Help - what's your Favorite muni fund and why?

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curious george
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Help - what's your Favorite muni fund and why?

Post by curious george » Sun Feb 25, 2018 12:07 am

Hello


We are in the federal 37% marginal tax rate with an additional 5.75% VA tax rate and have run out of room in our 401k - so we are adding some municipal bonds in our taxable account.

We currently own some of each of the three funds:
VWIUX, VMLUX (VG limited term tax exempt), VWLUX (VG long-term tax exempt). These were purchased by our prior FA in an attempt to have diversification and a bond ladder of funds. We have now ventured out on our own without a FA.

While our current funds are ok, I was wondering about just consolidating to one or two funds.
We would be interested in thoughts from the group - realizing that there are many roads to Dublin and am honestly wondering in 10 years will there be a meaningful difference amongst theses funds????

VWIUX - Vanguard Intermediate Tax Exempt ER 0.09
VTEB - vanguard tax exempt bond etf (to avoid the 0.25 purchase fee). ER 0.09
MUB -ishares national muni bond fund ER 0.25%
PRVAX - t Rowe price VA tax free - ER 0.47 mod duration 4.47 years
bMBIX - Baird Quality Intermediate Muni Bond Fund - ER of 0.30%

Questions:
Just wondering what everyone's favorite muni fund is and why ?
I am having a hard time figuring out which is the best and why ? They all look good.
How come VTEB doesn't charge a purchase fee but the admiral funds do ?

stlutz
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Re: Help - what's your Favorite muni fund and why?

Post by stlutz » Sun Feb 25, 2018 1:03 am

There aren't a lot of free lunches that are available in the scale of mutual funds in the fixed income space. What that means is that lower cost is generally better. All of the funds you've listed are relatively low cost, but the other funds would have to offer something significantly better than the Vanguard funds to go with them.

I use VWIUX since intermediate term bonds are basically what I'm looking for.

VTEB takes a little less credit risk and a little more duration risk than does VWIUX.

My general suggestion is to you VWIUX if your funds are held at Vanguard or use VTEB if you are at another broker like Schwab or Fidelity.

curious george
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Re: Help - what's your Favorite muni fund and why?

Post by curious george » Sun Feb 25, 2018 6:05 pm

Amy other thoughts from the forum/group ?
Thanks

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Kenkat
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Re: Help - what's your Favorite muni fund and why?

Post by Kenkat » Sun Feb 25, 2018 6:11 pm

I use Vanguard Intermediate Term Tax Exempt. It’s the default single fund choice for tax exempt bonds unless you have special circumstances like state specific requirements.

henry
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Re: Help - what's your Favorite muni fund and why?

Post by henry » Sun Feb 25, 2018 6:14 pm

Another vote for Vanguard Intermediate term tax exempt. I also have I bonds and EE bonds.

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heartwood
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Re: Help - what's your Favorite muni fund and why?

Post by heartwood » Sun Feb 25, 2018 6:16 pm

Have you tried the search function in the upper right?

So, so many threads on this topic recently, e.g.,

viewtopic.php?t=241132

But the search on "muni funds" or similar will return many threads exploring the many facets of what you might consider.

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welderwannabe
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Re: Help - what's your Favorite muni fund and why?

Post by welderwannabe » Sun Feb 25, 2018 6:31 pm

curious george wrote:
Sun Feb 25, 2018 12:07 am

We currently own some of each of the three funds:
VWIUX, VMLUX (VG limited term tax exempt), VWLUX (VG long-term tax exempt). These were purchased by our prior FA in an attempt to have diversification and a bond ladder of funds. We have now ventured out on our own without a FA.

While our current funds are ok, I was wondering about just consolidating to one or two funds.
We would be interested in thoughts from the group - realizing that there are many roads to Dublin and am honestly wondering in 10 years will there be a meaningful difference amongst theses funds????

VWIUX - Vanguard Intermediate Tax Exempt ER 0.09
I use VWITX (non admiral version of the above) exclusively for my muni bonds. Its the best deal going. Honestly, VWITX and the Vanguard Municipal Money Market is why I keep my taxable at Vanguard where all my tax advantaged stuff is at Fidelity. I am expecting my tax bracket to drop next year, but I am still on the hairy edge of the lovely 3.8% net investment tax, so we will see if I keep this approach.

I also keep IBonds. They are tax deferred. They can help provide you tax deferred access to Treasuries so you don't have all your eggs in the muni basket.
I am not an investment professional, but I did stay at a Holiday Inn Express last night.

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Artsdoctor
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Re: Help - what's your Favorite muni fund and why?

Post by Artsdoctor » Sun Feb 25, 2018 6:46 pm

The municipal bond fund which has met my needs most consistently is the Vanguard California intermediate-term tax-exempt fund. I've been investing in that fund for over 20 years and it consistently exceeds my expectations. The ER continues to decrease, Vanguard's bond team is well-regarded, the diversification is everything I expect in a bond fund, and it's credit risk is something I've never had a problem with. I've really not found similar funds elsewhere which beat it.

I've used short-term and limited-term municipal funds at Vanguard for money that I'll need in the short-term. I also use the national intermediate-term fund because this forum has made me think about the virtues of diversification. I don't invest in long-term municipal bond funds any more because I don't need that volatility, especially in this low-rate environment.

informal guide
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Re: Help - what's your Favorite muni fund and why?

Post by informal guide » Sun Feb 25, 2018 7:22 pm

I have around 20% of my muni bond portfolios in VWALX, High Yield tax-exempt Adm. bond fund, for the extra yield pick-up (3.17% vs. 2.30% 30 day yield for VWIUX, Tax exempt interm. Term Adm). Some folks don't believe in taking risks in the bond portion of their portfolios, but I am comfortable with that modest risk, particularly given the conservative nature of Vanguard's muni portfolio managers. I see three elements that one should understand before venturing to this fund:
1) Credit risk. This fund's name is a bit misleading but it is riskier, as currently, 58% of assets are in issues rated A or better and only 7.7% are in below investment grade issues, vs. 90% rated A or above in VWIUX.
2) Duration is higher, 6.9 years vs. 5.2 years for VWIUX. VWALX has essentially the same duration as Vanguard's long term muni fund, VWLUX
3) Unlike VWIUX, the high yield portfolio does hold around 15% of assets in bonds subject to the AMT, not a problem for me, particularly under the new tax regime, but this may be for others.

PFInterest
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Re: Help - what's your Favorite muni fund and why?

Post by PFInterest » Sun Feb 25, 2018 7:25 pm

VWIUX - Vanguard Intermediate Tax Exempt ER 0.09

thats it.

mega317
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Re: Help - what's your Favorite muni fund and why?

Post by mega317 » Sun Feb 25, 2018 9:29 pm

Good replies so far. My additional thought is that I haven't yet seen a state-specific fund outside of Vanguard's that was worth using. The increased expense ratios more than eat up the state tax savings when compared to Vanguard's national funds. (I didn't look in to the Virginia fund you mentioned.)

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matjen
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Re: Help - what's your Favorite muni fund and why?

Post by matjen » Sun Feb 25, 2018 9:47 pm

I am a fan of BMBIX because I have a lot of munis. More munis than Treasuries so I want my Munis to be super safe. These two posts give more detail. If my bonds were 75% treasuries and 25% munis then I would just go Vanguard for sure.

viewtopic.php?t=175804#p2658215

viewtopic.php?t=175804#p2659071
A man is rich in proportion to the number of things he can afford to let alone.

WolfgangPauli
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Re: Help - what's your Favorite muni fund and why?

Post by WolfgangPauli » Sun Feb 25, 2018 10:44 pm

I have a mix of intermediate term muni bond fund and short term muni bond fund.. both in Vanguard. works well for me for all the reasons the OP discussed.
Twitter: @JAXbogleheads | EM: JAXbogleheads@gmail.com

mega317
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Re: Help - what's your Favorite muni fund and why?

Post by mega317 » Sun Feb 25, 2018 11:20 pm

mega317 wrote:
Sun Feb 25, 2018 9:29 pm
Good replies so far. My additional thought is that I haven't yet seen a state-specific fund outside of Vanguard's that was worth using. The increased expense ratios more than eat up the state tax savings when compared to Vanguard's national funds. (I didn't look in to the Virginia fund you mentioned.)
Update: I took a look. PRVAX SEC yield is 2.03%. VWIUX after 5.75% VA tax is 2.17%. They have very similar duration and very similar credit profiles, perhaps PRVAX is slightly riskier with nearly 20% of bonds rated below A, while VWIUX has around 10%.

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Nestegg_User
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Re: Help - what's your Favorite muni fund and why?

Post by Nestegg_User » Mon Feb 26, 2018 12:16 am

VWIUX - intermediate term

higher quality issues, reasonable duration
(i wouldn’t go long duration in this bond environment)

(for short term- 2 yr CD’s are giving 2+% without interest risk - and in retirement haven’t had as much need for municipals as we did when at ~40% (cumulative state and federal) tax)
Last edited by Nestegg_User on Mon Feb 26, 2018 9:51 pm, edited 1 time in total.

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birdog
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Re: Help - what's your Favorite muni fund and why?

Post by birdog » Mon Feb 26, 2018 7:27 am

stlutz wrote:
Sun Feb 25, 2018 1:03 am
My general suggestion is to you VWIUX if your funds are held at Vanguard or use VTEB if you are at another broker like Schwab or Fidelity.
This is my thought as well. I’m currently at TD Ameritrade and use VTEB. If I ever move to Vanguard I’ll switch to VWIUX.

rkhusky
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Re: Help - what's your Favorite muni fund and why?

Post by rkhusky » Mon Feb 26, 2018 7:35 am

I use Vanguard Short-Term Tax-Exempt as part of my emergency fund. It's the only fund I have set as Average Cost Basis since the NAV changes so little.

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unclescrooge
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Re: Help - what's your Favorite muni fund and why?

Post by unclescrooge » Mon Feb 26, 2018 9:57 am

I use closed end funds like MZF.

It's expensive, leveraged and volatile, so not for the faint of heart. But I like to buy when they trade at discounts to their net asset value.

hudson
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Re: Help - what's your Favorite muni fund and why?

Post by hudson » Mon Feb 26, 2018 1:58 pm

My favorite would be BMBIX because it could be the safest muni mutual fund.
I own VWIUX because the distribution yield is higher. I do not own any BMBIX.

VWIUX is 70.4% AAA/AA rated
BMBIX is 98.5% AAA/AA rated
BMBIX also has 51% of it's holdings Pre-refunded or Escrowed to Maturity

VWIUX's Trailing Twelve Month Yield is 2.86%
BMBIX's Trailing Twelve Month Yield is 2.32%
Vanguard Total Bond Admiral TTM is 2.57%

UpperNwGuy
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Re: Help - what's your Favorite muni fund and why?

Post by UpperNwGuy » Mon Feb 26, 2018 2:58 pm

PFInterest wrote:
Sun Feb 25, 2018 7:25 pm
VWIUX - Vanguard Intermediate Tax Exempt ER 0.09

thats it.
+1

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eye.surgeon
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Re: Help - what's your Favorite muni fund and why?

Post by eye.surgeon » Mon Feb 26, 2018 3:46 pm

What state do you live in ? I use Vanguards California tax exempt muni fund, they have a few in other states, those are best for high tax rate earners when held in taxable.
"I would rather be certain of a good return than hopeful of a great one" | Warren Buffett

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