Recommendation for Intermediate Muni Bond Fund for Taxable Account

[alan4473]

Looking for recommendations on an Intermediate Muni Bond Fund for Taxable Account. I use BND for a few tax-deferred accounts but looking for a more tax efficient option for our taxable account to preserve our asset allocation. I was looking at VTEB but interested in others opinions.

[jebmke]

Rather than look for “intermediate” which is a term which can mean different things to different people, I’d look at defining my target duration. I own some of the VG INTERMEDIATE FUND but the duration is longer than I normally choose so the rest of our nominal fixed income is in shorter duration funds.

Baird has some very high quality muni funds (last time I looked at them the bond ratings were significantly higher than VG) but the ER is a little higher.

[retired@50]

Rather than look for “intermediate” which is a term which can mean different things to different people, I’d look at defining my target duration. I own some of the VG INTERMEDIATE FUND but the duration is longer than I normally choose so the rest of our nominal fixed income is in shorter duration funds.

Baird has some very high quality muni funds (last time I looked at them the bond ratings were significantly higher than VG) but the ER is a little higher.

The duration point jebmke makes above is a good one.

When discussing this issue with a friend who uses municipal bonds in her taxable account, she settled on a combination of the Vanguard Limited-Term Tax-Exempt fund (VMLTX or VMLUX Admiral) and the Vanguard Intermediate Term Tax-Exempt fund (VWITX or VWIUX Admiral). By mixing these two funds you can generally modify your duration exposure, presuming you want to shorten it to something less than "intermediate".

Of course if you're looking to increase duration, then you could use the Vanguard Long Term Tax-Exempt fund (VWLTX or VWLUX Admiral).

Regards,

[skeptical]

Looking for recommendations on an Intermediate Muni Bond Fund for Taxable Account. I use BND for a few tax-deferred accounts but looking for a more tax efficient option for our taxable account to preserve our asset allocation. I was looking at VTEB but interested in others opinions.

I have a large position in munis, right now it is all VTEB

I feel Vanguard has the best muni funds, hands down.
I looked at fidelity muni's - they have the second best muni funds IMO, but expense ratios are too high
I looked at a lot of others, and none of them, IMO, were close to Vanguard/Fidelity, except BMBIX and maybe iShares MUB.
I did this research many years ago, so things might have changed, but I do not see how you can go wrong with Vanguard muni funds.

Some things to consider:
- How long a duration do you want ?
- What "quality" do you want ?
- Is portability important ?
- Do you want national or state, or a mixture ?


Reasons I went with VTEB:
- I want an "intermediate" duration, as I am looking, as you are, for asset preservation (and, for me,income), and not duration matching. Looking to hold muni funds long term, just spending the interest, rebalancing into the muni's to keep up with inflation.
- I want high quality, but did not go with BMBIX, which is probably the highest quality fund due to the type of muni's it holds
- I used to have VWIUX (which is still my favorite), but wanted portability (I moved to Fidelity)
- I used to have a national/state mixture (VWIUX/VMATX), but went to national only because I did not see advantages to VMATX (MA). Now that interest rates are a lot higher, considering moving some back into a MA fund because the state tax hit is becoming a lot more noticeable.

[skeptical]

Rather than look for “intermediate” which is a term which can mean different things to different people, I’d look at defining my target duration. I own some of the VG INTERMEDIATE FUND but the duration is longer than I normally choose so the rest of our nominal fixed income is in shorter duration funds.

Baird has some very high quality muni funds (last time I looked at them the bond ratings were significantly higher than VG) but the ER is a little higher.

The duration point jebmke makes above is a good one.

When discussing this issue with a friend who uses municipal bonds in her taxable account, she settled on a combination of the Vanguard Limited-Term Tax-Exempt fund (VMLTX or VMLUX Admiral) and the Vanguard Intermediate Term Tax-Exempt fund (VWITX or VWIUX Admiral). By mixing these two funds you can generally modify your duration exposure, presuming you want to shorten it to something less than "intermediate".

Of course if you're looking to increase duration, then you could use the Vanguard Long Term Tax-Exempt fund (VWLTX or VWLUX Admiral).

Regards,

Yes, VMLUX/VWIUX/VWLUX provides a lot of flexibility for duration management. I have used all of these, mostly for tax loss harvesting (VWIUX <==> VWLUX/VMLUX).

In the end, I settled on VTEB for portability and being a VWIUX rough equivalent, stopped caring about duration issues, and the irritation that VWLUX and VMLUX kept giving off capital gains.

[sycamore]

Schwab has a low-cost national muni ETF: SCMB. Even lower cost than VTEB.

It's been discussed on other Bogleheads threads, like this one: viewtopic.php?t=408085. And some other threads: https://www.google.com/search?q=Schwab+ ... eheads.org

So that's another option.

[Hacksawdave]

Looking for recommendations on an Intermediate Muni Bond Fund for Taxable Account. I use BND for a few tax-deferred accounts but looking for a more tax efficient option for our taxable account to preserve our asset allocation. I was looking at VTEB but interested in others opinions.

Are you in a high tax state such as NY or CA? At the 37% tax rate plus NIIT, this would provide some additional suggestions on state specific funds depending on which state you live in. I agree with the post on Vanguard as I hold all three CA tax-exempt offerings.

[retired@50]

Looking for recommendations on an Intermediate Muni Bond Fund for Taxable Account. I use BND for a few tax-deferred accounts but looking for a more tax efficient option for our taxable account to preserve our asset allocation. I was looking at VTEB but interested in others opinions.

Are you in a high tax state such as NY or CA? At the 37% tax rate plus NIIT, this would provide some additional suggestions on state specific funds depending on which state you live in. I agree with the post on Vanguard as I hold all three CA tax-exempt offerings.

Hacksawdave brings up a good point about your particular state...

If you live in CA, MA, NJ, NY, OH, or PA then you can use a Vanguard state-specific municipal bond mutual fund - assuming it meets your needs...

Regards,

[grabiner]

Looking for recommendations on an Intermediate Muni Bond Fund for Taxable Account. I use BND for a few tax-deferred accounts but looking for a more tax efficient option for our taxable account to preserve our asset allocation. I was looking at VTEB but interested in others opinions.

Are you in a high tax state such as NY or CA? At the 37% tax rate plus NIIT, this would provide some additional suggestions on state specific funds depending on which state you live in. I agree with the post on Vanguard as I hold all three CA tax-exempt offerings.

And in those states, a good way to get an intermediate-term duration is a 50/50 split of Vanguard's long-term fund for the state and Limited-Term Tax-Exempt. This gives you an overall intermediate-term duration, with less single-state risk since half your bonds are out of the state, but less than half your bond interest subject to state tax. (In NY, you have to do this as Vanguard doesn't have an intermediate-term NY fund; in CA, you can use CA Intermediate-Term Tax-Exempt if you don't mind having all your bonds in CA.)