Tax-Exempt Index (VTEAX/VTEB) vs Interm Tax Exempt (VWIUX) vs MUB

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Kookaburra
Posts: 671
Joined: Thu Apr 02, 2020 11:14 pm

Tax-Exempt Index (VTEAX/VTEB) vs Interm Tax Exempt (VWIUX) vs MUB

Post by Kookaburra »

Which one do you think is better as a core tax-exempt bond holding, and why?

I’m curious why VTEAX has a much lower current distribution yield (1.7%) than VWIUX (2.2%). Not sure what the distribution yield for MUB is.
UpperNwGuy
Posts: 5154
Joined: Sun Oct 08, 2017 7:16 pm

Re: Tax-Exempt Index (VTEAX/VTEB) vs Interm Tax Exempt (VWIUX) vs MUB

Post by UpperNwGuy »

VTEAX is an index fund, but VWIUX is an actively managed fund, so presumably it has more buying and selling.
Last edited by UpperNwGuy on Sun May 02, 2021 7:24 pm, edited 1 time in total.
sycamore
Posts: 2051
Joined: Tue May 08, 2018 12:06 pm

Re: Tax-Exempt Index (VTEAX/VTEB) vs Interm Tax Exempt (VWIUX) vs MUB

Post by sycamore »

Kookaburra wrote: Sun May 02, 2021 4:52 pm Which one do you think is better as a core tax-exempt bond holding, and why?

I’m curious why VTEAX has a much lower current distribution yield (1.7%) than VWIUX (2.2%). Not sure what the distribution yield for MUB is.
As noted by UpperNwGuy, VWIUX is actively managed. Look at its portfolio composition -- it holds bond across the maturity spectrum and basically averages out to an intermediate term maturity. My guess is the managers don't take many large "bets" on parts of the muni market (which is typical for a Vanguard fund, IMO).

MUB and VTEX/VTEAX both track the same index: S&P National AMT-Free Municipal Bond Index. The ER is 0.06% for VTEB and 0.07% for MUB -- practically the same. If you want an ETF, either is appropriate. VTEAX is a tad bit more expensive at 0.09% but if you prefer mutual funds it's a fine choice.

I used VWIUX because Vanguard didn't offer VTEB/VTEAX at the time. If I wanted too invest in munis again, I'd be happy with either Vanguard fund.
HootingSloth
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Joined: Mon Jan 28, 2019 3:38 pm

Re: Tax-Exempt Index (VTEAX/VTEB) vs Interm Tax Exempt (VWIUX) vs MUB

Post by HootingSloth »

I prefer mutual funds, so I was deciding between VWIUX and VTEAX. I went with VWIUX, but I would consider them perfectly fine substitutes and would be happy tax loss harvesting from VWIUX into VTEAX.

I chose VWIUX for two reasons. First, it has a significantly longer track record than VTEAX/VTEB (especially when I was making this decision). Second, it does seem to have a greater proportion of its total return attributable to tax-free interest, rather than taxable price appreciation. I believe that this is also why VWIUX shows a higher distribution yield, although the total return tracks pretty closely. I imagine that it could be one of the things that the active management allows for.
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