Balanced fund in a taxable account

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
Topic Author
Mario2222
Posts: 64
Joined: Mon Dec 24, 2018 12:16 am

Balanced fund in a taxable account

Post by Mario2222 »

We are saving money for our daughter in our bank savings account. Probably She will need the money within 6 years from now. My wife keeps asking me to move the money to Vanguard balanced fund Vbiax 60/40 US stocks/bonds.Is it a good idea to invest the money in Vanguard balanced fund vbiax? taxable account.Any recommendations? Thanks.
Last edited by Mario2222 on Tue Feb 18, 2020 11:08 am, edited 1 time in total.
bloom2708
Posts: 8252
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: Balanced fund in a taxable account

Post by bloom2708 »

6 years is generally too short a time frame for investing.

Would you be dismayed if the fund lost 30% or more over the next few years?

Differentiate saving vs investing.

High yield money market or CD will get you some return.
"We are here to provoke thoughtfulness, not agree with you." Unknown Boglehead
User avatar
Brianmcg321
Posts: 1047
Joined: Mon Jul 15, 2019 8:23 am

Re: Balanced fund in a taxable account

Post by Brianmcg321 »

Put it in the tax managed balanced fund. VTMFX
Rules to investing: | 1. Don't lose money. | 2. Don't forget rule number 1.
User avatar
BolderBoy
Posts: 5058
Joined: Wed Apr 07, 2010 12:16 pm
Location: Colorado

Re: Balanced fund in a taxable account

Post by BolderBoy »

Mario2222 wrote: Tue Feb 18, 2020 11:00 amIs it a good idea to invest the money in Vanguard balanced fund vbiax? taxable account.Any recommendations? Thanks.
From a purist standpoint, the bond portion of VBIAX is not tax efficient if that matters to you.

If you can't afford to lose any of this money (the principal) before your daughter gets it, then don't invest it; put it in something safe.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
User avatar
grabiner
Advisory Board
Posts: 28256
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: Balanced fund in a taxable account

Post by grabiner »

The problem with a balanced fund in a taxable account is that you are locked into its asset allocation. If you want to sell bonds (in order to hold fewer bonds, or a different type of bonds, or bonds in a different account), you have to sell stocks as well, paying a capital-gains tax. For example, if your daughter moves to NY, she will want to sell whatever bonds she has in her taxable account, and buy NY municipal bonds.

Thus, if you do want to hold both stocks and bonds (which is reasonable for money that will not all be needed in the next few years), hold separate stock and bond funds.
Wiki David Grabiner
Puretaxableindexer
Posts: 218
Joined: Sun Feb 16, 2020 8:05 pm

Re: Balanced fund in a taxable account

Post by Puretaxableindexer »

I have the Vanguard LifeStrategy Mod Growth fund, which is similar to the Balanced Index but with International. I have had this for many many many years with lots of $ in a taxable account and the yearly cap gains that it throws off isn't big and not a dealbreaker for me. The Balanced Index has paid out less in cap gains over the years than my fund, VSMGX.
Post Reply