I would like to recommend a single 60/40 (stock/bond) mutual fund or etf at market weighting for my mom for simplicity. This is in a taxable account and I would like to keep costs down.
I am looking at VBIAX (Vanguard Balanced Index Fund Admiral Shares; 0.07 ER) and AOR (iShares Core Growth Allocation ETF; 0.2 ER). She is in the 24% federal and 6.25% state (NY)
What are the tax differences for each? I also expected them to have similar returns, but it turns out VBIAX has only US equity and AOA has international as well.
Tax Efficiency of 60/40 Allocation
Tax Efficiency of 60/40 Allocation
VT/VTWAX until I start adding bonds
-
- Posts: 3574
- Joined: Fri Jul 19, 2013 2:45 pm
Re: Tax Efficiency of 60/40 Allocation
Vanguard has a 50/50 Tax Managed Balanced Fund you might add to your list.
- retired@50
- Posts: 12709
- Joined: Tue Oct 01, 2019 2:36 pm
- Location: Living in the U.S.A.
Re: Tax Efficiency of 60/40 Allocation
Vanguard does have other 60/40 funds. The LifeStrategy series offers a globally diversified 60/40 fund (VSMGX). The trouble with using these blended funds is that they often use taxable bonds for the bond component.GXtrex wrote: ↑Tue Mar 21, 2023 5:00 pm I would like to recommend a single 60/40 (stock/bond) mutual fund or etf at market weighting for my mom for simplicity. This is in a taxable account and I would like to keep costs down.
I am looking at VBIAX (Vanguard Balanced Index Fund Admiral Shares; 0.07 ER) and AOR (iShares Core Growth Allocation ETF; 0.2 ER). She is in the 24% federal and 6.25% state (NY)
What are the tax differences for each? I also expected them to have similar returns, but it turns out VBIAX has only US equity and AOA has international as well.
If you can live with a 50/50 allocation - consider Vanguard Tax Managed Balanced Admiral fund (VTMFX). It uses municipal bonds for the bond component, so it generates less taxable income.
Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
Re: Tax Efficiency of 60/40 Allocation
This probably isn't the right fund in a 24% bracket; the munis are taxable in NY. (In a higher bracket, it is a good one-fund portfolio if its 49% stock allocation is right for you.)Mike Scott wrote: ↑Tue Mar 21, 2023 5:05 pm Vanguard has a 50/50 Tax Managed Balanced Fund you might add to your list.
If she is willing to hold separate stock and bond funds, she could hold NY munis, but non-NY munis likely don't do any better than taxable bonds of the same risk level.
As a single fund for simplicity, I would prefer LifeStrategy Moderate Growth, which includes international stocks as well as US stocks. The tax cost is about the same as Balanced Index, but the portfolio is better diversified.