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Diversifying bond funds in taxable account for high-income?

Posted: Sun Mar 29, 2020 1:09 pm
by cone774413
I'm in the 24% almost to be 32% tax bracket. Have a mid-sized taxable brokerage account and adding to it bi-weekly (roughly 2,000/mo). It's about 35/65 stocks/bond allocation. There's about a 25% chance I may need a large chunk of this money in 8 years.

My complete bond allocation has been in vanguard intermediate-term tax-exempt municipal fund (VWITX/VWIUX) but given the current situation I would like to diversify the bond portion slightly.

Would you recommend vanguard intermediate-term bond fund (VBILX) or vanguard total-bond fund (VBTLX) or I am being completely neurotic (absolutely) and ridiculous (likely) and either choice is fine/don't change anything at all. What would YOU do?

Re: Diversifying bond funds in taxable account for high-income?

Posted: Sun Mar 29, 2020 1:10 pm
by livesoft
If I was in that tax bracket, I would not hold VBTLX nor VBILX in a taxable account.

Re: Diversifying bond funds in taxable account for high-income?

Posted: Sun Mar 29, 2020 1:16 pm
by retired@50
cone774413 wrote: Sun Mar 29, 2020 1:09 pm My complete bond allocation has been in vanguard intermediate-term tax-exempt municipal fund (VWITX/VWIUX)
...
What would YOU do?
Do you have any bonds in a tax-deferred account like a 401k?

Since you're using a national municipal bond fund instead of a state-focused municipal bond fund, your risk is likely reduced. However, if you have any room in a tax-deferred account to hold additional taxable bonds, that might help. Plus it avoids buying taxable bonds in your taxable account space.

Regards,

Re: Diversifying bond funds in taxable account for high-income?

Posted: Sun Mar 29, 2020 1:26 pm
by aj76er
We hold bonds in tax sheltered, and IBonds.

If I wanted or needed to hold bonds in taxable, I’d probably do an even split of munis and treasuries. Something like 50% VTEB and 50% VGIT.

In tax sheltered, a 50/50 split of short-term investment grade and treasuries could make sense: 50% VCSH and 50% IEF.

VTEB - Vanguard national Muni, duration ~6yrs
VGIT - Vanguard inter term treasury, duration ~ 5 yrs

VCSH - Vanguard short term investment grated corporate, duration ~ 2.5 yrs
IEF - Blackrock 7-10yr treasuries

Re: Diversifying bond funds in taxable account for high-income?

Posted: Sun Mar 29, 2020 1:37 pm
by cone774413
livesoft wrote: Sun Mar 29, 2020 1:10 pm If I was in that tax bracket, I would not hold VBTLX nor VBILX in a taxable account.
Let's assume I have no choice but to hold bond in my taxable account in the asset allocation I listed.

Re: Diversifying bond funds in taxable account for high-income?

Posted: Sun Mar 29, 2020 1:42 pm
by livesoft
cone774413 wrote: Sun Mar 29, 2020 1:37 pm
livesoft wrote: Sun Mar 29, 2020 1:10 pm If I was in that tax bracket, I would not hold VBTLX nor VBILX in a taxable account.
Let's assume I have no choice but to hold bond in my taxable account in the asset allocation I listed.
Then a tax-exempt bond fund or a Treasury bond fund.

Re: Diversifying bond funds in taxable account for high-income?

Posted: Sun Mar 29, 2020 1:48 pm
by mike_in_ny
I have been using an intermediate term, tax exempt, fund (VWIUX) for a similar situation
and historically have been reasonably happy.

However, I have to admit that I was surprised at how poorly it did these last few weeks
relative to other bond portfolios. It has since recovered / closed the gap, but it was
not giving me as much "ballast" in my portfolio as I would have thought.

Re: Diversifying bond funds in taxable account for high-income?

Posted: Sun Mar 29, 2020 2:14 pm
by cone774413
livesoft wrote: Sun Mar 29, 2020 1:42 pm
cone774413 wrote: Sun Mar 29, 2020 1:37 pm
livesoft wrote: Sun Mar 29, 2020 1:10 pm If I was in that tax bracket, I would not hold VBTLX nor VBILX in a taxable account.
Let's assume I have no choice but to hold bond in my taxable account in the asset allocation I listed.
Then a tax-exempt bond fund or a Treasury bond fund.
Ok. Then how about a portfolio such as ....

30% Vanguard Total Stock Market
35% Vanguard Interm-term muni
35% Vanguard Interm-term treasury