Munis at Fidelity: FTABX or VTEB?

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Cash
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Munis at Fidelity: FTABX or VTEB?

Post by Cash » Mon Jul 31, 2017 9:12 pm

I'm consolidating my accounts at Fidelity and hold my bonds in taxable, so I'm trying to pick a muni fund. I've narrowed it down to the Fidelity Tax-Free Bond Fund (FTABX) or the Vanguard Tax-Exempt Bond ETF (VTEB). I am leaning toward the former for the longer duration (7.09 v. 5.8 years) and higher yield (2.23 v. 1.97), but am wondering if anyone knows of a better non-AMT muni fund/ETF to use for Fidelity. I know I could get the Vanguard Long-Term Tax Exempt Fund at Vanguard, but I do not wish to open another account.

Thanks!
Last edited by Cash on Tue Aug 01, 2017 4:53 am, edited 1 time in total.

stlutz
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Re: Fidelity taxable: FTABX or VTEB?

Post by stlutz » Mon Jul 31, 2017 9:38 pm

FTABX takes more duration risk and more credit risk than VTEB. Both are fine funds, just know that you are taking more risk with the former and are paying a somewhat higher ER (although .25% is surprisingly reasonable).

Cash
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Re: Munis at Fidelity: FTABX or VTEB?

Post by Cash » Tue Aug 01, 2017 7:42 am

My investment timeline is 20+ years, so I'm fine with the higher duration and credit risk. I just wanted to make sure that I wasn't overlooking a better option out there.

Big Dutch
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Re: Munis at Fidelity: FTABX or VTEB?

Post by Big Dutch » Tue Aug 01, 2017 8:00 am

I was in a similar position with perhaps a slightly shorter time horizon and decided to go with MUB. Free trades, same ER (0.25%). I typically buy in blocks and don't reinvest dividends to minimize tax lots.

~Big Dutch

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CyclingDuo
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Re: Munis at Fidelity: FTABX or VTEB?

Post by CyclingDuo » Tue Aug 01, 2017 8:48 am

Cash wrote:I'm consolidating my accounts at Fidelity and hold my bonds in taxable, so I'm trying to pick a muni fund. I've narrowed it down to the Fidelity Tax-Free Bond Fund (FTABX) or the Vanguard Tax-Exempt Bond ETF (VTEB). I am leaning toward the former for the longer duration (7.09 v. 5.8 years) and higher yield (2.23 v. 1.97), but am wondering if anyone knows of a better non-AMT muni fund/ETF to use for Fidelity. I know I could get the Vanguard Long-Term Tax Exempt Fund at Vanguard, but I do not wish to open another account.

Thanks!
Both are excellent. We use the VTEB ETF at Fidelity set up with DRIP (which we use for all of our Vanguard ETF's).

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Re: Munis at Fidelity: FTABX or VTEB?

Post by WentzWagon » Mon Aug 07, 2017 12:08 am

CyclingDuo wrote:
Cash wrote:I'm consolidating my accounts at Fidelity and hold my bonds in taxable, so I'm trying to pick a muni fund. I've narrowed it down to the Fidelity Tax-Free Bond Fund (FTABX) or the Vanguard Tax-Exempt Bond ETF (VTEB). I am leaning toward the former for the longer duration (7.09 v. 5.8 years) and higher yield (2.23 v. 1.97), but am wondering if anyone knows of a better non-AMT muni fund/ETF to use for Fidelity. I know I could get the Vanguard Long-Term Tax Exempt Fund at Vanguard, but I do not wish to open another account.

Thanks!
Both are excellent. We use the VTEB ETF at Fidelity set up with DRIP (which we use for all of our Vanguard ETF's).
What is DRIP? Also isn't it about $25 for the trade holding in Fidelity?

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Re: Munis at Fidelity: FTABX or VTEB?

Post by CyclingDuo » Mon Aug 07, 2017 6:24 am

flyersrule wrote:
CyclingDuo wrote:
Cash wrote:I'm consolidating my accounts at Fidelity and hold my bonds in taxable, so I'm trying to pick a muni fund. I've narrowed it down to the Fidelity Tax-Free Bond Fund (FTABX) or the Vanguard Tax-Exempt Bond ETF (VTEB). I am leaning toward the former for the longer duration (7.09 v. 5.8 years) and higher yield (2.23 v. 1.97), but am wondering if anyone knows of a better non-AMT muni fund/ETF to use for Fidelity. I know I could get the Vanguard Long-Term Tax Exempt Fund at Vanguard, but I do not wish to open another account.

Thanks!
Both are excellent. We use the VTEB ETF at Fidelity set up with DRIP (which we use for all of our Vanguard ETF's).
What is DRIP? Also isn't it about $25 for the trade holding in Fidelity?
Dividend Reinvestment Plan is what a DRIP is.

$4.95 is the trading fee when you purchase or sell any size lot of Vanguard ETF's at Fidelity.

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Re: Munis at Fidelity: FTABX or VTEB?

Post by nordsteve » Mon Aug 07, 2017 7:17 am

If you live in a high tax state, you might also consider a state specific fund. In my situation the incremental tax savings more that paid for the higher fee.

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Re: Munis at Fidelity: FTABX or VTEB?

Post by WentzWagon » Wed Aug 09, 2017 8:28 pm

CyclingDuo wrote:
flyersrule wrote:
CyclingDuo wrote:
Cash wrote:I'm consolidating my accounts at Fidelity and hold my bonds in taxable, so I'm trying to pick a muni fund. I've narrowed it down to the Fidelity Tax-Free Bond Fund (FTABX) or the Vanguard Tax-Exempt Bond ETF (VTEB). I am leaning toward the former for the longer duration (7.09 v. 5.8 years) and higher yield (2.23 v. 1.97), but am wondering if anyone knows of a better non-AMT muni fund/ETF to use for Fidelity. I know I could get the Vanguard Long-Term Tax Exempt Fund at Vanguard, but I do not wish to open another account.

Thanks!
Both are excellent. We use the VTEB ETF at Fidelity set up with DRIP (which we use for all of our Vanguard ETF's).
What is DRIP? Also isn't it about $25 for the trade holding in Fidelity?
Dividend Reinvestment Plan is what a DRIP is.

$4.95 is the trading fee when you purchase or sell any size lot of Vanguard ETF's at Fidelity.
What's the benefit. Does it reinvest without having to pay $4.95 again?

Cash
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Re: Munis at Fidelity: FTABX or VTEB?

Post by Cash » Wed Aug 09, 2017 8:49 pm

That's my understanding. However, in a taxable account, it leads to lots of tax lots.

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Re: Munis at Fidelity: FTABX or VTEB?

Post by CyclingDuo » Wed Aug 09, 2017 11:02 pm

flyersrule wrote:What's the benefit. Does it reinvest without having to pay $4.95 again?
Yes, no commission for the DRIPS.

The benefit is - for those with Fidelity brokerage accounts who want to invest in Vanguard funds - purchasing mutual fund shares of Vanguard funds is $45 - 75 per transaction. Of course, automatic reinvestment of dividends is an easy option for the funds. However, buying the ETF's at Fidelity is $4.95 per transaction, and using the DRIPS is how you get the dividends reinvested.

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Re: Munis at Fidelity: FTABX or VTEB?

Post by WentzWagon » Thu Aug 10, 2017 6:55 am

CyclingDuo wrote:
flyersrule wrote:What's the benefit. Does it reinvest without having to pay $4.95 again?
Yes, no commission for the DRIPS.

The benefit is - for those with Fidelity brokerage accounts who want to invest in Vanguard funds - purchasing mutual fund shares of Vanguard funds is $45 - 75 per transaction. Of course, automatic reinvestment of dividends is an easy option for the funds. However, buying the ETF's at Fidelity is $4.95 per transaction, and using the DRIPS is how you get the dividends reinvested.
Can you explain what a previous poster meant when he said it throws off tax lots?

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Re: Munis at Fidelity: FTABX or VTEB?

Post by CyclingDuo » Thu Aug 10, 2017 8:05 am

flyersrule wrote:
CyclingDuo wrote:
flyersrule wrote:What's the benefit. Does it reinvest without having to pay $4.95 again?
Yes, no commission for the DRIPS.

The benefit is - for those with Fidelity brokerage accounts who want to invest in Vanguard funds - purchasing mutual fund shares of Vanguard funds is $45 - 75 per transaction. Of course, automatic reinvestment of dividends is an easy option for the funds. However, buying the ETF's at Fidelity is $4.95 per transaction, and using the DRIPS is how you get the dividends reinvested.
Can you explain what a previous poster meant when he said it throws off tax lots?
When you sell shares of an equity or mutual fund or ETF, you have to report your cost basis (share price you paid for a stock, a mutual fund, an ETF, and the difference between that and the sale price which is then reported as either a capital gain or a loss). In the case of Fidelity, and your purchase of shares through Fidelity, they keep track of all of that information for you. You will have records for yourself, of course, in your statements as well as your purchase and sale information.

You, as the investor, are responsible for reporting the purchase date/price, and the sale date/price by using the information on your 1099B. Again, you can export all of the tax information directly into your tax preparation software on your own from Fidelity (or whatever brokerage one uses).

Brokers and Transfer agents are required to track the cost basis by the IRS, and it will appear right on your 1099B from Fidelity (or insert your broker/transfer agent name here: ____________).

It's really a simple process. If one prefers to reinvest the dividends on their own, then don't set up the ETF's with the DRIP feature. Just let your quarterly dividends accrue until you have enough to purchase additional shares (you'll have to pay the commission, though, if you do it this way). The DRIP works like an automatic dollar cost averaging function just as if you held the same fund in a mutual fund and reinvested dividends in additional shares. Set it, and forget it until years later when you sell, or if you rebalance or tax loss harvest in a particular year.

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Re: Munis at Fidelity: FTABX or VTEB?

Post by WentzWagon » Thu Aug 10, 2017 8:17 am

CyclingDuo wrote:
flyersrule wrote:
CyclingDuo wrote:
flyersrule wrote:What's the benefit. Does it reinvest without having to pay $4.95 again?
Yes, no commission for the DRIPS.

The benefit is - for those with Fidelity brokerage accounts who want to invest in Vanguard funds - purchasing mutual fund shares of Vanguard funds is $45 - 75 per transaction. Of course, automatic reinvestment of dividends is an easy option for the funds. However, buying the ETF's at Fidelity is $4.95 per transaction, and using the DRIPS is how you get the dividends reinvested.
Can you explain what a previous poster meant when he said it throws off tax lots?
When you sell shares of an equity or mutual fund or ETF, you have to report your cost basis (share price you paid for a stock, a mutual fund, an ETF, and the difference between that and the sale price which is then reported as either a capital gain or a loss). In the case of Fidelity, and your purchase of shares through Fidelity, they keep track of all of that information for you. You will have records for yourself, of course, in your statements as well as your purchase and sale information.

You, as the investor, are responsible for reporting the purchase date/price, and the sale date/price by using the information on your 1099B. Again, you can export all of the tax information directly into your tax preparation software on your own from Fidelity (or whatever brokerage one uses).

Brokers and Transfer agents are required to track the cost basis by the IRS, and it will appear right on your 1099B from Fidelity (or insert your broker/transfer agent name here: ____________).

It's really a simple process. If one prefers to reinvest the dividends on their own, then don't set up the ETF's with the DRIP feature. Just let your quarterly dividends accrue until you have enough to purchase additional shares (you'll have to pay the commission, though, if you do it this way). The DRIP works like an automatic dollar cost averaging function just as if you held the same fund in a mutual fund and reinvested dividends in additional shares. Set it, and forget it until years later when you sell, or if you rebalance or tax loss harvest in a particular year.
Thanks. I know VTEB and FTABX are Tax Exempt and I would just pay PA state tax. Didn't know if by using drip if it would change that.

Also it seems good that DRIP allows you to reinvest in VTEB without accruing then spending another 4.95 to reinvest back into VTEb

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Re: Munis at Fidelity: FTABX or VTEB?

Post by CyclingDuo » Thu Aug 10, 2017 8:26 am

flyersrule wrote:
CyclingDuo wrote:
flyersrule wrote:
CyclingDuo wrote:
flyersrule wrote:What's the benefit. Does it reinvest without having to pay $4.95 again?
Yes, no commission for the DRIPS.

The benefit is - for those with Fidelity brokerage accounts who want to invest in Vanguard funds - purchasing mutual fund shares of Vanguard funds is $45 - 75 per transaction. Of course, automatic reinvestment of dividends is an easy option for the funds. However, buying the ETF's at Fidelity is $4.95 per transaction, and using the DRIPS is how you get the dividends reinvested.
Can you explain what a previous poster meant when he said it throws off tax lots?
When you sell shares of an equity or mutual fund or ETF, you have to report your cost basis (share price you paid for a stock, a mutual fund, an ETF, and the difference between that and the sale price which is then reported as either a capital gain or a loss). In the case of Fidelity, and your purchase of shares through Fidelity, they keep track of all of that information for you. You will have records for yourself, of course, in your statements as well as your purchase and sale information.

You, as the investor, are responsible for reporting the purchase date/price, and the sale date/price by using the information on your 1099B. Again, you can export all of the tax information directly into your tax preparation software on your own from Fidelity (or whatever brokerage one uses).

Brokers and Transfer agents are required to track the cost basis by the IRS, and it will appear right on your 1099B from Fidelity (or insert your broker/transfer agent name here: ____________).

It's really a simple process. If one prefers to reinvest the dividends on their own, then don't set up the ETF's with the DRIP feature. Just let your quarterly dividends accrue until you have enough to purchase additional shares (you'll have to pay the commission, though, if you do it this way). The DRIP works like an automatic dollar cost averaging function just as if you held the same fund in a mutual fund and reinvested dividends in additional shares. Set it, and forget it until years later when you sell, or if you rebalance or tax loss harvest in a particular year.
Thanks. I know VTEB and FTABX are Tax Exempt and I would just pay PA state tax. Didn't know if by using drip if it would change that.

Also it seems good that DRIP allows you to reinvest in VTEB without accruing then spending another 4.95 to reinvest back into VTEb
Yes, that's the benefit these days for investors with the big low cost investment firms. It didn't used to be that way, and DRIPs were - or could be - expensive to set up, and you would get hit with commission fees along the way every quarter to reinvest the dividends. That's all gone away and it is easy to do these days. In the case of Fidelity, the commission charge to purchase the initial shares of a non-Fidelity mutual fund is a bit high in our opinion. So the ETF versions of the Vanguard funds are much lower cost - in terms of fees - at $4.95 to purchase 100 shares or 10,000 shares, and you just use their no cost DRIP.

Cash
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Re: Munis at Fidelity: FTABX or VTEB?

Post by Cash » Thu Aug 10, 2017 8:31 am

flyersrule, take a look at the wiki articles on reinvesting dividends in a taxable account:

https://www.bogleheads.org/wiki/Reinves ... le_account

and on specific identification of shares:

https://www.bogleheads.org/wiki/Specifi ... _of_shares

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Re: Munis at Fidelity: FTABX or VTEB?

Post by pshonore » Thu Aug 10, 2017 8:38 am

CyclingDuo wrote: Yes, that's the benefit these days for investors with the big low cost investment firms. It didn't used to be that way, and DRIPs were - or could be - expensive to set up, and you would get hit with commission fees along the way every quarter to reinvest the dividends. That's all gone away and it is easy to do these days. In the case of Fidelity, the commission charge to purchase the initial shares of a non-Fidelity mutual fund is a bit high in our opinion. So the ETF versions of the Vanguard funds are much lower cost - in terms of fees - at $4.95 to purchase 100 shares or 10,000 shares, and you just use their no cost DRIP.
Fidelity has probably as many non-Fidelity mutual funds available at no cost as any other broker but you do have to pay to purchase Vanguard mutual funds. You can also purchase many iShare ETFs with no commission (ITOT,IVV,IXUS, etc which are equivalent to VTI, VOO, VXUS)

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Re: Munis at Fidelity: FTABX or VTEB?

Post by WentzWagon » Thu Aug 10, 2017 8:42 am

CyclingDuo wrote:
flyersrule wrote:
CyclingDuo wrote:
flyersrule wrote:
CyclingDuo wrote:
Yes, no commission for the DRIPS.

The benefit is - for those with Fidelity brokerage accounts who want to invest in Vanguard funds - purchasing mutual fund shares of Vanguard funds is $45 - 75 per transaction. Of course, automatic reinvestment of dividends is an easy option for the funds. However, buying the ETF's at Fidelity is $4.95 per transaction, and using the DRIPS is how you get the dividends reinvested.
Can you explain what a previous poster meant when he said it throws off tax lots?
When you sell shares of an equity or mutual fund or ETF, you have to report your cost basis (share price you paid for a stock, a mutual fund, an ETF, and the difference between that and the sale price which is then reported as either a capital gain or a loss). In the case of Fidelity, and your purchase of shares through Fidelity, they keep track of all of that information for you. You will have records for yourself, of course, in your statements as well as your purchase and sale information.

You, as the investor, are responsible for reporting the purchase date/price, and the sale date/price by using the information on your 1099B. Again, you can export all of the tax information directly into your tax preparation software on your own from Fidelity (or whatever brokerage one uses).

Brokers and Transfer agents are required to track the cost basis by the IRS, and it will appear right on your 1099B from Fidelity (or insert your broker/transfer agent name here: ____________).

It's really a simple process. If one prefers to reinvest the dividends on their own, then don't set up the ETF's with the DRIP feature. Just let your quarterly dividends accrue until you have enough to purchase additional shares (you'll have to pay the commission, though, if you do it this way). The DRIP works like an automatic dollar cost averaging function just as if you held the same fund in a mutual fund and reinvested dividends in additional shares. Set it, and forget it until years later when you sell, or if you rebalance or tax loss harvest in a particular year.
Thanks. I know VTEB and FTABX are Tax Exempt and I would just pay PA state tax. Didn't know if by using drip if it would change that.

Also it seems good that DRIP allows you to reinvest in VTEB without accruing then spending another 4.95 to reinvest back into VTEb
Yes, that's the benefit these days for investors with the big low cost investment firms. It didn't used to be that way, and DRIPs were - or could be - expensive to set up, and you would get hit with commission fees along the way every quarter to reinvest the dividends. That's all gone away and it is easy to do these days. In the case of Fidelity, the commission charge to purchase the initial shares of a non-Fidelity mutual fund is a bit high in our opinion. So the ETF versions of the Vanguard funds are much lower cost - in terms of fees - at $4.95 to purchase 100 shares or 10,000 shares, and you just use their no cost DRIP.
Not to hijack the thread but I need about 100k to hit my 20% bond allocation. I only have PTTAX at .85 (no load,) in my 401k. In 28% bracket and am now thinking of going the VTEB, MUB or FTABX route instead in my Taxable Fido Account. Thoughts?
Last edited by WentzWagon on Thu Aug 10, 2017 8:58 am, edited 1 time in total.

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Re: Munis at Fidelity: FTABX or VTEB?

Post by CppCoder » Thu Aug 10, 2017 8:51 am

flyersrule wrote: Not to hijack the thread but I need about 100k to hit my 20% bond allocation. I only have PTTAX at .85 (no load,) in my 401k. In 28% bracket and am now thinking of going the VTEB, MUB or FTABX route instead in my Fido Account. Thoughts?
SEC 30 day yield on VTEB is higher than the SEC 30 day yield on PTTAX without adjusting for taxes for funds of similar duration, albeit different holdings. You might consider VTEB if it were in your 401k! Do you have other good investment options in your 401k or are you just trading a high ER bond fund for a high ER equity fund?

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Re: Munis at Fidelity: FTABX or VTEB?

Post by WentzWagon » Thu Aug 10, 2017 8:59 am

CppCoder wrote:
flyersrule wrote: Not to hijack the thread but I need about 100k to hit my 20% bond allocation. I only have PTTAX at .85 (no load,) in my 401k. In 28% bracket and am now thinking of going the VTEB, MUB or FTABX route instead in my Fido Account. Thoughts?
SEC 30 day yield on VTEB is higher than the SEC 30 day yield on PTTAX without adjusting for taxes for funds of similar duration, albeit different holdings. You might consider VTEB if it were in your 401k! Do you have other good investment options in your 401k or are you just trading a high ER bond fund for a high ER equity fund?
401K
Going to trade PTTAX and one other to BSPIX (SP500 .11 ER) since no other low Bond funds are avail.

Fido Taxable
I would pick up Muni's here to make my Bond allocation of 20%

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Re: Munis at Fidelity: FTABX or VTEB?

Post by CyclingDuo » Thu Aug 10, 2017 9:34 am

pshonore wrote:
CyclingDuo wrote: Yes, that's the benefit these days for investors with the big low cost investment firms. It didn't used to be that way, and DRIPs were - or could be - expensive to set up, and you would get hit with commission fees along the way every quarter to reinvest the dividends. That's all gone away and it is easy to do these days. In the case of Fidelity, the commission charge to purchase the initial shares of a non-Fidelity mutual fund is a bit high in our opinion. So the ETF versions of the Vanguard funds are much lower cost - in terms of fees - at $4.95 to purchase 100 shares or 10,000 shares, and you just use their no cost DRIP.
Fidelity has probably as many non-Fidelity mutual funds available at no cost as any other broker but you do have to pay to purchase Vanguard mutual funds. You can also purchase many iShare ETFs with no commission (ITOT,IVV,IXUS, etc which are equivalent to VTI, VOO, VXUS)
Yes, we are aware of that and personally own Fidelity and iShares - as well as the Vanguard ETF's.

In particular as it relates to the OP who was looking at the Municipal Bonds via Fidelity's Tax-Free Bond Fund (ER of .25) or the Vanguard Tax-Exempt Bond ETF (ER of .09) the iShares equivalent would be MUB (ER of .25).

So $10K a year would cost in ER fees...

FTABX = $25 a year
VTEB = $9 a year
MUB = $25 a year

The $4.95 commission fee for initial purchase, and on the back end for the sale with the Vanguard ETF's low ER fee still would cost less than the commission free purchase sale of Fidelity or iShares Muni Bond funds.

Here are the top 25 Muni Bond ETF's and their respective ER fees (always worth considering all costs, even if the commissions are zero at Fidelity - or other brokerages - for certain funds).

http://etfdb.com/type/bond/municipal-bo ... esc&page=1

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Re: Munis at Fidelity: FTABX or VTEB?

Post by oldcomputerguy » Thu Aug 10, 2017 9:57 am

CyclingDuo wrote: $4.95 is the trading fee when you purchase or sell any size lot of Vanguard ETF's at Fidelity.
Just as a note to the OP, this is only true for buying Vanguard ETF's. Buying Vanguard mutual funds incurs a whopping charge (in the neighborhood of $75 per). But generally Vanguard ETFs trade just like any stock at Fidelity.
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Re: Munis at Fidelity: FTABX or VTEB?

Post by indexfundfan » Thu Aug 10, 2017 9:58 am

The ETF version is easier to move if you want to switch brokerage in the future. Although a Fidelity fund can also be transferred, you will usually have to pay significant commissions to buy and/or sell the fund at the new brokerage. Having said that, I am using muni mutual funds and not ETFs at Vanguard.
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Re: Munis at Fidelity: FTABX or VTEB?

Post by WentzWagon » Thu Aug 10, 2017 10:06 am

Lets say we buy $100K in VTEB with Fidelity in 1 transaction at $4.95 and then sell in 5-10 years where it has increased to $108K.

What would be the fee for selling that fund?

Now lets use the same numbers with FTABX and MUB that don't have a $4.95 fee. That would be commission when selling at $108K

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Re: Munis at Fidelity: FTABX or VTEB?

Post by njboater74 » Thu Aug 10, 2017 11:04 am

flyersrule wrote:Lets say we buy $100K in VTEB with Fidelity in 1 transaction at $4.95 and then sell in 5-10 years where it has increased to $108K.

What would be the fee for selling that fund?

Now lets use the same numbers with FTABX and MUB that don't have a $4.95 fee. That would be commission when selling at $108K
You'll be charged $4.95 per transaction (assuming Fidelity doesn't change fees). So if you sold the entire $108K in one transaction, you would pay $4.95.

FTABX and MUB are commission free, regardless of how many transactions.
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Re: Munis at Fidelity: FTABX or VTEB?

Post by CppCoder » Thu Aug 10, 2017 11:27 am

You can always open a taxable account at Vanguard if you find the $4.95 commission intolerable. I like the convenience of having all of my accounts at Fidelity, so I eat the $4.95 commission on my very infrequent trading of non-Fidelity assets, most of which would incur a fee at Vanguard too (e.g., annual disposal of RSUs). In general, I like Fidelity's index funds, I just wish they had a muni-bond index.

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Re: Munis at Fidelity: FTABX or VTEB?

Post by CyclingDuo » Thu Aug 10, 2017 12:51 pm

flyersrule wrote:Lets say we buy $100K in VTEB with Fidelity in 1 transaction at $4.95 and then sell in 5-10 years where it has increased to $108K.

What would be the fee for selling that fund?

Now lets use the same numbers with FTABX and MUB that don't have a $4.95 fee. That would be commission when selling at $108K
$4.95 on both ends - purchase and sale.

$100K for 10 years in terms of ER fees would be...

FTABX = $25 a year for around $250
MUB = $25 a year for around $250

Those two are both commission free, so you would save the $9.90 total commission fee ($4.95 x 2).

VTEB = $9 a year for around $90

The Vanguard ETF would cost you $4.95 x 2 for the $9.90 commission. So your costs now would be $99.90 for the 10 years compared to the commission free Fidelity Muni Bond Fund and iShares Muni Bond Fund costing you $250 each for the 10 years. You could do an additional 30 trades at $4.95 of the Vanguard ETF over the 10 years time to get the expenses (ER fee plus commission) up to the $250 that the commission free funds would cost you. :mrgreen:

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Re: Munis at Fidelity: FTABX or VTEB?

Post by WentzWagon » Thu Aug 10, 2017 1:36 pm

CyclingDuo wrote:
flyersrule wrote:Lets say we buy $100K in VTEB with Fidelity in 1 transaction at $4.95 and then sell in 5-10 years where it has increased to $108K.

What would be the fee for selling that fund?

Now lets use the same numbers with FTABX and MUB that don't have a $4.95 fee. That would be commission when selling at $108K
$4.95 on both ends - purchase and sale.

$100K for 10 years in terms of ER fees would be...

FTABX = $25 a year for around $250
MUB = $25 a year for around $250

Those two are both commission free, so you would save the $9.90 total commission fee ($4.95 x 2).

VTEB = $9 a year for around $90

The Vanguard ETF would cost you $4.95 x 2 for the $9.90 commission. So your costs now would be $99.90 for the 10 years compared to the commission free Fidelity Muni Bond Fund and iShares Muni Bond Fund costing you $250 each for the 10 years. You could do an additional 30 trades at $4.95 of the Vanguard ETF over the 10 years time to get the expenses (ER fee plus commission) up to the $250 that the commission free funds would cost you. :mrgreen:
:sharebeer

Cool. Now just debating the yields and returns on each which could be splitting hairs over the 10yr period with 401K PTTAX vs others

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Re: Munis at Fidelity: FTABX or VTEB?

Post by Cash » Thu Aug 10, 2017 3:12 pm

No, not splitting hairs. FTABX has a higher yield, but that comes with a longer average duration and higher credit risk than VTEB and MUB. Given my investing time frame, I'm willing to accept that risk, and the higher yield should overcome the ER difference. But I expect a bit more volatility as a result.

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Re: Munis at Fidelity: FTABX or VTEB?

Post by grabiner » Thu Aug 10, 2017 9:07 pm

CppCoder wrote:SEC 30 day yield on VTEB is higher than the SEC 30 day yield on PTTAX without adjusting for taxes for funds of similar duration, albeit different holdings. You might consider VTEB if it were in your 401k! Do you have other good investment options in your 401k or are you just trading a high ER bond fund for a high ER equity fund?
The reason for the yield difference is expenses. PTTAX (Pimco Total Return, Class A) has a 1.93% yield and 0.85% expenses, which means that it holds bonds with a 2.78% yield. VTEB has a 1.97% yield and 0.09% expenses, which means that it holds bonds with a 2.06% yield. That is a normal yield difference between muni and taxable funds of comparable risk.

If everything in your 401(k) has expenses comparable to PTTAX, then it's reasonable to hold PTTAX as a core bond fund. If your 401(k) has a low-cost S&P 500 fund, then it is better to hold that in your 401(k), and hold munis in your taxable account if you need your IRA for other things or it is full of bonds.
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Re: Munis at Fidelity: FTABX or VTEB?

Post by WentzWagon » Thu Aug 10, 2017 9:56 pm

grabiner wrote:
CppCoder wrote:SEC 30 day yield on VTEB is higher than the SEC 30 day yield on PTTAX without adjusting for taxes for funds of similar duration, albeit different holdings. You might consider VTEB if it were in your 401k! Do you have other good investment options in your 401k or are you just trading a high ER bond fund for a high ER equity fund?
The reason for the yield difference is expenses. PTTAX (Pimco Total Return, Class A) has a 1.93% yield and 0.85% expenses, which means that it holds bonds with a 2.78% yield. VTEB has a 1.97% yield and 0.09% expenses, which means that it holds bonds with a 2.06% yield. That is a normal yield difference between muni and taxable funds of comparable risk.

If everything in your 401(k) has expenses comparable to PTTAX, then it's reasonable to hold PTTAX as a core bond fund. If your 401(k) has a low-cost S&P 500 fund, then it is better to hold that in your 401(k), and hold munis in your taxable account if you need your IRA for other things or it is full of bonds.
Yes. 401k - All BSPIX .11 is what I would move to. Just going to consolidate PTTRX and another equity to BSPIX

My Fido Roth IRA is about $26k FSITX . In Fido taxable I'd use Exempt Muni's to even out bond allocation.

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Re: Munis at Fidelity: FTABX or VTEB?

Post by CppCoder » Fri Aug 11, 2017 9:01 am

grabiner wrote:
CppCoder wrote:SEC 30 day yield on VTEB is higher than the SEC 30 day yield on PTTAX without adjusting for taxes for funds of similar duration, albeit different holdings. You might consider VTEB if it were in your 401k! Do you have other good investment options in your 401k or are you just trading a high ER bond fund for a high ER equity fund?
The reason for the yield difference is expenses. PTTAX (Pimco Total Return, Class A) has a 1.93% yield and 0.85% expenses, which means that it holds bonds with a 2.78% yield. VTEB has a 1.97% yield and 0.09% expenses, which means that it holds bonds with a 2.06% yield. That is a normal yield difference between muni and taxable funds of comparable risk.

If everything in your 401(k) has expenses comparable to PTTAX, then it's reasonable to hold PTTAX as a core bond fund. If your 401(k) has a low-cost S&P 500 fund, then it is better to hold that in your 401(k), and hold munis in your taxable account if you need your IRA for other things or it is full of bonds.
Of course, but the reason is irrelevant in this case. Why pay Pimco (and/or 401k administrator) for the "privilege" of getting higher yielding bonds in your 401k vs. muni bonds in your taxable if they net yield the same thing to the investor? I think we're giving the same advice. Given that these two investments are somewhat interchangeable (different risk profile), look at the portfolio as a whole and don't follow the bonds in tax deferred mantra if that is crowding out a better investment in the 401k.

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Re: Munis at Fidelity: FTABX or VTEB?

Post by Artsdoctor » Fri Aug 11, 2017 10:16 am

You should familiarize yourself with the 6-month rule associated with tax-exempt investment vehicles. FTABX accumulates its dividends daily; I believe that VTEB does as well although you'd have to read the prospectus. The ETFs mentioned above do not (MUB). The Wiki has a very nice synopsis on peculiarities associated with tax-exempt investing, so take a look.

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Re: Munis at Fidelity: FTABX or VTEB?

Post by CppCoder » Fri Aug 11, 2017 11:35 am

Artsdoctor wrote:You should familiarize yourself with the 6-month rule associated with tax-exempt investment vehicles. FTABX accumulates its dividends daily; I believe that VTEB does as well although you'd have to read the prospectus. The ETFs mentioned above do not (MUB). The Wiki has a very nice synopsis on peculiarities associated with tax-exempt investing, so take a look.
The tax rules make perfect sense. If they didn't have these rules, every savvy investor would simply buy tax exempt bond funds they day before the dividend, receive a tax free dividend, watch the fund fall an equal amount, and then sell for a capital loss. You'd convert the tax free dividend amount into a tax loss, even though you would actually incur no loss or taxation on that dividend. I would guess this only applies to funds where the interest is accounted for in the NAV vs. funds that accumulate interest daily and pay monthly without changing the NAV by the interest amount (but who knows with laws...they don't have to follow logic). I'm actually therefore confused by the wiki article. It seems to draw some distinction between mutual funds and ETFs rather than merely the interest accrual and payment structure. Is there really such a distinction based only on whether the fund is structured as a mutual fund or ETF, or did I read the wiki article wrong?

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Re: Munis at Fidelity: FTABX or VTEB?

Post by njboater74 » Fri Aug 11, 2017 12:05 pm

Artsdoctor wrote:You should familiarize yourself with the 6-month rule associated with tax-exempt investment vehicles. FTABX accumulates its dividends daily; I believe that VTEB does as well although you'd have to read the prospectus. The ETFs mentioned above do not (MUB). The Wiki has a very nice synopsis on peculiarities associated with tax-exempt investing, so take a look.
The example in the wiki makes sense. Thanks for this.

What if you held the shares for more than 6 months? Would you be free and clear to TLH? What if you had other shares that you had purchased in the previous 6 months (although not in the past 31 days), would you still be able to TLH?
When the mob and the press and the whole world tell you to move, your job is to plant yourself like a tree beside the river of truth and tell the whole world - 'No, YOU move'--Captain America, Boglehead

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Re: Munis at Fidelity: FTABX or VTEB?

Post by grabiner » Sat Aug 12, 2017 8:38 am

njboater74 wrote:
Artsdoctor wrote:You should familiarize yourself with the 6-month rule associated with tax-exempt investment vehicles. FTABX accumulates its dividends daily; I believe that VTEB does as well although you'd have to read the prospectus. The ETFs mentioned above do not (MUB). The Wiki has a very nice synopsis on peculiarities associated with tax-exempt investing, so take a look.
The example in the wiki makes sense. Thanks for this.

What if you held the shares for more than 6 months? Would you be free and clear to TLH? What if you had other shares that you had purchased in the previous 6 months (although not in the past 31 days), would you still be able to TLH?
The 6-month rule is applied to each lot separately. If you sell shares purchased more than 6 months ago, you get the full capital gain or loss, whether you sell the more recently purchased shares or not.
CppCoder wrote:The tax rules make perfect sense. If they didn't have these rules, every savvy investor would simply buy tax exempt bond funds they day before the dividend, receive a tax free dividend, watch the fund fall an equal amount, and then sell for a capital loss. You'd convert the tax free dividend amount into a tax loss, even though you would actually incur no loss or taxation on that dividend. I would guess this only applies to funds where the interest is accounted for in the NAV vs. funds that accumulate interest daily and pay monthly without changing the NAV by the interest amount (but who knows with laws...they don't have to follow logic). I'm actually therefore confused by the wiki article. It seems to draw some distinction between mutual funds and ETFs rather than merely the interest accrual and payment structure. Is there really such a distinction based only on whether the fund is structured as a mutual fund or ETF, or did I read the wiki article wrong?
The rule is not based on whether the fund is structured as a mutual fund or ETF, but on how it pays the distributions. ETFs do not accrue dividends; most mutual funds do, although there is no rule requiring it, and many don't. (For example, Vanguard Tax-Managed Balanced Fund does not accrue dividends, as it holds both stocks and municipal bonds. If you harvest a loss in that fund, the 6-month rule will apply to the tax-exempt part of the dividend you received, but not to the taxable part.)
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Re: Munis at Fidelity: FTABX or VTEB?

Post by WentzWagon » Wed Aug 16, 2017 11:45 am

Would you ever recommend doing an even split between FTABX and VTEB? 50/50. You get longer term more risk then mid term less.

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Re: Munis at Fidelity: FTABX or VTEB?

Post by dave_k » Wed Aug 16, 2017 4:27 pm

Even though I already had a taxable account at Fidelity, I opened a Vanguard account earlier this year so I could buy VWIUX and VWLUX (intermediate and long term muni funds) since they had the duration and SEC yield I was looking for with lower expense ratios (.09%). They are not subject to the 6 month rule. Opening the account and funding it was very easy.

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Re: Munis at Fidelity: FTABX or VTEB?

Post by Cash » Wed Aug 16, 2017 4:48 pm

I just closed my Vanguard accounts because I wanted to consolidate at Fidelity :).

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Re: Munis at Fidelity: FTABX or VTEB?

Post by .David. » Wed Aug 16, 2017 10:25 pm

Here is another factor you may want to consider when choosing between FTABX and VTEB:

FTABX holds more bonds issued by Illinois than by any other state. As of 6/30/17, Illinois bonds made up 17.3% of FTABX.

VTEB has a far smaller part of its portfolio in Illinois bonds. As of 4/30/2017, Illinois bonds made up 4.0% of VTEB.

How do you feel about Illinois?

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Re: Munis at Fidelity: FTABX or VTEB?

Post by Cash » Thu Aug 17, 2017 5:02 am

The higher credit risk has been mentioned before, but fair point about Illinois specifically. That said, 17.3% doesn't strike me as unreasonable for some yield chasing.

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Re: Munis at Fidelity: FTABX or VTEB?

Post by WentzWagon » Thu Aug 17, 2017 9:14 am

I think VTEB looks to be a solid choice considering growth since its inception compared to others like MUB, FTABX, PTTAX

http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D

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