How often should I buy VASIX and ORTYX given that they have transaction fees?

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maxsamson
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How often should I buy VASIX and ORTYX given that they have transaction fees?

Post by maxsamson » Sun Nov 04, 2018 3:52 pm

I have brokerage accounts with Schwab. Both VASIX and ORTYX have $25/transaction fees. How often/how much should I accumulate before purchasing more of those funds? And are there good equivalents I should use for temporarily investing cash rather than just letting that cash sit uninvested?

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BL
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Re: How often should I buy VASIX and ORTYX given that they have transaction fees?

Post by BL » Sun Nov 04, 2018 4:05 pm

Suggest you identify each fund in title and entry so each reader does not have to (or bother to) look them. Few memorize tickers.

Why are you buying a Vanguard fund if you don't wish to be at V? I would be looking for Schwab index funds or low cost balanced funds. I would not pay that much, except perhaps once or a few times a year at most. I like muni funds at V as well.

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Duckie
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Re: How often should I buy VASIX and ORTYX given that they have transaction fees?

Post by Duckie » Sun Nov 04, 2018 5:48 pm

maxsamson wrote:I have brokerage accounts with Schwab. Both VASIX and ORTYX have $25/transaction fees. How often/how much should I accumulate before purchasing more of those funds?
At least $1000 each and more would be better.
And are there good equivalents I should use for temporarily investing cash rather than just letting that cash sit uninvested?
Cash is fine.

VASIX Vanguard LifeStrategy Income Fund 0.11%
ORTYX Aquila Tax-Free Trust of Oregon 0.56%

At Schwab I found two other Oregon intermediate muni funds without transaction fees, but with higher expense ratios:
  • COEAX Columbia AMT-Free Oregon Intermediate Muni Bond Fund 0.83%
    FOTAX Nuveen Oregon Intermediate Municipal Bond Fund 0.82%
I also found some target-date funds that have a similar stock/bond AA as VASIX without transaction fees but the cheapest is 0.54% and the next is 0.70%.

I'd stick with the transaction fees and lower expense ratios.

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vineviz
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Re: How often should I buy VASIX and ORTYX given that they have transaction fees?

Post by vineviz » Sun Nov 04, 2018 6:49 pm

BL wrote:
Sun Nov 04, 2018 4:05 pm
Why are you buying a Vanguard fund if you don't wish to be at V? I would be looking for Schwab index funds or low cost balanced funds. I would not pay that much, except perhaps once or a few times a year at most. I like muni funds at V as well.
I agree. There are so many good funds available for no fee that I’d never use a fund that had a transaction fee for ongoing investment.
Last edited by vineviz on Sun Nov 04, 2018 8:43 pm, edited 1 time in total.
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typical.investor
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Re: How often should I buy VASIX and ORTYX given that they have transaction fees?

Post by typical.investor » Sun Nov 04, 2018 7:41 pm

Duckie wrote:
Sun Nov 04, 2018 5:48 pm
I also found some target-date funds that have a similar stock/bond AA as VASIX without transaction fees but the cheapest is 0.54% and the next is 0.70%.

I'd stick with the transaction fees and lower expense ratios.
The Schwab Target 20** Index Fund's are 0.08%. SWYAX 2010 has 35% equities (no emerging, no international small to reduce volatility)

The Schwab Target Fund's are as you say 0.54 - 0.70%

Schwab's most conservative balanced portfolio is SWCGX 0.5%, but has 40% equities. 2X VASIX.

You could use SWYAX monthly, and then once a year switch to VASIX. If 35% equities is too high, some purchases you could get SWAGX (intermediate bonds) 0.04% or SWSBX (short term) 0.06% or SWRSX (TIPS) 0.05%.

Flyer24
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Re: How often should I buy VASIX and ORTYX given that they have transaction fees?

Post by Flyer24 » Sun Nov 04, 2018 8:12 pm

I don’t get why you are buying other brand funds in a Schwab account.

SWTSX Total Stock Market Index .03%
SWISX International Index .06%
SWAGX Aggregate Bond Index .04%

maxsamson
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Re: How often should I buy VASIX and ORTYX given that they have transaction fees?

Post by maxsamson » Sun Nov 04, 2018 9:15 pm

Duckie wrote:
Sun Nov 04, 2018 5:48 pm
And are there good equivalents I should use for temporarily investing cash rather than just letting that cash sit uninvested?
Cash is fine.
But wouldn't some kind of temporary investment be better than nothing? In case it matters, this is being used to save for a down payment on a house, and we're saving about $3.6k per month.

maxsamson
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Re: How often should I buy VASIX and ORTYX given that they have transaction fees?

Post by maxsamson » Sun Nov 04, 2018 9:19 pm

vineviz wrote:
Sun Nov 04, 2018 6:49 pm
BL wrote:
Sun Nov 04, 2018 4:05 pm
Why are you buying a Vanguard fund if you don't wish to be at V? I would be looking for Schwab index funds or low cost balanced funds. I would not pay that much, except perhaps once or a few times a year at most. I like muni funds at V as well.
I agree. There are so many good funds available for no fee that I’d never use a fund that had a transaction fee for ongoing investment.
Honestly, I'm not sure. My wife and I saw a financial planner for a while (he's not managing the portfolio though) and VASIX was recommended as the fund we should use for our down payment savings. VASIX seems to come up in these forums relatively commonly as an option for down payment savings, so it seemed reasonable to me. What would some good Schwab alternatives be? Or how would I identify these myself?

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oldcomputerguy
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Re: How often should I buy VASIX and ORTYX given that they have transaction fees?

Post by oldcomputerguy » Sun Nov 04, 2018 9:24 pm

maxsamson wrote:
Sun Nov 04, 2018 9:19 pm
vineviz wrote:
Sun Nov 04, 2018 6:49 pm
BL wrote:
Sun Nov 04, 2018 4:05 pm
Why are you buying a Vanguard fund if you don't wish to be at V? I would be looking for Schwab index funds or low cost balanced funds. I would not pay that much, except perhaps once or a few times a year at most. I like muni funds at V as well.
I agree. There are so many good funds available for no fee that I’d never use a fund that had a transaction fee for ongoing investment.
Honestly, I'm not sure. My wife and I saw a financial planner for a while (he's not managing the portfolio though) and VASIX was recommended as the fund we should use for our down payment savings. VASIX seems to come up in these forums relatively commonly as an option for down payment savings, so it seemed reasonable to me. What would some good Schwab alternatives be? Or how would I identify these myself?
How soon do you contemplate making the down payment? If it’s, say, two years or less, just put it in a high-rate savings account such as Ally. Any cash you’re going to need in the next two or three years should not be in the stock market.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

fsh71
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Re: How often should I buy VASIX and ORTYX given that they have transaction fees?

Post by fsh71 » Sun Nov 04, 2018 10:37 pm

maxsamson wrote:
Sun Nov 04, 2018 9:15 pm
Duckie wrote:
Sun Nov 04, 2018 5:48 pm
And are there good equivalents I should use for temporarily investing cash rather than just letting that cash sit uninvested?
Cash is fine.
But wouldn't some kind of temporary investment be better than nothing? In case it matters, this is being used to save for a down payment on a house, and we're saving about $3.6k per month.
You could put it in a money-market fund, an ultra short-term bond fund, or a high-yield savings account.

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grabiner
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Re: How often should I buy VASIX and ORTYX given that they have transaction fees?

Post by grabiner » Mon Nov 05, 2018 8:14 pm

Duckie wrote:
Sun Nov 04, 2018 5:48 pm
ORTYX Aquila Tax-Free Trust of Oregon 0.56%

At Schwab I found two other Oregon intermediate muni funds without transaction fees, but with higher expense ratios:
  • COEAX Columbia AMT-Free Oregon Intermediate Muni Bond Fund 0.83%
    FOTAX Nuveen Oregon Intermediate Municipal Bond Fund 0.82%
And none of these are worth buying, even if munis are appropriate for you. If your OR tax rate is 9%, and the bonds in your fund yield less than 5%, a Vanguard fund holding bonds of comparable risk with an 0.09% expense ratio loses less combined to taxes and expenses. You could also use the ETF MUB, at 0.07% expenses; even if this isn't commission-free, the commission on ETF trades is lower than the fee on mutual fund trades.

If munis aren't appropriate (marginal in a 24% tax bracket), just use Schwab's bond ETFs or mutual funds in your Schwab account.
Wiki David Grabiner

maxsamson
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Re: How often should I buy VASIX and ORTYX given that they have transaction fees?

Post by maxsamson » Tue Nov 06, 2018 12:46 pm

grabiner wrote:
Mon Nov 05, 2018 8:14 pm
Duckie wrote:
Sun Nov 04, 2018 5:48 pm
ORTYX Aquila Tax-Free Trust of Oregon 0.56%

At Schwab I found two other Oregon intermediate muni funds without transaction fees, but with higher expense ratios:
  • COEAX Columbia AMT-Free Oregon Intermediate Muni Bond Fund 0.83%
    FOTAX Nuveen Oregon Intermediate Municipal Bond Fund 0.82%
And none of these are worth buying, even if munis are appropriate for you. If your OR tax rate is 9%, and the bonds in your fund yield less than 5%, a Vanguard fund holding bonds of comparable risk with an 0.09% expense ratio loses less combined to taxes and expenses. You could also use the ETF MUB, at 0.07% expenses; even if this isn't commission-free, the commission on ETF trades is lower than the fee on mutual fund trades.

If munis aren't appropriate (marginal in a 24% tax bracket), just use Schwab's bond ETFs or mutual funds in your Schwab account.
Interesting, would you mind showing me how the math would work? My wife and I will indeed be in the 24% tax bracket.

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grabiner
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Re: How often should I buy VASIX and ORTYX given that they have transaction fees?

Post by grabiner » Tue Nov 06, 2018 7:25 pm

maxsamson wrote:
Tue Nov 06, 2018 12:46 pm
grabiner wrote:
Mon Nov 05, 2018 8:14 pm
Duckie wrote:
Sun Nov 04, 2018 5:48 pm
ORTYX Aquila Tax-Free Trust of Oregon 0.56%

At Schwab I found two other Oregon intermediate muni funds without transaction fees, but with higher expense ratios:
  • COEAX Columbia AMT-Free Oregon Intermediate Muni Bond Fund 0.83%
    FOTAX Nuveen Oregon Intermediate Municipal Bond Fund 0.82%
And none of these are worth buying, even if munis are appropriate for you. If your OR tax rate is 9%, and the bonds in your fund yield less than 5%, a Vanguard fund holding bonds of comparable risk with an 0.09% expense ratio loses less combined to taxes and expenses. You could also use the ETF MUB, at 0.07% expenses; even if this isn't commission-free, the commission on ETF trades is lower than the fee on mutual fund trades.

If munis aren't appropriate (marginal in a 24% tax bracket), just use Schwab's bond ETFs or mutual funds in your Schwab account.
Interesting, would you mind showing me how the math would work? My wife and I will indeed be in the 24% tax bracket.
For state taxes. it is just math. The OR tax-exempt fund has a 2.65% yield, and 0.56% expenses, so it holds bonds with a 3.21% yield. A Vanguard fund holding bonds of comparable risk would have 0.09% expenses for a 3.12% yield on Admiral shares. (Long-Term Tax-Exempt, with 3.18% yield, is at about that risk level.) If you pay a 9% state tax, you would lose 0.28% to taxes, for a net yield of 2.84%.

For the decision whether to use taxable or municipal bonds, you have to use an estimate. My usual rule of thumb is that munis are break-even with taxable bonds of comparable risk at a 25% tax rate. With the change in tax rates, that 25% might become 22%, which would make munis slightly preferable in a 24% tax bracket if all else is equal. But if your taxable bonds yield 3%, that's a difference of 0.06%, and since you have lower-cost Schwab ETFs for taxable bonds, that might be better. (You might also use Treasury bonds in the taxable account to avoid the high state tax, and then hold more corporate bonds in your IRA or 401(k).)
Wiki David Grabiner

maxsamson
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Re: How often should I buy VASIX and ORTYX given that they have transaction fees?

Post by maxsamson » Wed Nov 07, 2018 4:40 pm

grabiner wrote:
Tue Nov 06, 2018 7:25 pm
maxsamson wrote:
Tue Nov 06, 2018 12:46 pm
grabiner wrote:
Mon Nov 05, 2018 8:14 pm
Duckie wrote:
Sun Nov 04, 2018 5:48 pm
ORTYX Aquila Tax-Free Trust of Oregon 0.56%

At Schwab I found two other Oregon intermediate muni funds without transaction fees, but with higher expense ratios:
  • COEAX Columbia AMT-Free Oregon Intermediate Muni Bond Fund 0.83%
    FOTAX Nuveen Oregon Intermediate Municipal Bond Fund 0.82%
And none of these are worth buying, even if munis are appropriate for you. If your OR tax rate is 9%, and the bonds in your fund yield less than 5%, a Vanguard fund holding bonds of comparable risk with an 0.09% expense ratio loses less combined to taxes and expenses. You could also use the ETF MUB, at 0.07% expenses; even if this isn't commission-free, the commission on ETF trades is lower than the fee on mutual fund trades.

If munis aren't appropriate (marginal in a 24% tax bracket), just use Schwab's bond ETFs or mutual funds in your Schwab account.
Interesting, would you mind showing me how the math would work? My wife and I will indeed be in the 24% tax bracket.
For state taxes. it is just math. The OR tax-exempt fund has a 2.65% yield, and 0.56% expenses, so it holds bonds with a 3.21% yield. A Vanguard fund holding bonds of comparable risk would have 0.09% expenses for a 3.12% yield on Admiral shares. (Long-Term Tax-Exempt, with 3.18% yield, is at about that risk level.) If you pay a 9% state tax, you would lose 0.28% to taxes, for a net yield of 2.84%.

For the decision whether to use taxable or municipal bonds, you have to use an estimate. My usual rule of thumb is that munis are break-even with taxable bonds of comparable risk at a 25% tax rate. With the change in tax rates, that 25% might become 22%, which would make munis slightly preferable in a 24% tax bracket if all else is equal. But if your taxable bonds yield 3%, that's a difference of 0.06%, and since you have lower-cost Schwab ETFs for taxable bonds, that might be better. (You might also use Treasury bonds in the taxable account to avoid the high state tax, and then hold more corporate bonds in your IRA or 401(k).)
Ok, what you say about state taxes mostly makes sense, except you lost me a bit in your parenthetical about "Long-Term Tax-Exempt". Is that just an alternative to the Admiral shares that has a slightly better yield? Also, is there a term for the yield+expense ratio number (3.21%)? Finally, is this the standard way one would go about finding comparable funds -- add together the yield and expense ratio, and then find funds whose yield+er is the same? That makes sense, I just want to confirm.

I'm not sure that I follow the logic in your second paragraph though. Why aren't federal tax considerations "just math" like state taxes are? And when you say "if your taxable bonds yield 3%, that's a difference of 0.06%", where are you getting the 0.06% number from?

Thanks for explaining all this to me -- this is obviously valuable far beyond the specific fund choice in this question!

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grabiner
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Re: How often should I buy VASIX and ORTYX given that they have transaction fees?

Post by grabiner » Wed Nov 07, 2018 9:25 pm

maxsamson wrote:
Wed Nov 07, 2018 4:40 pm
grabiner wrote:
Tue Nov 06, 2018 7:25 pm
maxsamson wrote:
Tue Nov 06, 2018 12:46 pm

Interesting, would you mind showing me how the math would work? My wife and I will indeed be in the 24% tax bracket.
For state taxes. it is just math. The OR tax-exempt fund has a 2.65% yield, and 0.56% expenses, so it holds bonds with a 3.21% yield. A Vanguard fund holding bonds of comparable risk would have 0.09% expenses for a 3.12% yield on Admiral shares. (Long-Term Tax-Exempt, with 3.18% yield, is at about that risk level.) If you pay a 9% state tax, you would lose 0.28% to taxes, for a net yield of 2.84%.

For the decision whether to use taxable or municipal bonds, you have to use an estimate. My usual rule of thumb is that munis are break-even with taxable bonds of comparable risk at a 25% tax rate. With the change in tax rates, that 25% might become 22%, which would make munis slightly preferable in a 24% tax bracket if all else is equal. But if your taxable bonds yield 3%, that's a difference of 0.06%, and since you have lower-cost Schwab ETFs for taxable bonds, that might be better. (You might also use Treasury bonds in the taxable account to avoid the high state tax, and then hold more corporate bonds in your IRA or 401(k).)
Ok, what you say about state taxes mostly makes sense, except you lost me a bit in your parenthetical about "Long-Term Tax-Exempt". Is that just an alternative to the Admiral shares that has a slightly better yield?
It is mentioned because it is a fund which you could use as an alternative at about the desired risk level. If Vanguard offered a fund holding bonds with a 3.21% yield, the fund would have a 3.12% yield on its Admiral shares. Vanguard actually offers a fund holding bonds with a 3.27% yield, which has a 3.18% yield on its Admiral shares; this is not much different in either risk or return from the hypothetical fund.
Also, is there a term for the yield+expense ratio number (3.21%)?
It is the yield on the bonds. A fund which holds bonds yielding 3.21% necessarily has an SEC yield of 3.21% minus its expense ratio.
Finally, is this the standard way one would go about finding comparable funds -- add together the yield and expense ratio, and then find funds whose yield+er is the same? That makes sense, I just want to confirm.
Assuming the market is efficient, bonds of equal yield should be equally risky. However, funds are not necessarily comparable because they may have different types of risks; a long-term, high-quality bond fund and an intermediate-term, medium-quality fund may have the same yield but different risks.
I'm not sure that I follow the logic in your second paragraph though. Why aren't federal tax considerations "just math" like state taxes are?
The taxes are just math. What is not just math is estimating the risk difference between bonds which are taxed differently. If the break-even tax rate for munis is 22%, then taxable bonds with a 3% yield have the same risk level as munis with a 2.34% yield.

However, there is no reason that this break-even needs to be 22%. In an efficient market, taxable bonds could reasonably yield the same after-tax as munis of comparable risk at a 28% rate, as long as there were enough investors with a tax rate over 28% to buy them all. Conversely, the break-even could be 15%. (Most investors in the 22% tax bracket don't hold any munis because their investments are all in IRAs or 401(k)s; muni investors in this bracket are a very small part of the muni market.)
And when you say "if your taxable bonds yield 3%, that's a difference of 0.06%", where are you getting the 0.06% number from?
If the break-even tax rate for munis is 22%, and you are in a 24% bracket, then you lose 0.06% for holding taxable bonds yielding 3% rather than munis yielding 2.34%. However, if you lose more than 0.06% to extra expenses or trading costs on the muni fund, it's still better to hold taxable bonds.
Wiki David Grabiner

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