Which short term bond fund?

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Joined: Sat Mar 24, 2018 10:06 pm

Which short term bond fund?

Post by rm2000 »

Hey All

Long time lurker, first time poster.

Im trying to save up for a downpayment probably 2 to 3 years away.

Currently this money is in a couple high yield saving accounts: Ally and Marcus.

Seeing the rates going down over the past few months, I was wondering if it would make sense to move to a short term bond fund.

I'm based in NJ and fall in a high tax bracket. Have some exposure to Vanguard New Jersey Long-Term Tax-Exempt Fund Investor Shares and everything else is in VTSAX.

Based on my research I am looking at the following but unable to determine which makes more sense for my needs. Definitely open to other suggestions as well.

1. Vanguard Limited-Term Tax-Exempt Fund Admiral Shares (VMLUX): https://investor.vanguard.com/mutual-fu ... view/VMLUX

2. Vanguard Short-Term Tax-Exempt Fund Admiral Shares (VWSUX): https://investor.vanguard.com/mutual-fu ... view/vwsux

3. Vanguard Short-Term Bond Index Fund Admiral Shares (VBIRX): https://investor.vanguard.com/mutual-fu ... view/VBIRX

Would really appreciate any insight. Thanks!
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Joined: Sun Apr 25, 2010 7:42 pm

Re: Which short term bond fund?

Post by Dandy »

I use mostly LTD Term Tax Exempt in taxable and Short Term Bond Index in my TIRA. Not fully convinced that muni's are ultra safe -- lots of states including NJ (my home also) had fiscal issues before Covid -19 -- now who knows how bad things will get.
Thus, LTD Term Tax Exempt and finger crossed a bit as opposed to a better tax situation with a NJ only fund.

I also use Short and Intermediate Treasuries and FDIC products to get some Fed "guarantees".
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Joined: Sun Mar 14, 2010 1:51 pm

Re: Which short term bond fund?

Post by jimkinny »

I would not use any bond fund if your time horizon is 2-3 years because what happens if in 2 years rates start to rise just when you want to cash out?
CDs or savings account are really about the only option unless you are willing to risk the loss of NAV. There are some ultra short term bond funds but my guess is they have an interest rate lower than an Ally 1 year CD which is about 1% and nothing to get excited about.
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Re: Which short term bond fund?

Post by dbr »

Keep the money in the bank. The tide is running low and everyone is grounded. There is no game to play. In holding money for a use in one or two years there is no game to play anyway because over short times there is little difference between low-low returns and low returns.

There are better things for you to spend your time on and you know keeping the money in the bank will serve your purpose just fine.
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Re: Which short term bond fund?

Post by Rudedog »

With all the current uncertainties in the the United States, I'd keep the money in the bank. You minimize the risk of bond market fluctuations, and the Fed has said interest rates will stay very low for a while.
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