suggested format for Asking Portfolio Questions (edit original post)

cody69
Posts: 38
Joined: Sat May 03, 2014 7:46 am

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by cody69 » Tue May 02, 2017 6:23 pm

I have invested in this fund for many years and it is a core holding for me.
I do have some aversion to fluxuations in NAV, so when I started, I divided FI holdings into 50% intermediate and 50% limited term TE fund.

The intermediate generates higher returns, but I sleep better with half in the limited term fund.

User avatar
Nicolas
Posts: 844
Joined: Wed Aug 22, 2012 7:41 am
Contact:

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by Nicolas » Tue May 02, 2017 7:28 pm

cody69 wrote:I have invested in this fund for many years and it is a core holding for me.
I do have some aversion to fluxuations in NAV, so when I started, I divided FI holdings into 50% intermediate and 50% limited term TE fund.

The intermediate generates higher returns, but I sleep better with half in the limited term fund.
What's your federal tax bracket, if I may ask? I'm in the 15% bracket, for now, and am vacillating over investing in this fund. I'll likely be in a higher bracket six years from now.
My understanding is that the lower return compared to taxable isn't worth it for taxpayers in my bracket. But my thinking is to buy this fund in order to keep my taxable income low for the next six years to enable more Roth conversions. I have so much in pre-tax retirement accounts that I'm not going to get it all converted in six years.
There’s many a slip ‘twixt the cup and the lip.

User avatar
weltschmerz
Posts: 311
Joined: Thu Jul 30, 2009 9:17 pm
Location: SoCal

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by weltschmerz » Tue May 02, 2017 7:41 pm

SpideyIndexer wrote:I would probably sleep best if my bonds were all treasuries. One really shouldn't look at the return of bonds in isolation, but rather a stock/portfolio close to your AA. Treasuries, probably because of the flight to safety reflex of investors, tend to go up most when equities plunge.
I agree with this. Looking back at the 2008/9 crisis, munis and treasuries behaved very differently when stocks were plunging. But I don't even think the munis vs treasuries argument needs to come down to rebalancing opportunities. I think munis should be avoided for other reasons.

I can see where someone would be attracted by the siren song of the muni bonds. If for instance you are in retirement and are living off the bond interest, you of course would want to maximize those interest payments, after taxes. The problem is that muni bonds clearly have a lower credit rating than treasuries, but just how low? In other words, how much FAITH do you have that the ratings agencies have done a good job of rating the debt this time around? We know how good of a job they did in 2008....

To me, bonds are for maximum safety. Since I prefer to take ALL the risk on the stock side of the portfolio, I want my bonds to simply be "Not Stocks". I don't want any credit risk, so ideally this Non-Stock money would be in short-term treasuries. However, I am OK with a bit of interest rate risk, since I am investing for long-term purposes, so I am OK with an intermediate-term treasury bond fund.

Someone could retort that the equation changes if you are in a high tax bracket. Again it comes down to what you're using the bonds for. Is it to squeeze out every drop of interest? Then sure, consider the munis. Is it to offset stock risk? Then no, do not include munis and stick with treasuries, even in a high tax bracket.

So to summarize, No I would not sleep well owning munis. I just don't trust 'em. I take my risk on the stock side of the portfolio. If I want more risk, I would increase the stock % before I would start adding munis.

User avatar
dratkinson
Posts: 4075
Joined: Thu Jul 26, 2007 6:23 pm
Location: Centennial CO

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by dratkinson » Tue May 02, 2017 9:16 pm

Nicolas wrote:
cody69 wrote:I have invested in this fund for many years and it is a core holding for me.
I do have some aversion to fluxuations in NAV, so when I started, I divided FI holdings into 50% intermediate and 50% limited term TE fund.

The intermediate generates higher returns, but I sleep better with half in the limited term fund.
What's your federal tax bracket, if I may ask? I'm in the 15% bracket, for now, and am vacillating over investing in this fund. I'll likely be in a higher bracket six years from now.
My understanding is that the lower return compared to taxable isn't worth it for taxpayers in my bracket. But my thinking is to buy this fund in order to keep my taxable income low for the next six years to enable more Roth conversions. I have so much in pre-tax retirement accounts that I'm not going to get it all converted in six years.
In my beginning after my forum review, I followed the recommended bond method. But was soon being bored to tears using safe bonds in my small tax-advantaged space. So I needed to change something.

I was in the 15% tax bracket then and looking at the oncoming 25% bracket. I wanted a proactive taxable bond strategy that would serve me then and later.

I looked through the recommended books and forum to gather/use these data points:
--When considering total return (price appreciation + distributions), the majority of bond fund's total return comes from distributions.
--Mr. Bogle likes corporate bonds (probably shorter-term, don't remember, didn't look).
--The BH recommended authors say munis are safer than comparable corporate bonds.
--TBM is IT duration, ~1/3 treasury, ~1/3 MBS (deprecated), ~1/3 corporate. Meaning IT muni is preferable to 2/3 of TBM.
--Annette Thau's The Bond Book (no longer on list of BH-recommended books) accepted munis with <=10-year duration.
--BH wisdom. Where recommended authors agree, that is the central course; where they disagree, those are optional routes.
--After-tax income analysis. Less-than or equal-to IT munis did not produce better after-tax income than TBM in 15% bracket; LT muni did.
--I didn't need to withdraw from taxable for the foreseeable future, so can't spend any bond NAV increase.
--Believed I could tolerance then muni NAV fluctuations: LT, ~90 cents/yr; IT, ~50 cents/yr,... ST, ~10 cents/yr. Similar fluctuations today.
--The government has a vested interest in maintaining stable (if slowly rising) low interest rates to maintain economic stability/growth.
--Any interest rate increase (/NAV decrease) results in increased dividends/NAV recovery within ~duration years. (Not selling, didn't care.)

--If I proactively use a muni fund, I will reap the benefits of staying in the 15% bracket longer. Meaning I will pay 0% tax on QDI/LTCG.
--As SS taxation is based on absolute dollars, a muni's lower yield produces less dollars so should affect SS taxation less.
--I may be forgetting something.

Decision. I decided to use a mix of IT and LT munis in the 15% fed tax bracket. But much preferred the LT distributions, so skewed all new investments toward it. My remaining IT is the largest tier of my formal EF, new car fund, and dry powder.

Concede I may have mixed apples/oranges in my thumbnail analysis, but I was satisfied with my decision then, and now.


Edit. Forgot.
Last edited by dratkinson on Wed May 03, 2017 7:45 pm, edited 3 times in total.
d.r.a, not dr.a. | I'm a novice investor, you are forewarned.

cody69
Posts: 38
Joined: Sat May 03, 2014 7:46 am

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by cody69 » Tue May 02, 2017 9:32 pm

What's your federal tax bracket, if I may ask? I'm in the 15% bracket, for now, and am vacillating over investing in this fund. I'll likely be in a higher bracket six years from now.
I am in a very high tax bracket, so it is a no brainer for my investing needs.

Search 'Vanguard tax equivalent yield calculator' to explore different scenarios and see where the break even point is for your situation. It is good you are thinking ahead and not just where you are at the moment.

User avatar
Nicolas
Posts: 844
Joined: Wed Aug 22, 2012 7:41 am
Contact:

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by Nicolas » Tue May 02, 2017 10:51 pm

dratkinson wrote:
Nicolas wrote:
cody69 wrote:I have invested in this fund for many years and it is a core holding for me.
I do have some aversion to fluxuations in NAV, so when I started, I divided FI holdings into 50% intermediate and 50% limited term TE fund.

The intermediate generates higher returns, but I sleep better with half in the limited term fund.
What's your federal tax bracket, if I may ask? I'm in the 15% bracket, for now, and am vacillating over investing in this fund. I'll likely be in a higher bracket six years from now.
My understanding is that the lower return compared to taxable isn't worth it for taxpayers in my bracket. But my thinking is to buy this fund in order to keep my taxable income low for the next six years to enable more Roth conversions. I have so much in pre-tax retirement accounts that I'm not going to get it all converted in six years.
In my beginning after my forum review, I followed the recommended bond method. But was soon being bored to tears using safe bonds in my small tax-advantaged space. So I needed to change something.

I was in the 15% tax bracket then and looking at the oncoming 25% bracket. I wanted a proactive taxable bond strategy that would serve me then and later.

I looked through the recommended books and forum to gather/use these data points:
--When considering total return (price appreciation + distributions), the majority of bond fund's total return comes from distributions.
--Mr. Bogle likes corporate bonds (probably shorter-term, don't remember, didn't look).
--The BH recommended authors say munis are safer than comparable corporate bonds.
--Annette Thau's The Bond Book (no longer on list of BH-recommended books) accepted munis with <=10-year duration.
--BH wisdom. Where recommended authors agree, that is the central course; where they disagree, those are optional routes.
--After-tax income analysis. Less-than or equal-to IT munis did not produce better after-tax income than TBM in 15% bracket; LT muni did.
--I didn't need to withdraw from taxable for the foreseeable future, so can't spend any bond NAV increase.
--Believed I could tolerance then muni NAV fluctuations: LT, ~90 cents/yr; IT, ~50 cents/yr,... ST, ~10 cents/yr. Similar fluctuations today.
--If I proactively use a muni fund, I will reap the benefits of staying in the 15% bracket longer. Meaning I will pay 0% tax on QDI/LTCG.
--As SS taxation is based on absolute dollars, a muni's lower yield produces less dollars so should affect SS taxation less.
--I may be forgetting something.

Decision. I decided to use a mix of IT and LT munis in the 15% fed tax bracket. But much preferred the LT distributions, so skewed all new investments toward it. My remaining IT is the largest tier of my formal EF, new car fund, and dry powder.

Concede I may have mixed apples/oranges in my thumbnail analysis, but I was satisfied with my decision then, and now.
Very helpful, thanks. I'm leery of LT with rates so low, and rising. If I do this I would stick to IT I think.
There’s many a slip ‘twixt the cup and the lip.

User avatar
dratkinson
Posts: 4075
Joined: Thu Jul 26, 2007 6:23 pm
Location: Centennial CO

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by dratkinson » Wed May 03, 2017 12:17 am

I forgot a few data points.



It does take time to become use to investing in something.

In early 2008, I purchased IT muni. I was counting on the 0% QDI/LTCG tax advantages in the 15% tax bracket to make up for any TEY loss against TBM.

By late 2008, feeling the itch to reach for more yield, I was comfortable enough with IT muni that I bought LT muni.

In 2015, feeling the itch to reach for more yield (and do some other simplifying), I began researching single-state munis.



After-tax income analysis. I used excel1040.com to guesstimate my after-tax income using different bond fund scenarios.

First, enter/duplicate your last tax return into excel1040.com to create a known baseline. Then modify it with your bond fund scenarios.

I wagged the dividends I'd receive from each bond fund as: total dividends = total bond principle x SEC yield.

It'll take an evening and will keep you off the street and out of trouble for a while.
d.r.a, not dr.a. | I'm a novice investor, you are forewarned.

CedarWaxWing
Posts: 357
Joined: Sun Nov 02, 2014 12:24 pm

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by CedarWaxWing » Wed May 03, 2017 12:14 pm

Kevin M wrote:Maximum drawdown for monthly total returns for VWITX (investor shares--has more history) was -6.79% from Mar 1987 - May 1987, with a recovery time of 11 months. The most recent drawdown was -4.59% from Sep 2016 - Nov 2016, and the recovery is still ongoing.

SEC yield for VWIUX (Admiral shares) is 2.01%. If we assume this is priced to be equivalent on a risk adjusted basis to a taxable bond fund at a 25% marginal tax rate, the taxable equivalent yield is 2.68% (=2.01%/0.75). I can buy a 5-year CD at 2.75% with an early withdrawal penalty of six months of interest, so a maximum downside of about -1.38%. So the CD has higher taxable-equivalent yield and less risk, thus I generally would prefer the CD.

I used to own this fund, but now only own the CA tax-exempt funds. VCADX (CA int-term Admiral) has SEC yield of 1.95%. At marginal tax rates of 25% and 8% without itemizing deductions, this is taxable-equivalent yield of 2.91% ( =1.95%/(1-0.25-0.08) ). This is more competitive with a good CD, but still involves more term risk and some credit risk.

Most recent drawdown for VCADX was -5.09% for Sep-Nov 2016, about 2/3 of which has been recovered.

Backtest Portfolio Asset Allocation

This fund and the long-term version, VCLAX, are included in the roughly 20% of my fixed income that's in bond funds (with about 75% in CDs). I continue to hold some bond funds for some exposure to term risk (rates could go lower) and credit risk (which has been rewarded over the last 6+ years).

Some volatility comes with exposure to term risk and credit risk, so I expect it and don't worry about it. I sometimes tax loss harvest to get some tax benefit from it. If the price fell far enough, I might buy more. If it rises enough, I'll probably sell more and move more into CDs.

Having something in muni funds allows me to do relatively small Roth conversions to the top of the 15% bracket, but of course muni funds aren't as competitive in the 15% bracket, so I'm not sure holding them makes a lot of sense.

Kevin
SEC yield for VWIUX (Vanguard Interm-Term Tx-Ex Admiral shares) is 2.01%.

VCADX (CA int-term Admiral) has SEC yield of 1.95%.

I would think these two funds are different enough that they could be used as surrogate funds for each other for TLH purposes.

Does anyone here think me to be incorrect on this, or would be it hard to justify?

thanks

M.

User avatar
Kevin M
Posts: 8972
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Re: Sleep well or not ? [Vanguard Intermediate-Term Tax-Exempt]

Post by Kevin M » Wed May 03, 2017 12:43 pm

CedarWaxWing wrote: SEC yield for VWIUX (Vanguard Interm-Term Tx-Ex Admiral shares) is 2.01%.

VCADX (CA int-term Admiral) has SEC yield of 1.95%.

I would think these two funds are different enough that they could be used as surrogate funds for each other for TLH purposes.

Does anyone here think me to be incorrect on this, or would be it hard to justify?
Yes, this is no problem at all, and I have done exactly that. I also used the long-term national TE fund as a TLH partner for the long-term CA TE fund.

If anyone tells you otherwise, ask them if the IRS challenged them on it or even on anything remotely similar.

Kevin
||.......|| Suggested format for Asking Portfolio Questions (edit original post)

User avatar
dratkinson
Posts: 4075
Joined: Thu Jul 26, 2007 6:23 pm
Location: Centennial CO

Substantially identical security

Post by dratkinson » Wed May 03, 2017 7:34 pm

CedarWaxWing wrote:...
SEC yield for VWIUX (Vanguard Interm-Term Tx-Ex Admiral shares) is 2.01%.

VCADX (CA int-term Admiral) has SEC yield of 1.95%.

I would think these two funds are different enough that they could be used as surrogate funds for each other for TLH purposes.

Does anyone here think me to be incorrect on this, or would be it hard to justify?

Had to review my notes.
Substantially identical security. For the purpose of avoiding a wash sale, what is a substantially identical security?

From: http://www.bogleheads.org/forum/viewtop ... 1&t=109450
"The following is a list of mutual fund transactions that are generally considered to be acceptable under the wash sale rules despite the lack of a concrete definition of "substantially identical security":

1. Sell one index fund and buy another index fund, if the indexes of the two funds are not the same index (e.g., S&P 500 for the Russell 1000).
2. Sell one actively managed fund and buy a fund at another company with different portfolio managers.
3. Sell an index fund and buy an actively managed fund regardless of the fund company.
4. Sell an actively managed fund and buy an index fund regardless of the fund company."

Full article here: http://www.fpanet.org/journal/Betweenth ... ancingAct/

As VWIUX is a national fund, and VCADX is a single-state fund, believe their active management goals make them NOT substantially identical, even if managed by the same portfolio managers.
d.r.a, not dr.a. | I'm a novice investor, you are forewarned.

Post Reply