TLH Bonds today... Suggestions for where to move please?

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longview
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TLH Bonds today... Suggestions for where to move please?

Post by longview »

(Background: Bonds have taken a bloodbath and looking to TLH. Looking for not equivalent but reasonably close places to move funds in a few categories:)

- My medium and short term munis and treasuries. (VWIUX, VFIUX, VMLUX, VFIRX, VWITX, also FUAMX, FUMBX). I expect rates to continue to rise, but don't want to be totally out of the market waiting to time. Where would you suggest parking the money? Some other shortterm fund? Don't know what would be an option for treasuries... (could do corporate instead of munis, and take the tax hit...)

- My BMBIX. I liked this for the large percentage of pre-funded munis. I'm not aware of anything in the same vien... any ideas here?

Thanks a ton, in advance, for any and all info and ideas :idea: .
(To color my comments: my situation is ER trying to make a large portfolio that is 99% taxable last 45 years)
bridge2benefits
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Re: TLH Bonds today... Suggestions for where to move please?

Post by bridge2benefits »

Have you considered I Bonds and individual TIPS, in order to eliminate inflation risk and interest rate risk?
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longview
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Re: TLH Bonds today... Suggestions for where to move please?

Post by longview »

bridge2benefits wrote: Fri May 20, 2022 8:59 am Have you considered I Bonds and individual TIPS, in order to eliminate inflation risk and interest rate risk?
Yes... but the numbers are very large and taxable (see my little sig above). I-bond limits 1% of loss. :beer TIPS are horrible in taxable, phantom income tax, etc. So need to move from fund to fund.
(To color my comments: my situation is ER trying to make a large portfolio that is 99% taxable last 45 years)
jebmke
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Re: TLH Bonds today... Suggestions for where to move please?

Post by jebmke »

I don't have a clue what those tickers are. I did some swaps from Short-term Treasury Admiral fund to Short-term Treasury Index Admiral Fund. Roughly the same characteristics.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
exodusNH
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Re: TLH Bonds today... Suggestions for where to move please?

Post by exodusNH »

longview wrote: Fri May 20, 2022 8:47 am (Background: Bonds have taken a bloodbath and looking to TLH. Looking for not equivalent but reasonably close places to move funds in a few categories:)

- My medium and short term munis and treasuries. (VWIUX, VFIUX, VMLUX, VFIRX, VWITX, also FUAMX, FUMBX). I expect rates to continue to rise, but don't want to be totally out of the market waiting to time. Where would you suggest parking the money? Some other shortterm fund? Don't know what would be an option for treasuries... (could do corporate instead of munis, and take the tax hit...)

- My BMBIX. I liked this for the large percentage of pre-funded munis. I'm not aware of anything in the same vien... any ideas here?

Thanks a ton, in advance, for any and all info and ideas :idea: .
Why not just park them all in VUSB for 31 days, then move back to where you want to be? You won't generate that much taxable income. Or even sell it all, buy a 4, 8, or 13 week Treasury, then go back into the funds?

TIPS funds aren't a terrible idea, either. They turn the phantom income into dividends that you could use to pay the taxes. (Because the inflation adjustments are paid out, you do need to reinvest them to get the actual inflation protection. It does make taxes easier, though.)

Another option is to go to cash for 31 days, then go right back into your positions.
secondopinion
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Re: TLH Bonds today... Suggestions for where to move please?

Post by secondopinion »

longview wrote: Fri May 20, 2022 10:00 am
bridge2benefits wrote: Fri May 20, 2022 8:59 am Have you considered I Bonds and individual TIPS, in order to eliminate inflation risk and interest rate risk?
Yes... but the numbers are very large and taxable (see my little sig above). I-bond limits 1% of loss. :beer TIPS are horrible in taxable, phantom income tax, etc. So need to move from fund to fund.
Tax swapping is one reason why I consider singleton bonds over funds for treasuries for the taxable account. Funds are generally hard to tax loss harvest on a fine-grain scale (sometimes, the tax bracket even encourages tax gain harvesting). Having most of my money in taxable accounts, I have to get creative to pay little tax as possible with my bonds (municipals are not quite a deal for me yet).
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
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Re: TLH Bonds today... Suggestions for where to move please?

Post by hudson »

Longview,
BMBIX is good for munis.
Selling and leaving it in the settlement fund for 31 days would work.
Short individual treasuries of the appropriate duration? https://home.treasury.gov/resource-cent ... nth=202205
Last edited by hudson on Fri May 20, 2022 12:03 pm, edited 1 time in total.
mega317
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Re: TLH Bonds today... Suggestions for where to move please?

Post by mega317 »

longview wrote: Fri May 20, 2022 8:47 am Bonds have taken a bloodbath
I'm finding it fascinating to read this all over the forum lately.

To be out of a bond fund for 31 days is likely meaningless. You could keep it in a money market fund. Or there are many other short term funds available. VGSH is short treasuries. SPTS is a different company and low ER. SUB is a muni fund.
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longview
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Re: TLH Bonds today... Suggestions for where to move please?

Post by longview »

jebmke wrote: Fri May 20, 2022 10:18 am I don't have a clue what those tickers are. I did some swaps from Short-term Treasury Admiral fund to Short-term Treasury Index Admiral Fund. Roughly the same characteristics.
That's allowed? Short term treasury to short term treasury index? What's the difference between them?
(To color my comments: my situation is ER trying to make a large portfolio that is 99% taxable last 45 years)
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longview
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Re: TLH Bonds today... Suggestions for where to move please?

Post by longview »

exodusNH wrote: Fri May 20, 2022 10:26 am Why not just park them all in VUSB for 31 days, then move back to where you want to be? You won't generate that much taxable income. Or even sell it all, buy a 4, 8, or 13 week Treasury, then go back into the funds?

TIPS funds aren't a terrible idea, either. They turn the phantom income into dividends that you could use to pay the taxes. (Because the inflation adjustments are paid out, you do need to reinvest them to get the actual inflation protection. It does make taxes easier, though.)
VUSB is interesting -- wow, talk about a drop. (I did a deep dive forever ago (posted on here actually) back when runaway inflation was "obvious"... couldn't seem to avoid the random tax spikes right -- trying to grow capital without necessarily needed to sell for taxes.)
(To color my comments: my situation is ER trying to make a large portfolio that is 99% taxable last 45 years)
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longview
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Re: TLH Bonds today... Suggestions for where to move please?

Post by longview »

hudson wrote: Fri May 20, 2022 11:44 am Longview,
BMBIX is good for munis.
Selling and leaving it in the settlement fund for 31 days would work.
Short individual treasuries of the appropriate duration? https://home.treasury.gov/resource-cent ... nth=202205
Thanks. I keep feeling like some individual treasuries makes sense -- I've just never really messed with them I guess (always trying to keep it simple). Could you give me an example of what you're suggesting (ie, are you saying to sim a 5-year duration buy a treasury with 2.84 yield?)? Could I do it from the vanguard broker interface and avoid the treasury/govt interface?
(To color my comments: my situation is ER trying to make a large portfolio that is 99% taxable last 45 years)
mega317
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Re: TLH Bonds today... Suggestions for where to move please?

Post by mega317 »

longview wrote: Fri May 20, 2022 3:03 pm
jebmke wrote: Fri May 20, 2022 10:18 am I don't have a clue what those tickers are. I did some swaps from Short-term Treasury Admiral fund to Short-term Treasury Index Admiral Fund. Roughly the same characteristics.
That's allowed? Short term treasury to short term treasury index? What's the difference between them?
Hard to say for sure because they don't list CUSIP on the website from what I could tell. But the top 2 holdings of VFIRX are TIPS not found in the top holdings of VSBSX, the third largest holding has a coupon of 2.250 and maturity 4/30/24--nowhere to be found on VSBSX. That's as far as I looked but I'd say they're different at least in some way.
Whether that's allowed, well in the absence of specific guidance from the IRS that's for everyone to decide for her/himself.
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longview
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Re: TLH Bonds today... Suggestions for where to move please?

Post by longview »

mega317 wrote: Fri May 20, 2022 12:00 pm To be out of a bond fund for 31 days is likely meaningless. You could keep it in a money market fund. Or there are many other short term funds available. VGSH is short treasuries. SPTS is a different company and low ER. SUB is a muni fund.
Agree. There's just always a non-zero chance that Powell blinks because markets crashing is scary, and that's not something you'd wanna miss. Although it is hopefully more likely he goes the other way.
(To color my comments: my situation is ER trying to make a large portfolio that is 99% taxable last 45 years)
exodusNH
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Re: TLH Bonds today... Suggestions for where to move please?

Post by exodusNH »

mega317 wrote: Fri May 20, 2022 3:17 pm
longview wrote: Fri May 20, 2022 3:03 pm
jebmke wrote: Fri May 20, 2022 10:18 am I don't have a clue what those tickers are. I did some swaps from Short-term Treasury Admiral fund to Short-term Treasury Index Admiral Fund. Roughly the same characteristics.
That's allowed? Short term treasury to short term treasury index? What's the difference between them?
Hard to say for sure because they don't list CUSIP on the website from what I could tell. But the top 2 holdings of VFIRX are TIPS not found in the top holdings of VSBSX, the third largest holding has a coupon of 2.250 and maturity 4/30/24--nowhere to be found on VSBSX. That's as far as I looked but I'd say they're different at least in some way.
Whether that's allowed, well in the absence of specific guidance from the IRS that's for everyone to decide for her/himself.
Common wisdom says that actively managed funds are different from each other and strict index funds.
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Re: TLH Bonds today... Suggestions for where to move please?

Post by mega317 »

Whose wisdom? Citation?
But yes I agree with you and didn't even think about VFIRX being an active fund before I wasted my time looking into the holdings.
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Re: TLH Bonds today... Suggestions for where to move please?

Post by hudson »

longview wrote: Fri May 20, 2022 3:15 pm
hudson wrote: Fri May 20, 2022 11:44 am Longview,
BMBIX is good for munis.
Selling and leaving it in the settlement fund for 31 days would work.
Short individual treasuries of the appropriate duration? https://home.treasury.gov/resource-cent ... nth=202205
Thanks. I keep feeling like some individual treasuries makes sense -- I've just never really messed with them I guess (always trying to keep it simple). Could you give me an example of what you're suggesting (ie, are you saying to sim a 5-year duration buy a treasury with 2.84 yield?)? Could I do it from the vanguard broker interface and avoid the treasury/govt interface?
Yes, you can buy through Vanguard.
I don't know if 5 years fits your situation?
I'm not sure if I answered your question..."sim a 5-year duration?"
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longview
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Re: TLH Bonds today... Suggestions for where to move please?

Post by longview »

Thanks everyone so far. So VSBSX looks like a winner for short term treasuries.. that's great. Seems like I could do the same thing for all maturities? Any reason not to move from active to index for all the treasuries? And BMBIX can maybe just wait 31 days.

As for the mention of VGSH... isn't that just an ETF of the short term fund -- is that allowed? Because, if so, couldn't I just switch from funds to ETFs and then back again? Seems like that wouldn't be allowed.

I also thought, for munis, I could change into the equivalent length of the state specific funds (ie, CA muni)... make sense or is there something better?

Thanks again.
(To color my comments: my situation is ER trying to make a large portfolio that is 99% taxable last 45 years)
exodusNH
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Re: TLH Bonds today... Suggestions for where to move please?

Post by exodusNH »

mega317 wrote: Fri May 20, 2022 3:24 pm Whose wisdom? Citation?
But yes I agree with you and didn't even think about VFIRX being an active fund before I wasted my time looking into the holdings.
Every TLH article mentions that actively managed funds are always considered different because what happens is up to the whim of the manager, who could change the entire set of holdings halfway through the year if desired.
bridge2benefits
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Re: TLH Bonds today... Suggestions for where to move please?

Post by bridge2benefits »

longview wrote: Fri May 20, 2022 10:00 am
bridge2benefits wrote: Fri May 20, 2022 8:59 am Have you considered I Bonds and individual TIPS, in order to eliminate inflation risk and interest rate risk?
Yes... but the numbers are very large and taxable (see my little sig above). I-bond limits 1% of loss. :beer TIPS are horrible in taxable, phantom income tax, etc. So need to move from fund to fund.
I get that a lot of people don't like paying taxes on the phantom income, but others see it as not being practically different from paying taxes on the annual interest from nominal treasuries. https://www.bogleheads.org/wiki/Treasur ... iderations

White Coat Investor is an example of someone who is buying TIPS in taxable nowadays viewtopic.php?p=6670318#p6670318
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Re: TLH Bonds today... Suggestions for where to move please?

Post by happysteward »

Use a municipal money market (Vanguard VMSXX or other equal) for 31 days……
"How much money is enough?", John Rockefeller responded, "...just a little bit more."
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longview
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Re: TLH Bonds today... Suggestions for where to move please?

Post by longview »

bridge2benefits wrote: Sat May 21, 2022 1:28 am
longview wrote: Fri May 20, 2022 10:00 am
bridge2benefits wrote: Fri May 20, 2022 8:59 am Have you considered I Bonds and individual TIPS, in order to eliminate inflation risk and interest rate risk?
Yes... but the numbers are very large and taxable (see my little sig above). I-bond limits 1% of loss. :beer TIPS are horrible in taxable, phantom income tax, etc. So need to move from fund to fund.
I get that a lot of people don't like paying taxes on the phantom income, but others see it as not being practically different from paying taxes on the annual interest from nominal treasuries. https://www.bogleheads.org/wiki/Treasur ... iderations

White Coat Investor is an example of someone who is buying TIPS in taxable nowadays viewtopic.php?p=6670318#p6670318
Thanks, I will read. I can't imagine wanting to pay taxes, much less on money I don't have.. but I will give it a chance.

For future generations that my wind up here, findings for TLH partners so far:

- Treasuries... VFIRX->VSBSX and VFIUX->VSIGX (funds managed to index funds, slightly longer duration for VSIGX right now)
- Munis... VWIUX/VWITX ->? VCADX (same duration + CA risk) and VMLUX -> VWSUX (move from limited to short munis). VTAPX or VIPIX for TIPS?...
- BMBIX... just cash for 30 days... maybe ultra short munis or treasuries makes sense.

Off topic, but VTAPX/VIPIX 30-day SEC yield is negative which confuses me.

So that looks like a good set of moves if I want to stay about the same and not market time. But it sure is tempting to market time a bit. Although I don't know what the winning move in stagflation even would be.

Thanks everyone. Comments and arguments against the above definitely welcome since I have the weekend. :sharebeer
(To color my comments: my situation is ER trying to make a large portfolio that is 99% taxable last 45 years)
mega317
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Re: TLH Bonds today... Suggestions for where to move please?

Post by mega317 »

longview wrote: Sat May 21, 2022 10:03 am Off topic, but VTAPX/VIPIX 30-day SEC yield is negative which confuses me.
TIPS funds report real yield. The nominal yield will be that number plus inflation.
Nominal treasury funds report nominal yield. The real yield will be that number minus inflation.
In an environment of stable and expected inflation, TIPS and nominal treasuries of the same duration will end up with about the same real and nominal yields. But will be reported differently.
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Re: TLH Bonds today... Suggestions for where to move please?

Post by jseagull »

You might want to consider the following in making your decision:

Trying to time the bottom is hard (impossible?) to do. Accept this as a given. Over optimizing creates delay, which has a cost in terms of lost/lower dividends, i.e., if you go too conservative, then inflation and lower dividend rates have a cost.

How long are you going to keep the money you plan on investing. Match your time horizon with the duration of the bond investment.

Reduce your risk (anxiety) by dollar cost averaging.

Make a decision recognizing that perfection is impossible, but one you can live with and sleep at night.
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Re: TLH Bonds today... Suggestions for where to move please?

Post by longview »

Indeed. My time horizon is very far, as I tend to live on dividends/interest (at least since things have been going well ;)). Will be interesting once I need to sell assets for expenses.

Interesting thought I saw on the internet: it's really near impossible to have a wash sale with bond funds since they actually hold different bonds. So even switching from Vanguard to Fido, or from any fund to another, they are filled with actually different bonds and a different amount -- so that makes them not substantially identical. What do you think of this? :confused

I thought it was interesting. Made some sense. Bonds aren't like stocks with funds having shares of the same company...
(To color my comments: my situation is ER trying to make a large portfolio that is 99% taxable last 45 years)
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Re: TLH Bonds today... Suggestions for where to move please?

Post by grabiner »

longview wrote: Sun May 22, 2022 8:15 am Interesting thought I saw on the internet: it's really near impossible to have a wash sale with bond funds since they actually hold different bonds. So even switching from Vanguard to Fido, or from any fund to another, they are filled with actually different bonds and a different amount -- so that makes them not substantially identical. What do you think of this? :confused

I thought it was interesting. Made some sense. Bonds aren't like stocks with funds having shares of the same company...
The exception would be bond index funds. If selling Vanguard S&P 500 Index and buying Fidelity S&P 500 Index is a wash sale (a common opinion although the IRS has not ruled even on this case), then selling Vanguard Total Bond Market Index and buying Fidelity Total Bond Market Index should also be a wash sale. Even though the funds may use different sampling strategies, they are tracking the same index (Barclays Aggregate), and attempting to be substantially identical.

Changing between active funds, or active and index, or funds tracking different indexes, will give you a fund with almost entirely different holdings.
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Re: TLH Bonds today... Suggestions for where to move please?

Post by grabiner »

longview wrote: Fri May 20, 2022 3:40 pm As for the mention of VGSH... isn't that just an ETF of the short term fund -- is that allowed? Because, if so, couldn't I just switch from funds to ETFs and then back again? Seems like that wouldn't be allowed.
This is definitely a wash sale. At Vanguard, the ETF is a share class of the mutual fund, and selling one share class of the fund to buy another share class is buying something which is substantially identical: the same bonds held in a different wrapper.
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Re: TLH Bonds today... Suggestions for where to move please?

Post by Lakers3 »

Question about TLH:
I have 3 Vanguard muni funds: VWIUX, VWALX, VWLUX. Of course all 3 are down about 10%.
Can I exchange both VWALX and VWLUX into VWIUX on May 23rd, wait till June 24 and the exchange half of VWIUX back to VWALX and half back into VWIUX? Then on July 24, repurchase VWIUX and restore the original number of shares for all 3? That way I capture losses from all 3 funds.
Is this valid TLH without violating wash sale rule? (I assume 31 days is not excluding weekend days and holidays?). Thanks for any help.
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Re: TLH Bonds today... Suggestions for where to move please?

Post by Lakers3 »

Sorry for typo meant half back to VWLUX.
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Re: TLH Bonds today... Suggestions for where to move please?

Post by Northern Flicker »

Why do you need 7 bond funds?
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Re: TLH Bonds today... Suggestions for where to move please?

Post by Northern Flicker »

grabiner wrote: Sun May 22, 2022 10:54 am
longview wrote: Fri May 20, 2022 3:40 pm As for the mention of VGSH... isn't that just an ETF of the short term fund -- is that allowed? Because, if so, couldn't I just switch from funds to ETFs and then back again? Seems like that wouldn't be allowed.
This is definitely a wash sale. At Vanguard, the ETF is a share class of the mutual fund, and selling one share class of the fund to buy another share class is buying something which is substantially identical: the same bonds held in a different wrapper.
VGSH is the ETF class for VSBSX. VGIT/VSIGX is Vanguard’s intermediate treasury index fund.
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Re: TLH Bonds today... Suggestions for where to move please?

Post by grabiner »

Northern Flicker wrote: Sun May 22, 2022 11:37 am
grabiner wrote: Sun May 22, 2022 10:54 am
longview wrote: Fri May 20, 2022 3:40 pm As for the mention of VGSH... isn't that just an ETF of the short term fund -- is that allowed? Because, if so, couldn't I just switch from funds to ETFs and then back again? Seems like that wouldn't be allowed.
This is definitely a wash sale. At Vanguard, the ETF is a share class of the mutual fund, and selling one share class of the fund to buy another share class is buying something which is substantially identical: the same bonds held in a different wrapper.
VGSH is the ETF class for VSBSX. VGIT/VSIGX is Vanguard’s intermediate treasury index fund.
So the clarification is that you can't switch between the mutual fund and ETF class of the same fund. You can certainly sell a mutual fund and buy an ETF class of a different fund, and this should not be a wash sale unless the underlying funds would be.
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