VBTLX versus NUVEEN managed Muni Bonds

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DieterReuther
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VBTLX versus NUVEEN managed Muni Bonds

Post by DieterReuther » Fri Jan 12, 2018 5:21 pm

Hello fellow Bogleheads,

I am working on converting our investments into a 3-fund portfolio consisting of VTSAX, VTIAX, and VBTLX. The bond part of the portfolio is currently at 56% with 12% in VBTLX in a tax-deferred account and 44% in NUVEEN managed muni bonds in a taxable account. The NUVEEN managed account currently holds 30 different muni bonds.

My goal is to bring the bond part down from 56% to 45%. The NUVEEN investment has historic reasons and I am struggling whether to keep this investment or completely converting to VBTLX.

I am interested in learning what advantages/disadvantages you see in keeping the NUVEEN muni bond investment.

We live in NH and don't pay any state tax.

Thank you for your guidance,
Dieter

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in_reality
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Re: VBTLX versus NUVEEN managed Muni Bonds

Post by in_reality » Sat Jan 13, 2018 12:24 am

What are your costs for NUVEEN?

What is your tax bracket and cost of holding taxable bonds?

Are you using any NUVEEN features such as selecting a laddered portfolio or limiting duration or selecting credit risk?

Have they been doing tax loss harvesting?

Do you or would you want to donate individual holdings?

You seem to have no need to use state specific funds, so I guess that is out.

You might look at a thread on the opposite -- going from VBTLX to a muni fund.
viewtopic.php?f=1&t=218208

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dratkinson
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Location: Centennial CO

Re: VBTLX versus NUVEEN managed Muni Bonds

Post by dratkinson » Sat Jan 13, 2018 1:46 am

It is our due diligence requirement to make an informed decision.

I read a Nuveen prospectus while researching muni funds. Scariest thing I've ever read.

Of course I would never have known how bad it was if I hadn't first read two of the bond books recommended by the Wiki.

Why read two bond books? Where recommended author agree, that is the central route. Where they disagree, those are alternate routes. More due diligence is required if you go an alternate route.

Suggestion. Search Wiki for recommended "books" (search term). Read two recommended bond books. Then (re)read your Nuveen prospectus, and the prospectus of any fund you are considering to replace it.

It is your due diligence requirement to come up to speed on bond basics and make an informed decision. And what you need to know would fill a book(s). Lucky for us, those books have been written.
Last edited by dratkinson on Sat Jan 13, 2018 5:59 pm, edited 1 time in total.
d.r.a, not dr.a. | I'm a novice investor, you are forewarned.

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in_reality
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Re: VBTLX versus NUVEEN managed Muni Bonds

Post by in_reality » Sat Jan 13, 2018 3:18 am

dratkinson wrote:
Sat Jan 13, 2018 1:46 am
It is our due diligence requirement to make an informed decision.

I read a Nuveen prospectus while researching muni funds. Scariest thing I've ever read.
Was that a leveraged CEF? What was so scary? Yeah I mean you have to know the leverage influenced duration and be prepared for NAV fluctuation, and IPOs are often not advantageous but why are they scary?

Anyway, the NUVEEN managed accounts don't use leverage do they? You really should know if they do!!!!

https://www.nuveen.com/Home/ManagedAccount/Default.aspx
https://www.nuveen.com/Home/Documents/D ... leId=54202

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dratkinson
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Location: Centennial CO

Re: VBTLX versus NUVEEN managed Muni Bonds

Post by dratkinson » Sat Jan 13, 2018 5:41 pm

Had to go back and refresh my memory.

The Nuveen fund was FCOTX. The ER was okay. But the prospectus promised...
--sales load,
--exposure to AMT issues “without limit”,
--up to 20% junk bond exposure,
--use of leverage.
See: http://www.rightprospectus.com/document ... State1.pdf

I was in 25% fed tax bracket at the time and believed I would be exposed to AMT in coming years. The fund's yield was not high enough to survive a 28% haircut (assuming 100% "without limit" AMT exposure).

So: load + AMT + junk bonds + leverage---scary.

The load is waived if we buy $250K. But since I didn't want "a little" of this fund, "a lot" was less appealing.

We are told to "plan for the worst, hope for the best", but the prospectus left no room for hope. So since the recommended bond books say we can do better, I decided to pass on the Nuveen fund.
d.r.a, not dr.a. | I'm a novice investor, you are forewarned.

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