MUB
iShares National Muni Bond ETF
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Muni bonds vs T-Bills for bonds in a taxable account
Question about bond and money market fund yields
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In my short-term account: I have a rolling ladder of 8-week treasury bills as my emergency fund, rather than a high-yield savings account. Current yields are right around 4%. Alternatively an ETF like SGOV isn't going to be far off that, or even a money market position. I do the bills so that money is "locked up" and spoken for, whereas my money market position is un-invested / discretionary. That is supplemented by a broad bond index (e.g. FXNAX, AGG, BND...), and increasingly municipal bonds both in index form (MUB) and some individual in-state bond holdings. That account is also supplemented by some defensive-sector equity (utilities, consumer staples) and dividend-focused equity ETF's in modest measure. Whether taxable or tax-exempt bonds make more sense for you depends on your tax bracket.
Keep your cash in treasury funds like SGOV to be exempt from state income tax, or potentially (if your net-of-tax situation makes it work out) municipal bonds like MUB. It depends on your net of tax situation, since MUB is lower yield but if you have very high federal income tax it may be better after tax. Do you itemize your taxes or take standard deduction? If you itemize, international dividends / cap gains will have foreign withholding tax which can be claimed as an itemized deduction on your taxes.
VTEB, MUB, and yes SGOV, just because you’ve asked..
Sure! Overall it's a 30/70 split between equities and fixed income. My base defensive layer is the emergency fund, which I split up in rolling treasury bills with one maturing every week. Alternatively you could do SGOV, which yields a little less, but the T-bills are so easy I figure why not squeeze the most out of them. Substantial amount of municipal bonds via a national, low-expense ratio ETF, MUB. I also have in-state municipals in MSNCX, even though the expense ratio is brutal, and some individual in-state bonds laddered over the next few years. I'd be all in on individual bonds if not for the fact they're not call protected. FXNAX rounds things out with some other bond sectors. I do have a position of ANGL in this account, which I think I'll move to my higher-risk portfolio. For equities I have a substantial chunk in defensive sectors that tend to outperform the broader market during recessions - consumer staples (VDC) and utilities (XLU). The utilities position I think may have some additional upside if electric demand increases in the future by means of data centers, electric vehicles, etc. Then I also have some dividend-oriented (and sub-1.0 beta) positions of HDV and SCHD. The goal of that equity blend is to lean heavily into defensive sectors and avoid economically sensitive sectors like tech and consumer cyclicals.
> I retired at 49 and we are invested 100% in equities If not for your spouse's income I'd call this beyond ballsy and basically reckless. Still a damn lot of real risk here, like whenever the next recession rolls around, potential for loss of her job and income stream while having your portfolio value cut down dramatically. Unless you have so much in your portfolio, like many millions to spare, to where it doesn't matter. Assuming this is a *taxable* account then sure, municipals can be great. Bond yields in general are as good as they've been in a decade or more. In addition to the in-state bond fund, which does have a not-negligible expense ratio given the returns we're looking at here, you can consider (a) buying municipal bonds directly and/or (b) looking at a national muni fund, like the MUB ETF, with a lower ER. Granted, that does come with some in-state tax. Tldr - bonds? Yes. Probably overdue in getting some exposure to them.
I have a little group of funds I use for moderate to moderately aggressive growth while trying to balance market exposure and include some defensive components: VTI (30%) VXUS (15%) LRGF (15%) QQQM (15%) AVDV (10%) MUB (7.5% QUAL (7.5%) These are in a taxable account, which I’m assuming you will be using. I use a different strategy in my tax advantaged accounts.
So 🥭did go all in on municipal bonds, so what would be the corresponding move? MUNI? VTEB? MUB? Fuck if I know
Depends what you're trying to achieve. I have positions in T-bills (SGOV would be the closest match), VCLT, TLT, ANGL, FXNAX, MUB, and some individual in-state municipal bonds. > I know of only a few that are worth investing maybe 5% of someones portfolio in. Is that to say, in your view, for *anyone* regardless of their age or investment goal time horizon, you can only imagine at most, 5% allocation into bonds?
Q: Should I sell off old index funds that are long term losses? I have a Schwab brokerage with a set of index funds I pulled out of a robotrader over 10 years ago. A couple of them are showing losses (over the entire lifetime of the account) between -8% to -10%, such as **BNDX**, **AGG**, **MUB**. BNDX for example has dropped off at the beginning of 2022 and never recovered.
You could do worse that your picks, but you can simplify. Pick a single US equity fund like VOO/VTI, a single international fund like VXUS, and a single bond fund like BND. Swap VTI/VXUS with VT for an all-in one world equity ETF. If you get to higher income swap some BND for munis like MUB to decrease taxation. Pick the percentages and hold. I do 45% US, 35% international, 20% bonds. That's it! Remember, dividends aren't free money, they're just forced capital gains. Don't chase them unless you have preferential tax treatment (eg. you live in Canada, Canadian-source dividends have preferential treatment for low income brackets). This normally isn't the case in the US.
This will be a hated opinion but you know what I would do? Take every single penny of that and buy tax exempt municipal bonds such as VTEB or MUB with it and keep that tax exempt train rolling for myself. Protect your money from those greedy hands of Uncle Sam! +1
Just DCAing from a recent stock vest, not panic selling. I’ve been holding AGG and MUB for tests, set and forget. Not looking for professional support for my 3 fund portfolios.
> Is it a no brainer to buy these? [...] Is it relatively safe to buy these? The longer the duration of a bond, the higher the interest rate sensitivity. If you buy in a bunch of TLT or EDV or whatever, if interest rates climb even higher, your principal value will go down. Same thing as your MUB position having dropped, but even more sensitive. The other side of this is if and when rates are cut, the principal value will go up. I have some TLT scooped up for that purpose. Hard to know where rates will go from here, and on what time frame.
Municipal Bonds drilling too.... MUB another great short.
It just depends, dude. Municipals, for example, can be a great choice for one person and terrible for another. If I was coming up on retirement at a time when interest rates were very low, I'd lean away from long-term bonds. If we were in a roaring economy and interest rates were being cranked up, I'd load up more on a long-term bond fund. It's all situational. Or you could choose to not overthink it and just buy into an aggregate index like BND for taxable or MUB for municipal.
Just something to think about here. But why not use a Municipal Bond fund such as MUB or VTEB for your savings so you can not only stack cash but avoid being extorted (taxes) while doing so?
Make sure you are actually looking at total return and not just price of the ETF. Also - with MUB - you have to also factor in the post-tax return which will depend on where you live and your tax bracket. Obviously, if you live in New York or California, a fund like MUB can potentially make sense. Both AGG and MUB are bond funds that maintain a constant intermediate duration. So that means that instead of maturing and getting your principal back. It's buying bonds so that the fund duration stays about the same. The duration on those funds are about 5 years. So selling them now while the yield is higher than in the past is kinda like selling at the lows. I personally find it simpler to hold target maturity funds instead.
Technically, you can't have a firm grasp on stock index funds if you don't understand bonds since the DCF for stocks has the same factors that bonds have plus additional factors. But I get what you mean. You don't need to know DCF to just buy and hold a broad index fund long term. Bond funds tend to be more varied. You don't have a net loss of 3-4% over many years. You are looking only at the price change and did not include the income distributions. Here's a total return chart: https://stockcharts.com/freecharts/perf.php?IAGG,MUB Bonds have two main factors: duration and credit. Short duration, high rated bonds will be close to cash and very low risk. Long duration, high rated bonds will be more volatile, even approaching stock volatility for the longest durations. But not very correlated to stocks. Lower rated bonds will be much more correlated to stocks. IAGG has a portfolio of foreign government and investment grade corporate bonds. It hedges the currencies so it acts like an index of USD bonds. It has medium duration and medium high credit rating. It's interesting that your advisor went with IAGG over a domestic bond index like AGG, though there's not that much difference because currency hedging will tend to equalize the yield and the duration and credit exposure is similar. Maybe they thought the yield curve looked more attractive in other countries at the time. IAGG has outperformed AGG over the past few years, so if so, they were right. MUB holds municipal bonds which are not taxed at the federal level (or the state in which they were issued). Also medium duration and medium high credit rating. These are most suitable if you are in a high tax bracket; less useful if you are in a lower bracket.
Many years ago we had hired a financial advisor to help us with our accounts who gave us an investment portfolio. Now after learning quite a bit more we are questioning the allocations and would like to simplify and rebalance. Seems like there was too much international investment, and it was distributed amongst some small and medium cap funds. However, we are still fairly new to all this. I understand what a bond is in principle. However, what is really eluding my understanding is how to analyze a bond fund. I feel like stock index funds are easy to grasp, and see returns over time, and what the investment portfolio looks like as a whole. However, bond funds seem to be much more difficult for me to understand intuitively, and figure out which to invest in. For example, we have a pretty significant investment (about 20% total) in [IAGG](https://digital.fidelity.com/prgw/digital/research/quote/dashboard/summary?symbol=IAGG) and [MUB](https://digital.fidelity.com/prgw/digital/research/quote/dashboard/summary?symbol=MUB). Both of these funds appear that we have a net loss of about 3-4% in the lifetime of our account, but I cannot find any average long term returns for the fund, or any details that are prominently displayed for stock mutual funds. As a bonus, are these two bond funds even worth holding? Are there any that are generally superior for just safety. Seems like we are just losing money on these over their lifetime.
Those three funds have positive five year returns: https://stockcharts.com/freecharts/perf.php?BIL,BND,HYG,MUB&l=3082&r=4340 You are probably looking at prices only, not total returns. Remember that price and yield are inversely related. Say I'll give you $100 in five years if you pay X today (a five-year zero-coupon bond). If you you buy it for $80, that's a yield of `(100/80)^(1/5) - 1 = ` 4.56%. If you buy it for $70 (lower), that's a yield of `(100/70)^(1/5) - 1 = ` 7.39% (higher). Either way you'll get $100 back at the end of five years, but its value today depends on what yields other people in the market would require in order to buy it from you. Yields are higher than they were five years ago, so bonds with maturity greater than five years have fallen in price in order to increase in yield. Yields were only ~1.7% in Dec 2019.
If you know you want Municipal bonds but you aren’t sure which funds you want to go with long-term you can always toss it to start into (1) MUB ETF (iShares national muni bond) or (2) VTEB (Vanguard national muni bond). Both have very low 0.05% expense ratio and very well diversified.
>my concern is, I read that MUB is not liquid as HYSA, I don't understand why? can't I just sell it anytime? Exchange-traded brokerage products are pretty liquid in that you can sell them whenever you want, but intermediate-term bonds can have price volatility as market yields change. So MUB does not fully protect principal and cannot really be considered a "cash-like" instrument; you can take a loss if you need to sell in a high-rate environment after buying in a lower-rate environment. MUB is more analogous to something like BND than to an HYSA. Muni bonds *do* have less price volatility than other bonds thanks to their compressed yields, though. For example, the max drawdown on MUB total return in 2022 was only 11.6%, whereas BND had a 17.5% hit. And if you want a true "cash-like" muni investment, you could go with something like a muni money market fund, like FTEXX or VMSXX. >also is there are a relationship between Fed interest rates and MUB rates? meaning when the Fed lower the rates, does it mean MUB rates will also go lower? Sort of. Market bond yields are driven in part by expectations of what the Fed Funds Rate will be in the future. But this means that yield changes will only occur in reaction to *surprises*. And any existing bonds held by the fund aren't going to change their payouts just because prevailing yields change. Instead, their *price* on the market (and, consequently, the price of the fund) will change to reflect these yields. When people talk about "yields changing" on the secondary market, they're really just describing price changes in another way. Buying a bond for cheaper means that its yield is higher because it pays out more relative to what you spent. And similarly, "yields rose" is another way of saying that the market value of a bond (or bond fund) went up.
i cashed out today at $40. So it turns out to be just a single day holding. The interest charge hasn’t hit the activity report yet. So I did a search of the list of shortable stocks on IB’s portal and DJT isn’t even on it! Anyway for approximation, AAPL is -0.41%pa. MUB (example of hard to borrow ticker) is -4.36%. Proceeds from short sale also gets to accrue cash interests at +3.58 to 4.58% depending on your balance. So one could end up shorting for free or maybe even on top in interests.
General question about Bond ETFs: I'm relatively new to most things investing and am still conducting my own research but can't figure this one out. From what I understand about bond prices is that their movement is inversely related to the movement of interest rates so you're better off buying bonds when interest rates are high and you expect them to lower in the future. As for Bond ETFs, they are funds that hold multiple bonds of varying grades, maturities, types etc. A Bond ETF will have a target average maturity that is maintained by the fund manager as they buy new bonds and sell off old ones. Therefore, my thoughts were that given the current high interest rates and the expectation that the Fed will cut and continue to cut rates over the next year or two, it would make sense to invest in Bond ETFs now. Additionally, it would make sense to invest in funds that have a duration of say 1-4 years which would capture the higher interest rates seen recently and would hold their value over the next few years even though rates are dropping then you could switch to a longer duration fund depending on the timeline of your goals and when rates reach neutral or lower. However, what I'm seeing is ALL Bond ETFs (BND, BNDX, LTL, VTEB, MUB, AGG etc) have dropped after the fed announced their 50 basis point cut, including long and short duration ETFs, corporate, municipal, and government bond ETFs. I know bond ETF prices are determined by the market like any other security that is publicly traded but shouldn't Bond ETFs be a more attractive investment to everyone as the rates drop? What am I missing here?
Thanks. I will look into MUB. Trying to understand how the fee works. can you confirm if this is correct order?They will take out the fees before the monthly distribution.
That’s ridiculously high, sounds like a borderline scam. MUB is 0.05%.
Main thing I’d say is if your state has an income tax, bonds from other states may still be taxed. MUB is a national fund so it’ll have bonds from basically everywhere.
MUB and VTEB are both solid. If you already have VTEB just add to that position. No compelling differentiator for HMOP.
I have MUB very similar to VTEB, expense ratio of HMOP is much higher. Not familiar with Hartford ETFs but why pay more?
Definitely sell that ETF. The whole reason for holding municipal bonds is to reap the benefit of state and federal tax free income. But you're holding this in a retirement account which is already tax sheltered. And worse, if you're holding these in a standard 401k or IRA, you're going to be taxed when you withdraw the dividends, when they would have been tax-free had you held it in a taxable account. Or to summarize, you've found the worst possible combination for tax efficient investing. It's so bad it's worthy of congratulations. Bond funds are fine, but sell MUB and buy something like BND instead.
Perfect. I'm turning 40 and have retired due to the sale of a couple businesses. Depending on your portfolio size and needs, you can lock in 4-5% yields with bonds right now. I personally am investing heavily in municipal bonds because they are exempt from income taxes. I am buying investment grade muni bond funds as they are at a discount right now which lock in a solid yield long term yield. I like NXP, NUB, MYI and MUB. I split it between them to diversify. Other than that, you can buy treasuries themselves and lock on 10-30year yields right now for 4.5-5%... I also diversify and invest in corporate bonds and emerging market bonds. Outside of that I have money in dividend paying equity funds as they go up with the market so it helps you outpace inflation. Happy to dive deeper if you want.
VTI and ITOT are essentially the same stock i would pick one or the other. I checked VTEB and MUB and it looks like they are basically the same too. I'm betting VWO and IEMG are near the same also. I would pick just one for these 3.
Only subtle difference is in tax advantaged accounts I add SCHD for some dividends. Also, I like MUB in brokerage accounts as muni yields on a tax savings adjusted basis are quite attractive.
You can try this calculator. You include your marginal Federal and State tax brackets. https://www.calcxml.com/calculators/inv02 When I fill in 5%, 22% and 3%, the calculator tells me the equivalent after-tax return is 3.75%. Since I'm getting 5.20% with my taxable money fund, it does not make sense to switch to muni bond ETF (like MUB). When you get into much higher tax brackets, muni funds make more sense.
I've been loading up on $AGG and $BND mostly. I also have a clutch of $SGOV, $UTWO, and $MUB for munis. Low fees, monthly income, and a smooth ride.
>Why are yields so low when interest rates are so high? e.g. MUB has a 2.79% dividend, BND 3.13%.. Shouldn't dividends on these bonds at least match or exceed the Treasury short-term rate given the extra risks (duration, insolvency for cities and corp bonds, etc.)? That's over the last 12 months. Be sure to look at the 30 day SEC yield which is the last 30d extrapolated to what it would be over a year.
Expanding on 7...BND and MUB are bond funds. they are full of bonds that were bought when rates were lower so their coupon rate is lower. When they mature the fund will buy bonds to replace them with a higher rate and the average yield will increase. Eventually when the fed rate drops, then these funds will still own the higher rate bonds. If you hold these funds you effectively hold all the internal bonds till maturity.
1. If you’re other option is investing in equity, your return on fixed income is likely to be lower, but still positive, with no strong (and often negative) correlation to your equities. It allows you to both rebalance and see overall lower volatility in your portfolio. 2. HYSA being a high rate is just the current rate, fed could cut tomorrow and you no longer have that high rate. As long as the curve is inverted this will persist. Buying longer maturity fixed income “locks in” that rate for far longer, which in a normal yield curve environment gets a higher return. 3. For most people, ETFs/mutual funds are best. Trading in and out of individual bonds is inefficient and there will be frictional losses due to wide spreads and trying to find buyers. You also hold much more risk as it is harder to diversify. 4. “Income” and “compounding” are just a choice. If you take your income and buy more, it will compound over time. Same with dividends in stocks 5. Don’t have much of an opinion here, just buying the US agg should be fine. Far from an expert here 6. Abstain, I don’t believe in climate/esg investing 7. MUB is a muni fund, muni’s have less yield than treasuries due to the tax advantaged nature. If you look at their taxable equivalent yields they should be slightly higher than a treasury of similar duration and convexity Good questions good luck
Thanks for the kind words! Not a blogger, maybe I should try ha ha :) I'm confused by the yield figures as well. I've been looking at the dividends reported by IBKR for these bond ETFs (BND, MUB, TLT etc.). I'm not sure why they're so low and I understand I should be looking for the 30-day SEC yield instead. I'm not sure why it's not reported on IBKR, but I can find it on Morningstar or others I think. What's the main difference between direct buying vs ETF buying? I like the simplicity of equity ETFs but not sure how to think about that for bonds. Also, are their compounding bonds and bond ETFs (where dividends are reinvested) or will all of them pay the coupon, making me take the income tax hit (I'm not US based so don't have tax-advantaged accounts)?
These are all excellent questions. You have clearly read and learned quite a bit to be able to even ask such questions. Though sometimes I have a sneaking suspicion, the pro finance bloggers and content creators come on here and ask stuff like this and then rewrite reddit answers onto their latest investopedia SEO click farm blog post. Anyway here's the short answer. Your options are buying bonds directly or buying a bond fund, or both. Google to learn the differences and pros and cons. the answer is longer than I can write here but it's important. A savings account is also an option and should be considered part of Fixed income. Again with pros and cons. For example, a savings account can change the interest rate at any time - that rate is not locked in. All that other weird shit you are looking into. BOXX or green bonds or whatever. Good luck. Too new and random, no one knows. Your yield numbers on MUB and BND are wrong. How you calculating that? Just keep reading and learning. There's no right answer. Dont overthink it. Lack of diversification and high fees are dangerous.
i honestly looked for about 20 minutes but couldnt find it. i dont know how badly you need specific data (if its for a generic indicator, or for a specific indicator) but if its just in general you can use the MUB etf, or when i looked on bloomberg at this [https://www.bloomberg.com/quote/LMBITR:IND](https://www.bloomberg.com/quote/LMBITR:IND) its average spread to 5y otr treasuries is 89bps with a stdev off 38bps. so you can model it and say its a 90bps premium. (LMBITR has an average duration about about 6y, so its not a perfect spread, but close enough)
If it is in a brokerage acct - pick the amount you need over the next 2-3 years and keep it in cash. The rest - if IRA buy a target date index fund from Fidelity corresponding to your retirement date. If Non-Qualified funds buy VT + MUB or VTEB in proportion to your risk tolerance. 60/40, 75/25, 45/55, etc. You didnt say what you have in retirement accounts but Id focus on that rather than cash savings. I dont know your income or work history or anything else but generally you are going to benefit much more in a Traditional or Roth IRA.
I too was a dumbass who held lots of long-term bond ETFs through a predictably bad time to be invested in *anything* that moved inverse to interest rates. You live and you learn. I decreased most of my bond holdings (yes, I bought at the top and sold at the bottom - like a fucking dumbass). It's OK. I lost some money but I have time to make up for it. I'm not going retire for another 25 years. I had no business being so heavy weighted in bonds to begin with. Again, you live and learn. I've rebalanced into cash, growth stocks, and value stocks. I still hold some bond ETFs, but more along the lines of BSV and BND (BND is comparable with intermediate term BIV). I don't hold any long-term anymore. I am still parking money in MUNI bonds, e.g.: MUB. I'll sell out of that if I need some cash or if a crazy opportunity comes along (e.g.: March 2020) YMMV. None of us would be here talking shit on reddit if we could see into the future. We'd all be on Wall Street making stupid money.
>The Tax Equivalent Yield at 20% tax rate, that puts the Yield to Maturity of MUB at 4.4875%. Where are you getting 20% from? Bonds are taxed as regular income, not as if they were dividends. They tend to start making sense when your tax bracket crosses into the 32% bracket. Before that, the after tax return from taxable bonds tends to be higher. Additionally, once you cross into that bracket you usually start owing the Net Investment Income Tax (NIIT) of 3.8% so the math works even more in your favor.
At a similar duration, the I shares 7-10 trasury etf has a YTM of 3.84%. whereas MUB for example has a YTM of 3.59% (and is a bit shorter duration too.) The Tax Equivalent Yield at 20% tax rate, that puts the Yield to Maturity of MUB at 4.4875%. Also, Treasuries and Munis perform differently and have different correlation characteristics. Thus, youd want munis in your Non Qualified account, and something resembling the Barclays Agg in your IRA like BND or AGG, and youd have full diversification characteristica and tax efficiency
Because that is a super shit fund. Something like MUB or VTEB is much more stable and diversified.
VTEB has a duration of 6 years. T Bills have a duration of less than a year. Right now T Bills pay more due to a historically rare inverted yield curve. The moment the yield curve returns to a more normal shape, all those T Bill yields will drop fast. You will be compensated in VTEB for declining yields via VTEB price appreciation. You are comparing apples to oranges. If you want a short term investment, T Bills make sense now. However, VTEB and MUB are not short term investments.
Imagine not owning investment-grade municipal bonds. **Couldn’t be me** MUB up +0.11% today, and +0.10% after-hours 💪 Muni gang we out here.
Imagine not owning investment-grade municipal bonds. **Couldn’t be me** MUB up +0.11% today. Muni gang we out here.
Imagine not owning investment-grade municipal bonds. **Couldn’t be me** ___ MUB up +0.11% today. Muni gang we out here.
VTEB or MUB ETFs are an easy way to buy muni bonds.
YouTube or search municipal bonds on here. Investopedia. They're good for people making high income / have a high tax burden in relation to a corporate bond. Investopedia has a lot of starter info. Or just go buy MUB. Research tax free yield to understand what you yield really is in comparison to corporate bonds or other financial instruments.
PSA, TIPS only work when there is unexpected inflation. Absent that they (and everyone's fav of the year I Bonds) are a terrible asset class. Lots of duplication in the portfolio. MUB or VTEB over BND or AGG in Non Qualified accounts if you are going to grow the account significantly over a long time period.
I can't forget equities altogether because I think there is still work to do in this market for now. That said, I am currently running 8% of my portfolio in MUB (muni bonds) and 2% as 10Y treasury bonds. I think I foresee increasing these allocations in coming months to rake in some tax-advantaged income at these VERY ATTRACTIVE rates. PS, I got a special offer from Capital One for a 5% CD, but they wanted it for 11 months. I can get the same yield on a 6 month treasury bond so I couldn't see the point.
What Municipal Bond fund are you looking at? When I look at [MUB](https://www.ishares.com/us/products/239766/ishares-national-amtfree-muni-bond-etf), for example, I'm seeing a 30 day SEC yield of 2.85% [SPAXX](https://fundresearch.fidelity.com/mutual-funds/composition/31617H102) is reporting a 7-day yield of 3.96%. I believe both of these are fair to compare because: * They are both annualized percentages based off of recent performance * They are both the returns net expenses So, the after-tax earnings of SPAXX, if you are in the 37% tax bracket would be: 3.96% * 63% = 2.4948% So MUB the interest kicked off would would be ~0.35% higher for MUB than SPAXX.
MUB is a municipal bond fund. Munis generally yield less than a taxable bond of comparable duration and quality, since munis are bought for their taxable-equivalent yield instead of their nominal yield.
Weighted Avg Maturity as of Jan 23, 2023 : 6.10 yrs. [https://www.ishares.com/us/products/239766/ishares-national-amtfree-muni-bond-etf#/](https://www.ishares.com/us/products/239766/ishares-national-amtfree-muni-bond-etf#/) Looks like MUB has many longer term bonds in it that are weighing down it rate. Money market funds are basically pure ultra short term bonds.
Muni Bonds 101 - planning for 2023 I am considering investing into Muni Bonds this year. In particular, I am at a higher tax bracket, and the market has really dived the last year, so I think it may be worth the tax free income and potential upside on the principal. I've realized the fees really add up on Muni bonds. If I pay an asset management fee of 0.65% plus expense ratios in many institutional level funds being close to 0.5%, if a fund nets 2.9% yield, I lose about 1.2 percent and only get a paltry 1.7% tax free. Based on this So a few questions * Is my understanding of my total expenses on the muni bonds correct? That I will lose a big portion of returns due to expenses in advisor fees and also expense fees? * If so, am I better off trying to invest into a lower cost Muni Fund directly with Vanguard, Schwab, etc.? I recognize will also likely have to pay state income taxes for buying a fund that is across many states. * Is there a difference in tax treatment between a muni bond fund and a muni etf? For Example VTEB and MUB are both muni bond etfs with low expenses. * Am I better off just putting the cash in wealthfront and paying taxes? Or any other alternatives others are considering Thank you in advance
Is the tax ID your fathers or does the trust have a seperate tax ID? If it was me I would do the following 40% tax free bonds split between MUB and HYMB. Then 60% equities- well diversified and don’t forget international Dev. Emerging markets and small cap in small quantities. Put everything in cash dividends and use quarterly dividends to buy some more of whatever made the least in the previous quarter.
The bond market is not nearly as efficient as the market for equities (less liquidity), and the principal upside of the ETF market is the solution to the problem of liquidity. The downside of this is, well, liquidity. You can lose money in rising interest rates environments (and there are [many](https://www.amazon.com/Price-Time-Real-Story-Interest/dp/0802160069) [people](https://www.amazon.com/Changing-World-Order-Nations-Succeed/dp/1982160276) [suggesting](https://www.gmo.com/globalassets/articles/viewpoints/2022/gmo_let-the-wild-rumpus-begin_1-22.pdf) that the 40 year party is over on ever lowering low rates). Bond ETFs have lower prices, but you get significantly lower yields. This is reflected in, e.g. MUB, which has a lower yield than any recent issue of A-rated municipal bond coming to market, excluding the 3 month bonds. By willing to part with your money for even two years, you can get yields more than compensatory for any transaction cost. If you are concerned with the transaction costs, your local credit union could most likely get a better rate on any short dated CDs they have (my local credit union has 12 month CDs at 1.95% and 60 month CDs at 2.80%, both higher than MUB's yield). The bond ETFs will give you diversification. I'm not sure how much that matters for bonds of any sort with A ratings and above, especially when they are on a short duration. And even here, CDs are better, since FDIC insurance is better than diversification. The only upside to bond ETFs I can see is an instrument to short the bond market, or leveraged long positions, based on anticipated changes from interest rates.
I'm socking away all my savings account money in $MUB, adding to it every month to average down costs and get more of that sweet tax free income.
What about bone ETFs? Most hold bonds for 7.5 years. Can you explain if this vs. savings account. For example MUB
MUB - municipal bond etf. Returns are tax free.
Leveraged munis with a duration of 14 in a rising rate environment? This fund got crushed but might not be the best time to sell it at the bottom of the market. Intermeditate/shorter duration likr MUB or VTEB would be less volatile longer term.
This is a closed end leveraged muni fund. That means although yield is higher the fund value can swing pretty wildly in drawdowns. Each element can amplify downswings in times of credit stress. It also seems to carry slightly lower rated munis than a standard fund like MUB. You can see in 2008 regular muni funds fell a few percent while BKN fell a whopping 45%. This may be a way to get more juice in yields but I wouldn't make it the bulk of my portfolio.
My favorite canary is MUB..muni fund. All actual USA debt. Recent price action is beyond looney, so I watch premium or to par pricing..debt default voodoo is in the chart. check it out. By that metric, in answer to your question, no. JMHO DYODD GLTA
I luv your summery attitude. Been reinvesting divs in BRMK and LFT. Holding BZH. Adding to MUB. Watching little SHOP of horrors. Down bigly. Lutke better produce, or we put his head on a pike at the village walls. If I were you, I would hit the beach and forget about it. This shitshow is not over.
Just wanted to put my strategy in here. Hopefully it helps some. If you have any input, that would be great as well: 1. High earner approaching 40 years old. I own 4 different small businesses. Multiple income streams helps you stay financially redundant and secure. I have a solid amount of income coming in. 2. Investing 10-20% of income back into my businesses to help them grow and to begin delegating work to others so I have more passive involvement. Just FYI = having your own business has the GREATEST ROI than any other investment you can make. If you don't have a business, really consider starting a small side hustle. There is unlimited income potential with a business, not a W2 job. 3. 20-30% goes to taxes 4. The other 50-60% if my income I am investing between real estate, SEP-IRA, and my post tax brokerage. 5. Real estate- I am waiting on deals. They are still out there. They MUST have positive cash flow. Plus the tax depreciation alone is an investment in itself at a high tax bracket. I don't see prices decreasing significantly even with high interest rates. Demand is high and supply is low in most places. It will slow down, but it will not crash. So, I am sitting on the side lines waiting for deals in various markets throughout the country. 6. Maxing out my self employed IRA at $61k per year in between 4 funds 70/30 stocks and bonds through vanguard. I wont touch this money for 20 years, so I never even look at the account. 7. Post tax brokerage is where I am focusing right now because everything is on sale guys... There are few asset classes out there right now that are on sale. Stocks are, so I am taking advantage of it. I have 50% in VTV and VTI, 20% in TIP and MUB, 10% in VXUS, 10% on VDE, and 10% in BDJ. I have lost value this year, but I dont need this money for another 5-7 years when I FIRE. Plus these funds = 4% dividend payments. So, I am earning income that is being automatically reinvested back into the account. Plus I am throwing almost all my extra income into the brokerage right now. I suspect significant compounding and growth over the next 5 years. Things will get back to normal. They always do. 8. I continue to live well below my means. I can live very comfortably off $3k a month. Everything else is invested. That really is the key = live well below your means and keep your expenses in check. This is what I am doing right now. The environment is not scaring me. I think right now is a great time to invest.
MUB just does not believe the fed at all.
I bought TIP and MUB. They are down about 7%. Not a big deal overall. I have some winners that offset, most notably VDE. Correct, I do medical cannabis cards and generate approximately $80k a year from that. Why is that unbelievable?
Yeah pretty much any class of bonds currently has positive 5-year returns: AGG, TLT, SHY, LQD, HYG, MBB, MUB, except for EM bonds.
MUB $5 from covid low.
Yep. Shitshow shall continue. I see MUB in a sustained uptrend, I'll figure said shitshow might be abating.
Yeah..subject to Federal tax. But you could dollar cost into MUB or such, tax free. I bonds yielding 9.62% over six months, not clear here on the particulars. JMHO DYODD GLTA
It all depend on what you want and what your goals are. I am only familiar with a couple of them but just looking them up it looks like TFI and MUB are municipal bonds (which means you don't get taxed on the dividends). VTIP is a bond fund of Treasury Inflation Protected Securities meaning it should provide inflation protection. BNDX and EMB are both international bond funds. AGG looks like it is just a mix of different bonds. I personally have MUB and VTIP in my portfolio. Why are you wanting to get rid of some of them vs just reducing all of them by a smaller amount?
OP is big brain. Mone is small and smooth. I have been following MUB, and wondering really why it's downtrend has been so slow and predictable. REITs and munis are good, depending on your timeline, and entry point. OPs squiggly lines suggest to me that munis are approaching a bottom.
MUB about to go negative on the 5 yr chart
> just DCA into some solid positions DCA is investing when you *already have* a certain amount of money and break it into smaller chunks. regular investing from paychecks is not DCA. see The Future for Investors by prof. Jeremy Siegel (2005). but for income, look at options like IYLD, ALTY, HDV, SPYD, MUB, DIV, SDIV, ANGL ... things that emphasize dividends/income. but as mentioned it needs to be a larger principle amount to be worthwhile. HDV is ~70 US blue chip stocks paying 3-4% dividends (Exxon, Chevron, Proctor & Gamble, etc). $10k per year would pay about $350 a year in dividends.
I have been reading about ETFs for the last few weeks hoping to build a portfolio that I could contribute too, and not think too much about. I used to use robo-advisors, but I realized I could just cut out the middle man and buy ETFs on my own through Fidelity or other places. I am still pretty new to a lot of this, but below is what I am currently thinking: **40% VOO** \- Vanguard S&P 500 ETF **10% IJH** \- iShares Core S&P Mid Cap ETF **10% IJR** \- iShares Core S&P Small Cap ETF **15%** VEA - Vanguard Developed Markets Index Fund ETF **15%** VWO - Vanguard Emerging Markets Stock Index Fund ETF **5%** BNDX - Vanguard total international bond ETF **5%** MUB - iShares National AMT My aims in this split is: \-A 90/10 split between ETFs and bonds. (I read this is good?) \-split between international and domestic investment I think I'm at a 65/35 split with this \-Inclusion of emerging markets \-good diversity and coverage of broad market I plan to make an initial contribution of about $2K and then make varying monthly contributions. I plan on investing for the next 7 years minimum and most likely longer. Is this a good portfolio. Is there something I'm missing, or that I should be aware of?
AGG in my IRA, MUB in my taxable account.
What are your thoughts on BND bs MUB in a taxable account? It’s been a few years since I was looking between the two for my taxable portfolio.
some MUB (around 8% of portfolio) just for stability. thinking about them 7% yielding I Bonds.
I have a taxable brokerage account that invests in Municipal bond ETF funds such as MUB (broad US market exposure, investment grade) and HYD (broad US exposure, High Yield, 75% below BBB). I previously invested in a total bond fund (FTBFX) and considered BND and BNDX ETFs, but none of those were ideal for a taxable account.
BND is fine. Buying bonds directly is difficult; it's not something geared for average retail investors. If you wanted to diversify within bonds, there are various funds for parts of that market (VTC, MUB, etc.) that would provide a middle ground.
Thanks! This is an excellent comment and it's a wealth of information for me! ANGL seems interesting because the economy is recovering, so the downside risk is lower. You are right about HYEM, the price is somewhat stable, despite all the developing markets it covers (I would have expected more volatility but the Yahoo chart only goes back 9 years, so maybe more data is needed). I have one question though and maybe you or someone else can answer this. Regarding MUB, I see in the chart there was a quick 10% drop from April 2013 to August of 2013: https://finance.yahoo.com/quote/MUB?ltr=1. I wonder what would lead to such a sharp decline for MUB in a span of a few months in 2013?
in rough order of stability (starting with more stable options) you could look at... MUB is US municipal bonds, pays about 1.8-2%. very stable over time, generally. BND, US high-grade corporate bond fund from Vanguard, also pays 1.8-2% ANGL is high-yield US corporate bonds, pays over 4%. potentially more volatile than treasury or corporate bonds, because the companies are distressed with poor credit ratings. but still pretty dull when you look at the chart long-term. HYEM is emerging market corporate bonds, pays about 5% and is relatively stable when you look at the charts. but there's more political and currency risk because it's nations like China, Turkey, Brazil, etc that can be unstable relative to the US, Japan and Western Europe. PFFD is US 'preferred stock' that pays higher dividends than 'common stock'. typically less volatile than the general stock market, pays about 4%. ACWV is a global 'low volatility stock' index, stocks that are less likely to see dramatic shifts up or down in share price. big mature boring stable companies like Roche, Deutsche Telecom, Verizon. pays about 1.8% dividend. HDV is US high-dividend stocks, pays about 3%. it's more volatile than SHY but more stable than the overall stock market, because it's got big boring stable old companies like Exxon, Johnson & Johnson, Chevron, etc.
My best advice would be to invest in ETF and very little in skyrocketing stocks. Here’s what I follow: 1. SCHD —> large cap dividend/ value - 30% 2. VT —> Total world stock/ diversified- 30% 3. MUB —> Muni Bonds /Tax free interest- 20% 4. TSLA, Z, GOOG, AMZN etc —> All crazy stocks 20% This way I can get healthy dividends and appreciation. Hope this helps.
>So we think these sector overweight and style tilts are purposeful and for a reason based on capital market expectations though? Highly doubtful. Sure, they could be. We can only speculate though. Owning shorter duration bonds than the benchmark only starting working this year, but rising rates has been a common fear for many years, and many advisors are purposefully shorter duration than the AGG. And just given the yield vs. duration relationship on the AGG, its long-term prospects are pretty dismal. The advisor seems to like factor-based investing, so I would also assume the overweight to lower cap sizes is purposeful. Research indicates size is a meaningful factor over time, so that's likely purposeful alongside the volatility factor exposures. And to be frank, a lot of people in this subreddit are patting themselves on the back for how diversified they are with their market cap weighted index ETFs, but a handful of tech companies are dominating those weights. VTSAX has 17% in the top 5 names (AAPL, MSFT, AMZN, FB, Google). Mega caps have had a great run, especially during Covid, but I think it's reasonable to expect them to lag as the rest of the market catches up. >Ytd out performance is not really a meaningful sample size; a rough backtest seems to show vti * agg as the long term winner. Agreed, but I don't know the advisor's holdings and trades so trying to guess their performance further back is futile. > Also that’s not accounting for trading costs and management expenses. We also don't know their management fees or trading costs. If I assume each trade is $50 (surely the ETFs are cheaper, and maybe the MFs too), then it costs $1550 to populate this portfolio. For a 1MM portfolio, that's .15%. It's not going to break the bank as long as the advisor isn't over-trading. Even after a 1% management fee and 15 bps in commissions, this portfolio is apparently beating the benchmark this year. >The only thing I like is the overweight of muni bonds for the tax benefits. Returns we are analyzing are all pre tax. But could just invest in MUB for that exposure. fwiw, the portfolio is an IRA, so there's no benefit to munis from a tax perspective. But they've performed pretty well even without the tax benefit, so I don't find a problem with their inclusion. > I highly doubt this financial advisor can reliably outperform the market before expenses let alone after the excessive trading costs. We have no way of knowing that, and I don't really care. As long as the MIL isn't getting ripped off and is happy, then the advisor is probably doing his job. There's more to being an advisor than simply outperforming a benchmark. From the information provided, I think it's unlikely the advisor is a shyster and robbing OP's spouse of their future inheritance. So hopefully this thread has provided some helpful context about the situation.
So we think these sector overweight and style tilts are purposeful and for a reason based on capital market expectations though? Highly doubtful. Ytd out performance is not really a meaningful sample size; Also not accounting for trading costs and management expenses. The only thing I like is the overweight or muni bonds for the tax benefits. But could just invest in MUB. I highly doubt this financial advisor can reliably outperform before expenses let alone after the excessive trading costs.
Looks like a great start! Definitely needs more KO, MMM, KHC, MUB, PG and CAG
Think VTI:VXUS:QYLD:MUB in 1:1:3:3 is a decent portfolio for my safeish monthly investments? Got some income from the qyld and growth from its qqq component, some stability from mub, and long term exposure to the world market in vti and vxus. Gonna deposit $1,000 into my brokerage, around 2/3 into the above and 1/3 into whatever individual stocks I want to do. Not counting IRA contributions or RH play account for regarded option plays.
Oh, how come ITOT over FSKAX? That's what I do on my Fidelity Roth. They look nearly identical to me, but just wondering what your thoughts are. Same thing goes with IXUS over FSPSX. I believe with Municipal bonds you have to be a resident of the municipality where those bonds are issued for it to be tax advantageous. Exceptions are US territories like American Samoa, Guam, Puerto Rico, and others. Do you actually get tax credits or cuts from MUB?
Can't go wrong! If you're fidelity, ITOT is the equivalent. I personally do: 45% US (ITOT) 40% International (IXUS) 15% Tax-efficient bonds (MUB) I'm heavy international, but it's a personal choice. I chose muni bonds to offset taxes due to high earnings. Whatever you choose, set and forget, rebalance to your allocations every year or two, and resist the urge to change your allocations over time!
You think JPow is gonna make this market moon? The market is telling him FUCK OFF. He just put a piece of gum as a patch but this fucker looks very fragile. Don’t take my word look at any of these BOND / FIXED INCOME ETF’s. THE PRICE IN ALL OF THEM IS UNDER PRESSURE. MOST HAVE LOST ALL OR MOST OF THEIR GAINS IN THE LAST FEW DAYS. REMEMBER BONDS 101 PRICES GO DOWN YIELD GOES UP (YIELD AS IN RATES). THE BOND MARKET IS WAY BIGGER THAN THE EQUITY MARKET AND ALSO A LOT MORE POWERFUL THAN THE FED. -AGG: iShare Core Bond - LQD: iShares High Grade Corporates - MBB: iShare MBS (Mortgage Backed Securities) -MUB: iShare Munis -EMB: JPM Emerging Market Debt -HYG: iShare High Yield (Junk Bonds) -IYR: iShare REITS
You think JPow is gonna make this market moon? The market is telling him FUCK OFF. He just put a piece of gum as a patch but this fucker looks very fragile. Don’t take my word look at any of these BOND / FIXED INCOME ETF’s. THE PRICE IN ALL OF THEM IS UNDER PRESSURE. MOST HAVE LOST ALL OR MOST OF THEIR GAINS IN THE LAST FEW DAYS. REMEMBER BONDS 101 PRICES GO DOWN YIELD GOES UP (YIELD AS IN RATES). THE BOND MARKET IS WAY BIGGER THAN THE EQUITY MARKET AND ALSO A LOT MORE POWERFUL THAN THE FED. -AGG: iShare Core Bond - LQD: iShares High Grade Corporates - MBB: iShare MBS (Mortgage Backed Securities) -MUB: iShare Munis -EMB: JPM Emerging Market Debt -HYG: iShare High Yield (Junk Bonds) -IYR: iShare REITS