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Taxable Accounts: Municipal Bonds? Adding ER to TCR?

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  • Taxable Accounts: Municipal Bonds? Adding ER to TCR?

    Hello forum,

    I am continuing to try to educate myself about this financial stuff. I am a big believer in active learning so I have created a spreadsheet for myself and read about all these funds on morningstar and similar sites. I am not sure when my wife and I will actually be starting a taxable account since we need to first fill up our tax-advantaged accounts and clean up some remaining student loan debt. However, in my reading today I have come up with two questions.

    1. If I want to add bond coverage to our portfolio, is there a risk of only doing so utilizing municipal bonds in a taxable account for bond allocation? I don't foresee going above 10% bonds in the next 5 years and it is tax efficient, so it seems reasonable to me but I am still learning? We are currently 100% equities, but I am starting to rethink that since my wife is much more risk averse than I am. I am not the biggest fan of the bond options in our tax advantaged accounts except for the Vanguard Total Bond Index (VBTLX) for our Roths and iShares US Aggregate Bond (WFBIX) for my wife's 403b from a previous employer, but I am not sure if they are better than municipal bonds.

    2. Is it mathematically valid to add the expense ratio and the tax-cost ratio to estimate the total "fees" for a particular mutual fund for a taxable account? In the spreadsheet below I organized the Mutual funds based on asset class then what I thought would be the "total cost ratio."

     

    NOTE: Table may not be viewable on phone



































































































































































































































































































































































































































































































































































































    Taxable Account
    Investment Name Symbol Asset Class Exp Ratio  Minimum Investment Tax-Cost Ratio Total Cost Ratio (ER+TCR)
    Vanguard Tax-Managed Balanced Fund Admiral Shares VTMFX Balanced 0.09%  $         10,000.00 0.58% 0.67%
    Vanguard Intermediate-Term Tax-Exempt Fund Admiral Shares VWIUX Intermediate-Term Bond 0.09%  $         50,000.00 0.00% 0.09%
    Vanguard California Intermediate-Term Tax-Exempt Fund Admiral Shares VCADX Intermediate-Term Bond 0.09%  $         50,000.00 0.02% 0.11%
    Vanguard Intermediate-Term Tax-Exempt Fund Investor Shares VWITX Intermediate-Term Bond 0.19%  $           3,000.00 0.00% 0.19%
    Vanguard California Intermediate-Term Tax-Exempt Fund Investor Shares VCAIX Intermediate-Term Bond 0.19%  $           3,000.00 0.02% 0.21%
    Fidelity Intermediate Municipal Income Fund FLTMX Intermediate-Term Bond 0.35%  $         10,000.00 0.04% 0.39%
    Vanguard High-Yield Tax-Exempt Fund Admiral Shares VWALX Long-Term Bond 0.09%  $         50,000.00 0.00% 0.09%
    Vanguard Tax-Exempt Bond Index Fund Admiral Shares VTEAX Long-Term Bond 0.09%  $         10,000.00 0.00% 0.09%
    Vanguard California Long-Term Tax-Exempt Fund Admiral Shares VCLAX Long-Term Bond 0.09%  $         50,000.00 0.02% 0.11%
    Vanguard Long-Term Tax-Exempt Fund Admiral Shares VWLUX Long-Term Bond 0.09%  $         50,000.00 0.02% 0.11%
    Vanguard New York Long-Term Tax-Exempt Fund Admiral Shares VNYUX Long-Term Bond 0.09%  $         50,000.00 0.03% 0.12%
    Vanguard Pennsylvania Long-Term Tax-Exempt Fund Admiral Shares VPALX Long-Term Bond 0.09%  $         50,000.00 0.04% 0.13%
    Vanguard New Jersey Long-Term Tax-Exempt Fund Admiral Shares VNJUX Long-Term Bond 0.09%  $         50,000.00 0.06% 0.15%
    Vanguard Massachusetts Tax-Exempt Fund VMATX Long-Term Bond 0.15%  $           3,000.00 0.02% 0.17%
    Vanguard High-Yield Tax-Exempt Fund Investor Shares VWAHX Long-Term Bond 0.19%  $           3,000.00 0.00% 0.19%
    Vanguard Tax-Exempt Bond Index Fund Investor Shares VTEBX Long-Term Bond 0.19%  $           3,000.00 0.00% 0.19%
    Vanguard California Long-Term Tax-Exempt Fund Investor Shares VCITX Long-Term Bond 0.19%  $           3,000.00 0.02% 0.21%
    Vanguard Long-Term Tax-Exempt Fund Investor Shares VWLTX Long-Term Bond 0.19%  $           3,000.00 0.02% 0.21%
    Vanguard Ohio Long-Term Tax-Exempt Fund VOHIX Long-Term Bond 0.15%  $           3,000.00 0.07% 0.22%
    Vanguard New York Long-Term Tax-Exempt Fund Investor Shares VNYTX Long-Term Bond 0.19%  $           3,000.00 0.03% 0.22%
    Vanguard Pennsylvania Long-Term Tax-Exempt Fund Investor Shares VPAIX Long-Term Bond 0.19%  $           3,000.00 0.04% 0.23%
    Vanguard New Jersey Long-Term Tax-Exempt Fund Investor Shares VNJTX Long-Term Bond 0.19%  $           3,000.00 0.06% 0.25%
    Fidelity Tax-Free Bond FTABX Long-Term Bond 0.25%  $         25,000.00 0.04% 0.29%
    Vanguard Municipal Money Market Fund VMSXX Money Market 0.15%  $           3,000.00 0.01% 0.16%
    Vanguard California Municipal Money Market Fund VCTXX Money Market 0.16%  $           3,000.00 0.01% 0.17%
    Vanguard New Jersey Municipal Money Market Fund VNJXX Money Market 0.16%  $           3,000.00 0.01% 0.17%
    Vanguard New York Municipal Money Market Fund VYFXX Money Market 0.16%  $           3,000.00 0.01% 0.17%
    Vanguard Pennsylvania Municipal Money Market Fund VPTXX Money Market 0.16%  $           3,000.00 0.01% 0.17%
    Fidelity Tax-Exempt Money Market FMOXX Money Market 0.45%  $           5,000.00 0.29% 0.74%
    Fideltiy California Ltd Trm Tax-Fr BdFd FCSTX Municipal Bond 0.47%  $         10,000.00 0.02% 0.49%
    Fidelity Michigan Municipal Income Fund FMHTX Municipal Bond 0.49%  $         10,000.00 0.05% 0.54%
    Fidelity New Jersey Municipal Income Fd FNJHX Municipal Bond 0.47%  $         10,000.00 0.08% 0.55%
    Fidelity Massachusetts Municipal Inc Fd FDMMX Municipal Bond 0.46%  $         10,000.00 0.10% 0.56%
    Fidelity Pennsylvania Municipal Income Fund FPXTX Municipal Bond 0.49%  $         10,000.00 0.07% 0.56%
    Fidelity Minnesota Municipal Income Fd FIMIX Municipal Bond 0.50%  $         10,000.00 0.06% 0.56%
    Fidelity New York Municipal Income Fund FTFMX Municipal Bond 0.46%  $         10,000.00 0.11% 0.57%
    Fidelity Ohio Municipal Income Fund FOHFX Municipal Bond 0.48%  $         10,000.00 0.11% 0.59%
    Fidelity California Municipal Income Fd FCMAX Municipal Bond 0.80%  $           2,500.00 0.06% 0.86%
    Vanguard Limited-Term Tax-Exempt Fund Admiral Shares VMLUX Short-Term Bond 0.09%  $         50,000.00 0.00% 0.09%
    Vanguard Short-Term Tax-Exempt Fund Admiral Shares VWSUX Short-Term Bond 0.09%  $         50,000.00 0.00% 0.09%
    Vanguard Limited-Term Tax-Exempt Fund Investor Shares VMLTX Short-Term Bond 0.19%  $           3,000.00 0.00% 0.19%
    Vanguard Short-Term Tax-Exempt Fund Investor Shares VWSTX Short-Term Bond 0.19%  $           3,000.00 0.00% 0.19%
    Fidelity Limited Term Municipal Income FSTFX Short-Term Bond 0.48%  $         10,000.00 0.02% 0.50%
    Fidelity Emerging Markets Index Premium FPMAX Stock- Emerging Markets 0.13%  $         10,000.00 0.75% 0.88%
    Fidelity Global ex US Index Fund Investor Class FSGUX Stock- Foreign Large Blend 0.17%  $           2,500.00 0.58% 0.75%
    Vanguard Total International Stock Index Fund Investor Shares VGTSX Stock- Foreign Large Blend 0.18%  $           3,000.00 0.66% 0.84%
    Fidelity Global ex US Index Fund Premium Class FSGDX Stock- Foreign Large Blend 0.10%  $         10,000.00 0.83% 0.93%
    Fidelity International Index Investor FSIIX Stock- Foreign Large Blend 0.16%  $           2,500.00 0.82% 0.98%
    Fidelity International Index Premium FSIVX Stock- Foreign Large Blend 0.06%  $         10,000.00 1.03% 1.09%
    Vanguard Total International Stock Index Fund Admiral Shares VTIAX Stock- Foreign Large Blend 0.11%  $         10,000.00 1.03% 1.14%
    Vanguard Tax-Managed Capital Appreciation Fund Admiral Shares VTCLX Stock- Large Blend 0.09%  $         10,000.00 0.36% 0.45%
    Vanguard Total Stock Market Index Fund Admiral Shares VTSAX Stock- Large Blend 0.04%  $         10,000.00 0.42% 0.46%
    Vanguard Total Stock Market Index Fund Investor Shares VTSMX Stock- Large Blend 0.15%  $           3,000.00 0.40% 0.55%
    Fidelity 500 Index Fund Premium Class FUSVX Stock- Large Blend 0.04%  $         10,000.00 0.51% 0.55%
    Fidelity 500 Index Fund Investor Class FUSEX Stock- Large Blend 0.09%  $           2,500.00 0.63% 0.72%
    Fidelity Total Market Index Fund Investor Class FSTMX Stock- Large Blend 0.09%  $           2,500.00 0.67% 0.76%
    Fidelity Total Market Index Premium FSTVX Stock- Large Blend 0.04%  $         10,000.00 0.76% 0.80%
    Fidelity Large Cap Value Index Fund Premium Class FLCHX Stock- Large Value 0.05%  $         10,000.00 0.99% 1.04%
    Fidelity Large Cap Value Index Fund Investor Class FLCDX Stock- Large Value 0.17%  $           2,500.00 0.93% 1.10%
    Fidelity Extended Market Index Investor FSEMX Stock- Mid-Cap Blend 0.10%  $           2,500.00 0.86% 0.96%
    Fidelity Extended Market Index Premium FSEVX Stock- Mid-Cap Blend 0.07%  $         10,000.00 1.08% 1.15%
    Vanguard Tax-Managed Small Cap Fund Admiral Shares VTMSX Stock- Small Blend 0.09%  $         10,000.00 0.23% 0.32%

  • #2
    Why do you need to look at all these funds again?

    No reason to be 100% Muni for FI. Definitely is more risk than necessary.

     

    Comment


    • #3


      Why do you need to look at all these funds again?
      Click to expand...


      Just an exercise to learn how to analyze funds (this is how I learn). I certainly do not plan on investing in all of them. More than likely just 3 of them.


      Definitely is more risk than necessary.
      Click to expand...


      Why is it risky?

      Comment


      • #4
        is there a risk of only doing so utilizing municipal bonds in a taxable account for bond allocation?

        The muni risk is widespread municipal default.    It has happened in Detroit, Stockton CA, and a few other places. Stay away from high-yield munis.

        Munis protect you from taxes.  Corporates protect you from lowest yield. Treasuries protect you from default.  TIPS protect you from inflation.  What are you most afraid of?   Taxes, right?  Go with munis in taxable account.

        Comment

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