Direct purchasing munis near expiration to park cash short term?

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Joined: Tue Oct 30, 2018 7:36 am

Direct purchasing munis near expiration to park cash short term?

Post by neflyer » Tue Oct 30, 2018 9:14 am

Howdy! Been reading this forum for a few months since I experienced a significant liquidity event in my business and have found the discussion here very useful.

Basically the question I'm trying to answer is whether buying individual small lots of munis expiring between now and 2019 EOY on my own is a stupid way to park cash and get a higher post-tax rate than a T-bill. I'll be in the maximum bracket for 18 and 19 at least.

Looking on Fidelity's platform there appear to be a decent number of small lots of munis in my home state (Mass.) in that duration with ~50% higher post-tax yield than I can get out of a T-bill or money market. Given that I'd be planning to hold to maturity, I am wondering if I could be on the winning side of the small-lot price spread and manage my own short-duration fund with a few dozen issues. My expectation is that no single issue would be more than 1% of my total portfolio. As issues mature I'd either roll them into another bond or into something else as I decide where I want to be longer term. Even if I decide on a three-fund autopilot approach, the models I've seen suggest I should dollar-cost average into that pretty gradually.

Given the investable amount I have I've also gotten proposals from the usual wealth management suspects to manage such a portfolio for me for ~35 basis points but after talking to a bunch of these guys I feel like they're salesmen first and second, and wondering how much value they really add in this scenario. I have a suspicion that all they'll do is place a standing order on their desk for anything that meets a screen I could run myself in 5 minutes. I also know there are plenty of people who've spent decades trading fixed income and I don't know how much I'd need to learn in order to avoid the sort of mistakes that would make those 35 points worth paying.

Curious to hear what more experienced minds think!

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