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Investment in taxable account

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  • Investment in taxable account

    Hello

     

    I wanted your opinion on closed end mutual funds like NUV (symbol )- Nuveen.  What do you all think of this in taxable account .  Any advise will be highly appreciated.  These are municipal bonds .

  • #2
    Why do you need them vs a mutual at Vanguard per say?

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    • #3
      CEFs are...goofy. I really had to read into them to find out how and why they differ from ETFs and traditional mutual funds. Tbh I didn't get it very well, but I quit looking into it because my needs were met well enough by some of my parent brokerage's funds and so I quit learning about them.

      I don't get what they'd really have to offer you over an ETF or mutual fund of a similar class/composition.

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      • #4




        I wanted your opinion on closed end mutual funds like NUV (symbol )- Nuveen.  What do you all think of this in taxable account .  Any advise will be highly appreciated.  These are municipal bonds .
        Click to expand...


        Ah, good old Nuveen. My clients in their 70s, 80s, and 90s love getting those dividend checks.
        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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        • #5
          They offer a large dividend payout is the reason most people like these. They have lots of embedded leverage, which can be very painful for the fund. I had some for a while, but they are really not in a good rate, cost of leverage, return profile (a lot of return on capital) for the future. The vg funds would do for me instead.

          There is definitely a lot of complexity in these, and since they are mostly retail owned, you do have opportunities to get in/out at opportune times as the market is very inefficient. Though the learning curve is too annoying and too particular for me to bother when you combine it with illiquidity at the amount of an average doctors exposure. You dont want to be 20-40% of the daily traded volume of any instrument.

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          • #6
            As others have said, (in terms of funds) if Vanguard doesn't have what I need, I have to take a hard look at why I need it.

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            • #7
              I have found CEFs to be really interesting. I haven't used one in a long time but when I did it seemed pretty easy to get in and out based on the cycle of their discount to NAV. You still had to be convinced the underlying asset class was worth holding, and watch out for fees, but my experience was pretty positive. I agree with Zaphod that the market seems highly inefficient and sometimes there are exploitable opportunities.

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              • #8
                The discount to NAV is usually the most compelling reason to own a closed end bond fund.  One other positive not mentioned thus far is known duration with the particular bond fund.  Trading liquidity issues, and selling at a discount (relative to asset value) are also compelling reasons not to hold the asset.  Another concern I would have for CEF bond fund(s) would be credit risk.  The product is not a buy it and forget it product.  CEF's can be compelling, though it is particular product for a specific situation, and the vast majority of folks would not be suited to this product.

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                • #9
                  Thanks for all the advise. Appreciate it. What do you all suggest investing in for taxable accounts.

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                  • #10
                    The answer to a suggestion with taxable requires more information.  Understanding the purpose of the taxable account (retirement, saving for a home etc.).  Also an understanding of why; perhaps you are focused upon municipal offerings due to a very high tax bracket or residence in a high income tax/cost of living state (such as CA).  This does also make the assumption you are fully investing into tax deferred, have an emergency fund, and appropriate insurance and your are not carrying significant student loan/other debt.

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                    • #11
                      I am maxing out my 401 k and 457. Started contributing to 529 two years back as well. No student debt. I do not have Roth IRA though. I had my regular ira during my residency that I stopped contributing to as I do not get any deduction now on that as income shifted from residency to attending.

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                      • #12
                        Also, in addition to the Backdoor Roth, a taxable account is always a good idea when you have maximized your tax-advantaged accounts.

                        The replies were not questioning that fact but rather the reasoning for your first investment to be in closed end funds.

                        Taxable investments should reflect you overall investment philosophy and their intended use. Not all taxable investments are intended as purely for retirement purposes. You should really ask yourself how any investment reflects that philosophy.

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