which bond fund and what %

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jsa307
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which bond fund and what %

Post by jsa307 » Sun Nov 17, 2019 1:13 pm

I'm accumulating extra cash each month, beyond what I've allocated as savings for retirement. I'd like to start using a taxable account specifically for this bucket, but unsure what the right bond fund is (and what the AA should be). The money isn't earmarked for anything in particular; it could be for a home renovation, a car, or something I haven't thought of in the future. No specific time horizon. I'd like to be more aggressive than a MM account, and it won't "ruin" any plans if there is a decrease in value. I'm a New York state resident in the 37% federal/6.85% state tax brackets ... any suggestions for which bond fund to use in taxable? And thoughts for AA, given the circumstances ... 50/50? 40/60?

Thanks!

livesoft
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Re: which bond fund and what %

Post by livesoft » Sun Nov 17, 2019 1:16 pm

I use 100% equities in taxable and no bond funds. I put my bond funds in my tax-deferred 401(k). Thus, I don't have the same asset allocation in my taxable, tax-deferred, nor Roth IRA accounts, but if I consider them all as one portfolio they add up to the asset allocation that I want for my total portfolio.

But if you want some bond fund in taxable, then I suggest the Vanguard New York Long-term Tax-Exempt Fund.
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retired@50
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Re: which bond fund and what %

Post by retired@50 » Sun Nov 17, 2019 1:59 pm

VNYTX if you can commit $3,000 or VNYUX if you want to commit $50,000 or greater.
The percentage of your asset allocation is up to you.
Regards,

vipertom1970
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Re: which bond fund and what %

Post by vipertom1970 » Sun Nov 17, 2019 2:16 pm

livesoft wrote:
Sun Nov 17, 2019 1:16 pm
I use 100% equities in taxable and no bond funds. I put my bond funds in my tax-deferred 401(k). Thus, I don't have the same asset allocation in my taxable, tax-deferred, nor Roth IRA accounts, but if I consider them all as one portfolio they add up to the asset allocation that I want for my total portfolio.

But if you want some bond fund in taxable, then I suggest the Vanguard New York Long-term Tax-Exempt Fund.

how will you rebalance to the intended AA without paying capital gain tax if you don't have equities in tax-deferred account ?

livesoft
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Re: which bond fund and what %

Post by livesoft » Sun Nov 17, 2019 2:19 pm

I did not write I didn't have equities in my tax-deferred account, so that must be something that you made up.
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vipertom1970
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Re: which bond fund and what %

Post by vipertom1970 » Sun Nov 17, 2019 2:24 pm

livesoft wrote:
Sun Nov 17, 2019 2:19 pm
I did not write I didn't have equities in my tax-deferred account, so that must be something that you made up.
sorry, misunderstood you your comment.

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jsa307
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Re: which bond fund and what %

Post by jsa307 » Sun Nov 17, 2019 3:30 pm

retired@50 wrote:
Sun Nov 17, 2019 1:59 pm
VNYTX if you can commit $3,000 or VNYUX if you want to commit $50,000 or greater.
The percentage of your asset allocation is up to you.
Regards,
Yes I realize, ultimately, the AA is up to me ... but I'd like the forum's opinion, based on the goal of the money in the bucket ..

Also- just wondering if it's acceptable to have VNYTX/VNYUX as the only bond funds for the bucket, given the longer term of the bonds? Thoughts?

thanks!

livesoft
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Re: which bond fund and what %

Post by livesoft » Sun Nov 17, 2019 3:33 pm

jsa307 wrote:
Sun Nov 17, 2019 3:30 pm
Also- just wondering if it's acceptable to have VNYTX/VNYUX as the only bond funds for the bucket, given the longer term of the bonds? Thoughts?
It would depend on what else is going on in your portfolio, wouldn't it? For instance, suppose my tax-deferred 401(k) of $4 million was 100% Vanguard Total US Bond Market Index and I had $50,000 of VNYTX/VNYUX in my taxable account, then in that case I wouldn't worry about it.
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jsa307
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Re: which bond fund and what %

Post by jsa307 » Sun Nov 17, 2019 3:44 pm

livesoft wrote:
Sun Nov 17, 2019 3:33 pm
jsa307 wrote:
Sun Nov 17, 2019 3:30 pm
Also- just wondering if it's acceptable to have VNYTX/VNYUX as the only bond funds for the bucket, given the longer term of the bonds? Thoughts?
It would depend on what else is going on in your portfolio, wouldn't it? For instance, suppose my tax-deferred 401(k) of $4 million was 100% Vanguard Total US Bond Market Index and I had $50,000 of VNYTX/VNYUX in my taxable account, then in that case I wouldn't worry about it.
I know the advice here is not to do "buckets" (i.e. it's all one portfolio), but I'm choosing to look at this bucket of surplus cash is a closed system

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jsa307
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Re: which bond fund and what %

Post by jsa307 » Mon Nov 25, 2019 10:43 am

would a 50/50 AA seem reasonable to most for this purpose? or would some advocate an even more conservative AA?

thoughts about Vanguard Tax-Managed Balanced Fund (VTMFX) for what i have in mind? it seems like Vanguard Tax-Exempt Bond Index Fund (VTEBX), combined with an equities % of my choice, would have been perfect -but is no longer available

thoughts?

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Re: which bond fund and what %

Post by goodenyou » Mon Nov 25, 2019 12:12 pm

I don't use bond funds in tax deferred because I have no access to low cost bond index funds in tax deferred space. I have to pay 1% for PIMCO funds and 1% for a managed government bond fund. I have a Blackrock Index 500 that I have to pay 40 basis points for in tax-deferred. I have a few JP Morgan Target Date Funds that have bonds and stocks that are barely acceptable. We have a few small additional retirement accounts that offer VBTLX, but they represent a small fraction of our portfolio. My taxable/tax deferred ratio is close to 80/20 although we contribute 6-figures to our tax deferred space annually. Overall we have a 60/40 AA.

So, I choose VWIUX (Intermedate Tax Free) in taxable for bonds with Total Index/International for equities. Why? I am in high federal bracket, and I live in a no state income tax state.
"Ignorance more frequently begets confidence than does knowledge" | Do you know how to make a rain dance work? Dance until it rains.

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jsa307
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Re: which bond fund and what %

Post by jsa307 » Mon Nov 25, 2019 1:58 pm

after a little more reading i'm leaning towards vwitx for the bond component (vs vteax). still soliciting opinions for what to set the AA at? thank you ..

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ruralavalon
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Re: which bond fund and what %

Post by ruralavalon » Mon Nov 25, 2019 3:29 pm

What is your regular asset allocation for retirement investing?

What bond funds are offered in your 401k plan or other work-based plan? Please give fund names, tickers and expense ratios.

Do you have space in tax-advantaged accounts for additional bond investing? Or are your tax-advantaged accounts already invested 100% in bonds?


jsa307 wrote:
Sun Nov 17, 2019 1:13 pm
I'm accumulating extra cash each month, beyond what I've allocated as savings for retirement. I'd like to start using a taxable account specifically for this bucket, but unsure what the right bond fund is (and what the AA should be). The money isn't earmarked for anything in particular [emphasis added]; it could be for a home renovation, a car, or something I haven't thought of in the future. No specific time horizon [emphasis added]. I'd like to be more aggressive than a MM account, and it won't "ruin" any plans if there is a decrease in value. I'm a New York state resident in the 37% federal/6.85% state tax brackets ... any suggestions for which bond fund to use in taxable? And thoughts for AA, given the circumstances ... 50/50? 40/60?

Thanks!
jsa307 wrote:
Sun Nov 17, 2019 3:30 pm
Yes I realize, ultimately, the AA is up to me ... but I'd like the forum's opinion, based on the goal of the money in the bucket ..
You have not stated a goal for this money.
jsa307 wrote:
Mon Nov 25, 2019 10:43 am
would a 50/50 AA seem reasonable to most for this purpose? or would some advocate an even more conservative AA?
You have not stated a purpose for this money.

In my opinion money not intended for a specific purpose, at an unknown time, can be invested "as if" for the long-term for retirement.

So use your regular asset allocation, I suggest using a total bond market index fund or an intermediate-term bond fund for the bond allocation.

Use tax-efficient fund placement. Increase your bond holdings in a tax-advantaged account, and use very tax-efficient stock index funds in your taxable brokerage account.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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jsa307
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Re: which bond fund and what %

Post by jsa307 » Mon Nov 25, 2019 4:59 pm

ruralavalon wrote:
Mon Nov 25, 2019 3:29 pm

You have not stated a purpose for this money.
I basically did .... "it could be for a home renovation, a car, or something I haven't thought of in the future". Essentially, some sort of large, discretionary spending that I'm not counting towards what I "need" to save for retirement. If the lack of a time horizon is an issue for advice, let's say approximately 5 years. Thoughts?

Blue456
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Re: which bond fund and what %

Post by Blue456 » Mon Nov 25, 2019 7:12 pm

jsa307 wrote:
Sun Nov 17, 2019 1:13 pm
I'm accumulating extra cash each month, beyond what I've allocated as savings for retirement. I'd like to start using a taxable account specifically for this bucket, but unsure what the right bond fund is (and what the AA should be). The money isn't earmarked for anything in particular; it could be for a home renovation, a car, or something I haven't thought of in the future. No specific time horizon. I'd like to be more aggressive than a MM account, and it won't "ruin" any plans if there is a decrease in value. I'm a New York state resident in the 37% federal/6.85% state tax brackets ... any suggestions for which bond fund to use in taxable? And thoughts for AA, given the circumstances ... 50/50? 40/60?

Thanks!
Check out the thread below. I decided to invest mine in vanguard intermediate treasuries. Others recommend short term bonds.

Trader Joe
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Re: which bond fund and what %

Post by Trader Joe » Mon Nov 25, 2019 8:36 pm

jsa307 wrote:
Sun Nov 17, 2019 1:13 pm
I'm accumulating extra cash each month, beyond what I've allocated as savings for retirement. I'd like to start using a taxable account specifically for this bucket, but unsure what the right bond fund is (and what the AA should be). The money isn't earmarked for anything in particular; it could be for a home renovation, a car, or something I haven't thought of in the future. No specific time horizon. I'd like to be more aggressive than a MM account, and it won't "ruin" any plans if there is a decrease in value. I'm a New York state resident in the 37% federal/6.85% state tax brackets ... any suggestions for which bond fund to use in taxable? And thoughts for AA, given the circumstances ... 50/50? 40/60?

Thanks!
No bond fund is appropriate for a taxable account. Please read the wiki.

bgf
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Re: which bond fund and what %

Post by bgf » Mon Nov 25, 2019 8:48 pm

Trader Joe wrote:
Mon Nov 25, 2019 8:36 pm
jsa307 wrote:
Sun Nov 17, 2019 1:13 pm
I'm accumulating extra cash each month, beyond what I've allocated as savings for retirement. I'd like to start using a taxable account specifically for this bucket, but unsure what the right bond fund is (and what the AA should be). The money isn't earmarked for anything in particular; it could be for a home renovation, a car, or something I haven't thought of in the future. No specific time horizon. I'd like to be more aggressive than a MM account, and it won't "ruin" any plans if there is a decrease in value. I'm a New York state resident in the 37% federal/6.85% state tax brackets ... any suggestions for which bond fund to use in taxable? And thoughts for AA, given the circumstances ... 50/50? 40/60?

Thanks!
No bond fund is appropriate for a taxable account. Please read the wiki.
thats not what the wiki says.
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"

bradinsky
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Re: which bond fund and what %

Post by bradinsky » Mon Nov 25, 2019 8:48 pm

Trader Joe wrote:
Mon Nov 25, 2019 8:36 pm
jsa307 wrote:
Sun Nov 17, 2019 1:13 pm
I'm accumulating extra cash each month, beyond what I've allocated as savings for retirement. I'd like to start using a taxable account specifically for this bucket, but unsure what the right bond fund is (and what the AA should be). The money isn't earmarked for anything in particular; it could be for a home renovation, a car, or something I haven't thought of in the future. No specific time horizon. I'd like to be more aggressive than a MM account, and it won't "ruin" any plans if there is a decrease in value. I'm a New York state resident in the 37% federal/6.85% state tax brackets ... any suggestions for which bond fund to use in taxable? And thoughts for AA, given the circumstances ... 50/50? 40/60?

Thanks!
No bond fund is appropriate for a taxable account. Please read the wiki.
If there is no room in tax deferred, where do you suggest bond funds be placed?

Blue456
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Re: which bond fund and what %

Post by Blue456 » Mon Nov 25, 2019 9:07 pm

Trader Joe wrote:
Mon Nov 25, 2019 8:36 pm
jsa307 wrote:
Sun Nov 17, 2019 1:13 pm
I'm accumulating extra cash each month, beyond what I've allocated as savings for retirement. I'd like to start using a taxable account specifically for this bucket, but unsure what the right bond fund is (and what the AA should be). The money isn't earmarked for anything in particular; it could be for a home renovation, a car, or something I haven't thought of in the future. No specific time horizon. I'd like to be more aggressive than a MM account, and it won't "ruin" any plans if there is a decrease in value. I'm a New York state resident in the 37% federal/6.85% state tax brackets ... any suggestions for which bond fund to use in taxable? And thoughts for AA, given the circumstances ... 50/50? 40/60?

Thanks!
No bond fund is appropriate for a taxable account. Please read the wiki.
That's incorrect. Wiki suggests using bond fund for emergency fund.
For instance, a multi-tiered emergency fund could consist of:

Three months of expenses in cash (bank account or money market fund)
The next three months of expenses in CDs with the option to cash them in for three months of interest
The next three months of expenses in a short-term Treasury bond fund. Selling these would risk incurring some loss of principal due to interest rate changes, but since the odds of needing to rely on your emergency fund for more than six months are slim, some would consider this an acceptable compromise.
https://www.bogleheads.org/wiki/Emergency_fund

Or you can read the article here.

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jsa307
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Re: which bond fund and what %

Post by jsa307 » Tue Nov 26, 2019 10:38 am

Blue456 wrote:
Mon Nov 25, 2019 7:12 pm

Check out the thread below. I decided to invest mine in vanguard intermediate treasuries. Others recommend short term bonds.
sorry ... which thread below??

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ruralavalon
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Re: which bond fund and what %

Post by ruralavalon » Tue Nov 26, 2019 11:12 am

jsa307 wrote:
Mon Nov 25, 2019 4:59 pm
ruralavalon wrote:
Mon Nov 25, 2019 3:29 pm

You have not stated a purpose for this money.
I basically did .... "it could be for a home renovation, a car, or something I haven't thought of in the future". Essentially, some sort of large, discretionary spending that I'm not counting towards what I "need" to save for retirement. If the lack of a time horizon is an issue for advice, let's say approximately 5 years. Thoughts?
For an unknown purpose at an indefinite time I suggest investing "as if" for the long-term for retirement. In other words use the same asset allocation, funds and fund placement that you would use for retirement investing.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Van Down By Da River
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Re: which bond fund and what %

Post by Van Down By Da River » Tue Nov 26, 2019 12:21 pm

I am in a similar boat as the OP. I have a high yield savings account for any money I need for 1-5 years, and treat my taxable as an account as a medium term 5-15 year savings, and my retirement as a 20-30 year savings.

I get it that it inst the most 'tax efficient to hold bonds in a taxable account, especially when it is earmarked for retirement funds, but for your case (and mine), I think it makes sense.

For the record, my taxable AA is now, 85-15 and getting 5% more conservative per year, with AGG as my bond fund. I figure, anything I need within the next 5 years will come from the bonds, and anything I need in 10-15 years will be liquidated into the bond fund slowly as the years go on

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jsa307
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Re: which bond fund and what %

Post by jsa307 » Wed Nov 27, 2019 8:21 am

Van Down By Da River wrote:
Tue Nov 26, 2019 12:21 pm
I am in a similar boat as the OP. I have a high yield savings account for any money I need for 1-5 years, and treat my taxable as an account as a medium term 5-15 year savings, and my retirement as a 20-30 year savings.

I get it that it inst the most 'tax efficient to hold bonds in a taxable account, especially when it is earmarked for retirement funds, but for your case (and mine), I think it makes sense.

For the record, my taxable AA is now, 85-15 and getting 5% more conservative per year, with AGG as my bond fund. I figure, anything I need within the next 5 years will come from the bonds, and anything I need in 10-15 years will be liquidated into the bond fund slowly as the years go on
Just curious why you chose a 85/15 AA for money you want in approx 10 years? Wouldn't that be analogous to a 55 year old, planning to retire at 65, choosing a 85/15 AA? that would be viewed a overly aggressive by most.

I was thinking that for my goal of approx 5-7 years, 50/50 AA was about right?

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Re: which bond fund and what %

Post by dratkinson » Wed Nov 27, 2019 6:55 pm

One forum member recommends pairing 50/50 VMLTX (limited-term national muni fund) with a LT single-state muni fund. Why? This produces a total bond investment of intermediate-term duration, limits your single-state default risk, and makes the majority of your dividends triple tax-exempt.


I keep 1yr of living expenses (checking, savings, TE mmkt) as my 1st-tier EFs to avoid the tax reporting hassle of sell taxable investments. But my extended-EF tier is all munis and they serve multiple duties: as the last tier of my formal EFs, home projects, new car, dry powder fund... and retirement bonds if not used otherwise.

If interested, recall Vanguard has a NY tax-exempt mmkt fund.
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Re: which bond fund and what %

Post by abuss368 » Wed Nov 27, 2019 7:01 pm

jsa307 wrote:
Sun Nov 17, 2019 1:13 pm
I'm accumulating extra cash each month, beyond what I've allocated as savings for retirement. I'd like to start using a taxable account specifically for this bucket, but unsure what the right bond fund is (and what the AA should be). The money isn't earmarked for anything in particular; it could be for a home renovation, a car, or something I haven't thought of in the future. No specific time horizon. I'd like to be more aggressive than a MM account, and it won't "ruin" any plans if there is a decrease in value. I'm a New York state resident in the 37% federal/6.85% state tax brackets ... any suggestions for which bond fund to use in taxable? And thoughts for AA, given the circumstances ... 50/50? 40/60?

Thanks!
Depending on your personal tax situation you could use either Total Bond or a Tax Exempt Bond Fund. The tax exempt bond fund can be either a national fund such as intermediate term tax exempt or a state specific tax exempt fund which may provide additional tax benefits.

Please understand that either will be a little more volatile than a savings or money market fund.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

Van Down By Da River
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Re: which bond fund and what %

Post by Van Down By Da River » Tue Dec 03, 2019 4:00 pm

jsa307 wrote:
Wed Nov 27, 2019 8:21 am
Van Down By Da River wrote:
Tue Nov 26, 2019 12:21 pm
I am in a similar boat as the OP. I have a high yield savings account for any money I need for 1-5 years, and treat my taxable as an account as a medium term 5-15 year savings, and my retirement as a 20-30 year savings.

I get it that it inst the most 'tax efficient to hold bonds in a taxable account, especially when it is earmarked for retirement funds, but for your case (and mine), I think it makes sense.

For the record, my taxable AA is now, 85-15 and getting 5% more conservative per year, with AGG as my bond fund. I figure, anything I need within the next 5 years will come from the bonds, and anything I need in 10-15 years will be liquidated into the bond fund slowly as the years go on
Just curious why you chose a 85/15 AA for money you want in approx 10 years? Wouldn't that be analogous to a 55 year old, planning to retire at 65, choosing a 85/15 AA? that would be viewed a overly aggressive by most.

I was thinking that for my goal of approx 5-7 years, 50/50 AA was about right?
My wife tells me this is way too aggressive all the time, and it may be a little bit of a gamble, but sometimes you just have to aim for the fences. With an emergency fund already in place, baring a huge catastrophe, I should be able to leave it untouched until I 'need' to buy a boat/Porsche/second home/kids college tuition in 5-10 years. With it at 85/15 now, and getting 5% more conservative every year (2-3% new contributions, as well as 2% dividend yields reinvested into bonds), in 5 years, it will be 60/40, and 35/65 in 10 years

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