Schwab replacement for VMLUX (short term nat muni)

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idoc2020
Posts: 1090
Joined: Mon Oct 22, 2007 3:40 pm

Schwab replacement for VMLUX (short term nat muni)

Post by idoc2020 »

I want to use VMLUX as a depository to hold "dry powder" cash at Schwab to be used later on. I selected the safer VMLUX because I am in the highest tax bracket and already own a lot of intermed munis. The problem is that VMLUX is not available at Schwab since it's an admiral fund so I would need to go with VMLTX (.08% higher expense ratio). Since we're talking about $1M would it be fair to assume that I would be earning about $800 less by doing this? Also, Schwab charges a trading fee of $50 which would be levied every time I wanted to allocate monies from this fund to other investments. I looked on their website and it seems as if I could go with MUB (interm muni) and/or SUB (short muni). On portfolio visualizer it appears as if 75% SUB + 25% MUB is almost identical to VMLTX. Does it make sense to do it this way? The expense ratio of both of these is very low.
sycamore
Posts: 6360
Joined: Tue May 08, 2018 12:06 pm

Re: Schwab replacement for VMLUX (short term nat muni)

Post by sycamore »

ilan1h wrote: Sun May 09, 2021 10:07 pm On portfolio visualizer it appears as if 75% SUB + 25% MUB is almost identical to VMLTX. Does it make sense to do it this way?
Maybe. In what way do you mean almost identical: same return or same volatility or same Sharpe ratio?

Another way to compare your fund options is average duration. VMLUX is actively managed so I imagine its average duration will change more than the index funds.

For the purposes of having "dry powder" I'd probably just go with SUB alone to keep the duration shorter.
Topic Author
idoc2020
Posts: 1090
Joined: Mon Oct 22, 2007 3:40 pm

Re: Schwab replacement for VMLUX (short term nat muni)

Post by idoc2020 »

Thanks for the suggestions. I discovered that at Schwab I have "Pinnacle" status and was never even aware of it. I noticed the term when I was looking at my online account and googled it. Turns out that they will have all trading fees, even those that come from Vanguard funds. The only thing that they can't do is give me access to Admiral funds. This usually implies that I would have to pay another 7-8 basis points to hold the regular funds. I think this only becomes significant when large sums are involved.
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