Vanguard VWIUX

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onetallman
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Vanguard VWIUX

Post by onetallman » Wed Dec 04, 2019 6:22 pm

I am a retired senior citizen and at the time in my life where preservation of assets is important. I have a very low risk tolerance and consequently have limited my investments to treasury securities and a couple of dividend-paying stocks. Subject to acting in a financially responsible manner, my calculations indicate that I should have sufficient assets on hand to meet my needs until death. My question concerns some non-essential (meaning I could survive if I lost it but don't intend to) money that I am considering placing in the “Vanguard Intermediate-Term Tax-Exempt Fund Admiral Shares (VWIUX) fund. Browsing Vanguard’s website, it appears they have approximately fifteen funds in their “U.S. bond funds – Treasury/Agency” category. I am not “bond fund savvy” enough to know if I am making a good selection or if another of the offerings is better for my situation and consequently would appreciate any helpful comments from those of you with more experience in this arena. Thank you in advance for any assistance.

UpperNwGuy
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Re: Vanguard VWIUX

Post by UpperNwGuy » Wed Dec 04, 2019 6:27 pm

VWIUX is an excellent fund. I use it for more than half of my fixed income allocation. I, too, am a retired senior citizen. Vanguard puts VWIUX in the same risk category as Treasury funds and Total Bond.

retired@50
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Re: Vanguard VWIUX

Post by retired@50 » Wed Dec 04, 2019 6:34 pm

VWIUX National Intermediate Term Municipal Bond Fund - 30 Day SEC yield = 1.62%. Risk level 2 at Vanguard.

VBILX Intermediate Term Bond Index Fund - 30 Day SEC yield = 2.15%. Risk level 2 at Vanguard.

The answer depends upon your tax bracket. If you're in a high(er) tax bracket, then generating tax-free income from a municipal bond fund like VWIUX makes sense. If you're in a low(er) tax bracket, you might be better off in a taxable bond fund that carries a higher yield. See VBILX above.

What's your state tax rate? What's your Federal tax rate? If the forum knows these tax brackets (rates) we can help compute the taxable equivalent yield to get a proper answer for you.

Regards,

Topic Author
onetallman
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Re: Vanguard VWIUX

Post by onetallman » Wed Dec 04, 2019 6:38 pm

Thank you for the prompt and helpful responses. My state's tax rate is 6% and my federal tax rate is 33%.

retired@50
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Re: Vanguard VWIUX

Post by retired@50 » Wed Dec 04, 2019 7:22 pm

onetallman wrote:
Wed Dec 04, 2019 6:38 pm
Thank you for the prompt and helpful responses. My state's tax rate is 6% and my federal tax rate is 33%.
In that case, the municipal fund is the better choice.

2.15 * (1- .33 -.06) = 1.3115% which is lower than the Municipal fund yield of 1.62.

Regards,

Topic Author
onetallman
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Re: Vanguard VWIUX

Post by onetallman » Wed Dec 04, 2019 7:35 pm

Thank you. Nice to know my reasoning seems appropriate for my situation.

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Wiggums
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Re: Vanguard VWIUX

Post by Wiggums » Wed Dec 04, 2019 7:35 pm

retired@50 wrote:
Wed Dec 04, 2019 7:22 pm
onetallman wrote:
Wed Dec 04, 2019 6:38 pm
Thank you for the prompt and helpful responses. My state's tax rate is 6% and my federal tax rate is 33%.
In that case, the municipal fund is the better choice.

2.15 * (1- .33 -.06) = 1.3115% which is lower than the Municipal fund yield of 1.62.

Regards,
+1

I agree

rkhusky
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Re: Vanguard VWIUX

Post by rkhusky » Wed Dec 04, 2019 7:44 pm

retired@50 wrote:
Wed Dec 04, 2019 7:22 pm
onetallman wrote:
Wed Dec 04, 2019 6:38 pm
Thank you for the prompt and helpful responses. My state's tax rate is 6% and my federal tax rate is 33%.
In that case, the municipal fund is the better choice.

2.15 * (1- .33 -.06) = 1.3115% which is lower than the Municipal fund yield of 1.62.

Regards,
VWIUX is likely taxed by your state. Generally, only muni bonds from your state are exempt from your state tax. In that case, the correct comparison is 1.44% vs. 1.62%.

One should also make sure that your tax bracket is the same as your marginal rate. There is another current thread where the OP is in the "12% bracket", but also has a 50% marginal rate on income, and even a 20% marginal tax rate on "tax exempt" muni income (all due to SS taxation).
Last edited by rkhusky on Wed Dec 04, 2019 8:07 pm, edited 1 time in total.

MotoTrojan
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Re: Vanguard VWIUX

Post by MotoTrojan » Wed Dec 04, 2019 7:47 pm

Dividend stocks are not necessarily less risky and I would wager just holding a few of them would be riskier than holding Total US (see GE).

Also while an intermediate treasury fund is a good/safe choice, please understand that the best estimate at forward returns is the SEC yield, which is much lower than the 1, 3, 5, 10 year returns you'll see. Do not expect to get past returns moving forward.

Topic Author
onetallman
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Re: Vanguard VWIUX

Post by onetallman » Wed Dec 04, 2019 7:51 pm

Concerning the mechanics, I am planning to open my Vanguard account online and have them debit an existing bank account for the funds. My reading of the "expense-minimums" page for the VWIUX fund indicates there is no "$20.00 annual account fee" if the account balance exceeds $10,000.00. Since Admiral shares carry a $50,000.00 minimum, it seems the only funds that would be withdrawn from my account would be the exact amount I specify to invest. Is this the way it works?

retired@50
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Re: Vanguard VWIUX

Post by retired@50 » Wed Dec 04, 2019 8:08 pm

rkhusky wrote:
Wed Dec 04, 2019 7:44 pm
retired@50 wrote:
Wed Dec 04, 2019 7:22 pm
onetallman wrote:
Wed Dec 04, 2019 6:38 pm
Thank you for the prompt and helpful responses. My state's tax rate is 6% and my federal tax rate is 33%.
In that case, the municipal fund is the better choice.

2.15 * (1- .33 -.06) = 1.3115% which is lower than the Municipal fund yield of 1.62.

Regards,
VWIUX is likely taxed by your state. Generally, only muni bonds from your state are exempt from your state tax. In that case, the correct comparison is 1.44% vs. 1.62%.

One should also make sure that your tax bracket is the same as your marginal rate. There is another current thread where the OP is in the "12% bracket", but also has a 50% marginal rate on income, and even a 20% marginal tax rate on "tax exempt" muni income.
good point rkhusky. If we actually knew which state was involved, we might be able to recommend a state specific municipal fund for onetallman.

Regards,

retired@50
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Re: Vanguard VWIUX

Post by retired@50 » Wed Dec 04, 2019 8:09 pm

onetallman wrote:
Wed Dec 04, 2019 7:51 pm
Concerning the mechanics, I am planning to open my Vanguard account online and have them debit an existing bank account for the funds. My reading of the "expense-minimums" page for the VWIUX fund indicates there is no "$20.00 annual account fee" if the account balance exceeds $10,000.00. Since Admiral shares carry a $50,000.00 minimum, it seems the only funds that would be withdrawn from my account would be the exact amount I specify to invest. Is this the way it works?
I believe your understanding is correct. I wouldn't expect to see an additional $20 taken.

Regards,

rkhusky
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Re: Vanguard VWIUX

Post by rkhusky » Wed Dec 04, 2019 8:11 pm

onetallman wrote:
Wed Dec 04, 2019 7:51 pm
Concerning the mechanics, I am planning to open my Vanguard account online and have them debit an existing bank account for the funds. My reading of the "expense-minimums" page for the VWIUX fund indicates there is no "$20.00 annual account fee" if the account balance exceeds $10,000.00. Since Admiral shares carry a $50,000.00 minimum, it seems the only funds that would be withdrawn from my account would be the exact amount I specify to invest. Is this the way it works?
If you specify $15K to be transferred from your bank, that is all that will be taken. If there are any purchase fees or maintenance fees, they are deducted from your Vanguard account, not from your bank. Plus I think that maintenance fees are waived if you agree to electronic statements and other documents.

Topic Author
onetallman
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Re: Vanguard VWIUX

Post by onetallman » Wed Dec 04, 2019 8:12 pm

My state of residence is Georgia and the tax bracket is the same as the marginal rate.

rkhusky
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Re: Vanguard VWIUX

Post by rkhusky » Wed Dec 04, 2019 8:21 pm

onetallman wrote:
Wed Dec 04, 2019 8:12 pm
My state of residence is Georgia and the tax bracket is the same as the marginal rate.
Vanguard does not have a GA tax exempt fund, only CA, MA, NJ, NY, OH, PA.

Topic Author
onetallman
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Re: Vanguard VWIUX

Post by onetallman » Wed Dec 04, 2019 8:23 pm

Appreciate your input. Was doubtful they would have a Georgia fund.

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abuss368
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Re: Vanguard VWIUX

Post by abuss368 » Wed Dec 04, 2019 8:35 pm

onetallman wrote:
Wed Dec 04, 2019 6:22 pm
I am a retired senior citizen and at the time in my life where preservation of assets is important. I have a very low risk tolerance and consequently have limited my investments to treasury securities and a couple of dividend-paying stocks. Subject to acting in a financially responsible manner, my calculations indicate that I should have sufficient assets on hand to meet my needs until death. My question concerns some non-essential (meaning I could survive if I lost it but don't intend to) money that I am considering placing in the “Vanguard Intermediate-Term Tax-Exempt Fund Admiral Shares (VWIUX) fund. Browsing Vanguard’s website, it appears they have approximately fifteen funds in their “U.S. bond funds – Treasury/Agency” category. I am not “bond fund savvy” enough to know if I am making a good selection or if another of the offerings is better for my situation and consequently would appreciate any helpful comments from those of you with more experience in this arena. Thank you in advance for any assistance.
Welcome to the forum. In my opinion Vanguard Intermediate Term Tax Exempt Bond Fund is an excellent choice. We have invested in it for a long time and it does the job allowing us to sleep well.

My parents are long retired and have invested in this fund forever. They are happy with the results and thankful for the simplicity. They have the monthly dividend deposited in checking.

Keep investing (and life) simple.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

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grabiner
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Re: Vanguard VWIUX

Post by grabiner » Wed Dec 04, 2019 9:20 pm

onetallman wrote:
Wed Dec 04, 2019 6:38 pm
Thank you for the prompt and helpful responses. My state's tax rate is 6% and my federal tax rate is 33%.
Please check your tax rate. There is no 33% tax bracket under the current tax laws; the old 33% bracket is now a 32% bracket. Munis are still better than taxable bonds in the 32% bracket, but I wouldn't recommend them in the 24% bracket unless you can use a fund for your state, or your marginal federal tax rate is higher than 24% because you hit some phase-out in the tax code.
Wiki David Grabiner

CoastalWinds
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Re: Vanguard VWIUX

Post by CoastalWinds » Wed Dec 04, 2019 9:59 pm

grabiner wrote:
Wed Dec 04, 2019 9:20 pm
onetallman wrote:
Wed Dec 04, 2019 6:38 pm
Thank you for the prompt and helpful responses. My state's tax rate is 6% and my federal tax rate is 33%.
Please check your tax rate. There is no 33% tax bracket under the current tax laws; the old 33% bracket is now a 32% bracket. Munis are still better than taxable bonds in the 32% bracket, but I wouldn't recommend them in the 24% bracket unless you can use a fund for your state, or your marginal federal tax rate is higher than 24% because you hit some phase-out in the tax code.
Plus, if the OP is in the 32% bracket, they are probably also subject to the 3.8% net investment income tax. So the marginal federal rate is 35.8%.

finite_difference
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Re: Vanguard VWIUX

Post by finite_difference » Wed Dec 04, 2019 10:54 pm

A couple dividend paying stocks seems way riskier to me than a total stock market index fund like VTSAX. Diversification. Then again, I’m a Boglehead.

I would also have at least 25% in stocks, so a maximum of 75% bonds. Otherwise you’re putting yourself at risk in other ways. Then again, if it makes you sleep well at night and you have enormous amounts of money I could see going even more conservative.
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh

dognose
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Re: Vanguard VWIUX

Post by dognose » Thu Dec 05, 2019 8:09 am

VWIUX is an excellent choice, and it seems ideal for your situation. I have invested in this fund for many years and it has served our family well. I strongly recommend it.

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midareff
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Re: Vanguard VWIUX

Post by midareff » Thu Dec 05, 2019 8:13 am

retired@50 wrote:
Wed Dec 04, 2019 7:22 pm
onetallman wrote:
Wed Dec 04, 2019 6:38 pm
Thank you for the prompt and helpful responses. My state's tax rate is 6% and my federal tax rate is 33%.
In that case, the municipal fund is the better choice.

2.15 * (1- .33 -.06) = 1.3115% which is lower than the Municipal fund yield of 1.62.

Regards,
The end result is the same but the SEC Yield and the Monthly Distribution Yield are not the same. The monthly is considerably higher.

hudson
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Re: Vanguard VWIUX

Post by hudson » Thu Dec 05, 2019 11:31 am

onetallman,
VWIUX is a great intermediate muni fund and it is my primary non-certificate of deposit holding.
I like it because:
It has a low expense ratio.
It is about 80% AAA/AA/A
The SEC yield is 1.63.
It paid out a little more than 3 cents a share at the end of November....or annual rate of 2.58% (The Distribution Yield...or the actual amount you get paid)
It's Vanguard Risk Potential 2
The fund holds $71 Billion in assets. Is it the largest muni fund?

There is another intermediate fund to consider...Baird's BMBIX.
I keep thinking that I need to switch to BMBIX because it is about 100% AAA/AA/A. Therefore it's a notch or two safer than VWIUX. Of course it doesn't pay out as much. I'd have to hold my nose because of the .25 expense ratio.

Those would be my 2 favorites. After that, I would consider the ETFs VTEB and MUB.

Topic Author
onetallman
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Re: Vanguard VWIUX

Post by onetallman » Thu Dec 05, 2019 12:51 pm

Gents -
My sincere thanks for your very helpful comments and suggestions. Concerning the distributions which I understand to be monthly by default (unless I elect to reinvest the income rather than receiving distributions), is the choice to receive income or reinvest an ongoing option or can it be changed after your initial selection? Also, though it is not my intention, how difficult is it to dispose of the shares if necessary and should I expect to fully recoup my investment if the shares are sold?

retired@50
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Re: Vanguard VWIUX

Post by retired@50 » Thu Dec 05, 2019 1:18 pm

onetallman wrote:
Thu Dec 05, 2019 12:51 pm
Gents -
My sincere thanks for your very helpful comments and suggestions. Concerning the distributions which I understand to be monthly by default (unless I elect to reinvest the income rather than receiving distributions), is the choice to receive income or reinvest an ongoing option or can it be changed after your initial selection? Also, though it is not my intention, how difficult is it to dispose of the shares if necessary and should I expect to fully recoup my investment if the shares are sold?
If you invest with Vanguard, you can update your preference related to dividend re-investment at will (ongoing option). With regard to selling shares, since it's a mutual fund, you can trade in or out once per day, at the NAV at market close. This might be restricted based on Vanguard's frequent trading policy, but if you're not moving money more than every 30 days, you'll likely be fine. With regard to whether or not you'll fully recoup your investment, that would be based on what interest rates do between purchase and sale of shares. In other words, nobody knows. That's the risk.

Regards,

rkhusky
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Re: Vanguard VWIUX

Post by rkhusky » Thu Dec 05, 2019 1:29 pm

If you want no risk to principal, you should use a money market or CD.

Topic Author
onetallman
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Re: Vanguard VWIUX

Post by onetallman » Thu Dec 05, 2019 2:47 pm

Thank you both for the comments. Much appreciated.

PDX_Traveler
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Re: Vanguard VWIUX

Post by PDX_Traveler » Thu Dec 05, 2019 3:50 pm

MotoTrojan wrote:
Wed Dec 04, 2019 7:47 pm
Dividend stocks are not necessarily less risky and I would wager just holding a few of them would be riskier than holding Total US (see GE).

Also while an intermediate treasury fund is a good/safe choice, please understand that the best estimate at forward returns is the SEC yield, which is much lower than the 1, 3, 5, 10 year returns you'll see. Do not expect to get past returns moving forward.
+1
OP - I know this was not your original question, but
(1.) you indicate your core holdings include some % of stocks in the form of dividend paying securities. This appears advisable in general per the wisdom of folks in this forum, except for the diversification risk - i.e. holding a broader index fund may be advisable compared to the individual stock holdings. Especially if these are currently held in a tax-deferred account. It's worth researching and considering such a move.
(2.) for the "non-essential (meaning I could survive if I lost it but don't intend to) money" - why not similarly consider a more balanced (i.e. some non-zero % of stocks) positioning in this portion of your portfolio also? Again, perhaps worth researching if such a more diversified asset allocation is consistent with your goals and risk tolerance.

Topic Author
onetallman
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Re: Vanguard VWIUX

Post by onetallman » Thu Dec 05, 2019 5:20 pm

Good comments. Thank you.

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