VTMFX (TaxManaged Balanced Fund)

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RRAAYY3
Posts: 108
Joined: Thu Jan 17, 2013 12:32 pm

VTMFX (TaxManaged Balanced Fund)

Post by RRAAYY3 » Mon Jun 19, 2017 2:31 pm

5 star Morningstar rating / average risk with "high" return ... thoughts on this fund for a taxable account?

I'm looking to invest more of my oversized "emergency fund" but do not want it in something too volatile (not at these market prices anyway) ... thoughts? I can't really find too many negatives about this fund.

32 in 25% tax bracket

https://personal.vanguard.com/us/funds/ ... undId=0103

fund link ^

livesoft
Posts: 56383
Joined: Thu Mar 01, 2007 8:00 pm

Re: VTMFX (TaxManaged Balanced Fund)

Post by livesoft » Mon Jun 19, 2017 2:36 pm

I don't think there is really any reason to own this fund when one can own a total US market fund and a tax-exempt muni bond fund instead. At least with 2 funds one can tax-loss harvest one and/or the other. Plus if one wants to withdraw in an emergency, then one can choose whether to sell the equity or the bond fund in order to keep taxes low and to help rebalance the portfolio.

In other words, don't do mental accounting by hiding volatility under the covers. The volatility happens to the stocks regardless of which fund you own them in.
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grabiner
Advisory Board
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Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: VTMFX (TaxManaged Balanced Fund)

Post by grabiner » Tue Jun 20, 2017 8:38 pm

In the 25% bracket, I wouldn't even recommend a muni fund (unless Vanguard has one for your state). You can use a taxable bond fund, which should have comparable after-tax returns for the same risk level, and can switch to a muni fund if you move to a higher tax bracket or a high-tax state.

And that is another disadvantage of the balanced fund; you will have a tax cost if you choose to switch to a different bond fund, or to hold bonds in a different account. For example, if you start a new job and the 401(k) has better bond than stock options, you will want to hold all your bonds there, and sell any taxable bonds. If you move to NY, you will want to sell your bond fund and buy a NY muni bond fund. You will have a tax bill to do either of these if you hold Tax-Managed Balanced.
David Grabiner

Dude2
Posts: 668
Joined: Fri Jun 08, 2007 3:40 pm

Re: VTMFX (TaxManaged Balanced Fund)

Post by Dude2 » Tue Jun 20, 2017 9:11 pm

I think it could be a good choice for taxable if
-- your target asset allocation is 50/50, e.g. simplicity, no need to re-balance, one stop shopping
-- the lower volatility helps to reduce the likelihood of tinkering, i.e. helps you to stay the course
-- you don't like paying taxes, regardless of lower returns of munis if in a lower tax bracket (or you have some years of higher tax bracket)
-- you consider it a longer term holding (the bond duration is 5 years)
-- you live in a state without state tax and don't plan on going anywhere

All of the points in the posts above are not to be ignored, but somebody should say something good about this fund. I love it.

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