Should I stay in VMFXX ?

[paul e]

First, a little context. Im well into retirement and live in Florida where there is no state income tax. Being retired, income isnt my only investing goal, but its a significant part of it, generating enough to live comfortably on.. So... I had a large sum of money in VWIUX representing most of the bond portion of my asset allocation. At the end of '22, I decided to sell it all to tax lost harvest.. I had a $50k loss I decided to take. But instead of parking it in an similar muni bond holding, I was lured by the over 4% sec yield of VMFXX which was considerably higher than what VWIUX was paying where the total return has been nothing to brag about.. So, with todays rate at 4.4% on VMFXX, Im loathe to take it out and put it back in VWIUX yet. VWIUX has a current 30 day sec yield of 2.96% which for me has a taxable equivalent of 3.89% which is easily and considerably beaten by VMFXX.

While I dont know for sure, the FED doesnt seem like it wants to lower rates any time soon and the increase as recently as last week was another 25 basis points. Im watching the SEC yield on the VMFXX daily as well as the inflation rate, and once it starts to trend downward, thats when I intend to cash out and reinvest in either VWIUX, or another bond asset. But as long as cash is doing so well, is there any reason to give it up just yet?

[jebmke]

so, you're market timing. Let us know how it works out.

[paul e]

so, you're market timing. Let us know how it works out.

Hmm. Is interest rate watching the same as market timing? When you're living on interest and dividends, I dont see how you can ignore them.

[mamster]

You should really post your whole portfolio, but if you're in the 24% federal tax bracket, that's probably too low to bother with munis at all, even if you need to have bonds in taxable... which we can't tell without seeing your whole portfolio.

[Ricola]

What degree of tax-free is VMFXX? A recent Allan Roth article mentions VUSXX Vanguard Treasury Money Market Fund as being Fed and State Tax-free. I can't see where this can be verified anywhere.

[paul e]

You should really post your whole portfolio, but if you're in the 24% federal tax bracket, that's probably too low to bother with munis at all, even if you need to have bonds in taxable... which we can't tell without seeing your whole portfolio.

Good point. In addition to the approx $1m currently in VMFXX I have about 80% in stocks with VITSX (currently $4.5m) where I derive most of my income and growth... Also a small holding in Int'l . And a smallish Ira ($230k) in VBTLX, VAIPX, AND VTSLX. I also have about $900k in 4 individual issues I inherited.

[paul e]

What degree of tax-free is VMFXX? A recent Allan Roth article mentions VUSXX Vanguard Treasury Money Market Fund as being Fed and State Tax-free. I can't see where this can be verified anywhere.

I believe it is federally taxable at income tax rates.

[evelynmanley]

What degree of tax-free is VMFXX? A recent Allan Roth article mentions VUSXX Vanguard Treasury Money Market Fund as being Fed and State Tax-free. I can't see where this can be verified anywhere.

Discussed in this thread:

viewtopic.php?p=7068843#p7068843

<<Vanguard U.S. government obligations information for 2022 is out: https://advisors.vanguard.com/iwe/pdf/FASUSGO.pdf

Cash Reserves Federal Money Market Fund 53.08%
Federal Money Market Fund 37.79%
Treasury Money Market Fund 100.00%<<

<<

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Kevin M
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Re: Vanguard Money Market Funds - Differences in Returns?

Post by Kevin M » Wed Jan 18, 2023 1:28 am

luffy wrote: ↑Wed Jan 18, 2023 12:58 am
Vanguard U.S. government obligations information for 2022 is out: https://advisors.vanguard.com/iwe/pdf/FASUSGO.pdf

Cash Reserves Federal Money Market Fund 53.08%
Federal Money Market Fund 37.79%
Treasury Money Market Fund 100.00%

Thanks.

Neither Cash Reserves nor Fed MM meets the requirement for state tax exemption in CA, NY and CT. VUSXX of course does.

It was prudent for us living in these states not to have assumed VMFXX or VMRXX would be exempt from state and local income taxes.<<

[brawlrats]

What degree of tax-free is VMFXX? A recent Allan Roth article mentions VUSXX Vanguard Treasury Money Market Fund as being Fed and State Tax-free. I can't see where this can be verified anywhere.

Treasuries are not federal tax free...only state tax free. So VUSXX would be mostly state tax free...they don't guarantee it is 100% state tax free, as they are able to invest in repurchase agreements per their fund summary, but I believe it is usually pretty close to 100%.

VMFXX was 37% state tax free in 2022. Some states, however, have a higher threshold in order to meet the state tax free treatment.

[jebmke]

so, you're market timing. Let us know how it works out.

Hmm. Is interest rate watching the same as market timing? When you're living on interest and dividends, I dont see how you can ignore them.

not the watching, the switching. IMO market timing is moving in and out of investments based on some theory that one knows what future returns will be.

To be successful you generally need to be able to do it two times for each move (out and back) and do it relatively consistently over some longish period of time -- say 30-40 years. Or, just get lucky.

[increment]

What degree of tax-free is VMFXX? A recent Allan Roth article mentions VUSXX Vanguard Treasury Money Market Fund as being Fed and State Tax-free. I can't see where this can be verified anywhere.

Neither is federally tax free.

VUSXX "Treasury MMF" is state tax free. VMFXX "Federal MMF" is state tax free for the proportion of dividends attributable to Treasurys and the like, except for those states that require certain thresholds for tax exemption (because VMFXX didn't meet them last year; that fact could change annually). See Vanguard's tax year 2022 update on the subject.

[paul e]

so, you're market timing. Let us know how it works out.

Hmm. Is interest rate watching the same as market timing? When you're living on interest and dividends, I dont see how you can ignore them.

not the watching, the switching. IMO market timing is moving in and out of investments based on some theory that one knows what future returns will be.

You understand that the switching out of VWIUX was to effect some tax loss harvesting, right? Im generally a total buy and hold investor, except for some very occasional TLH .

[brad.clarkston]

You should really post your whole portfolio, but if you're in the 24% federal tax bracket, that's probably too low to bother with munis at all, even if you need to have bonds in taxable... which we can't tell without seeing your whole portfolio.

Good point. In addition to the approx $1m currently in VMFXX I have about 80% in VITSX (currently $4.5m) where I derive most of my income and growth... Also a small holding in Int'l . And a smallish Ira ($230k) in VBTLX, VAIPX, AND VTSLX. I also have about $900k in 4 individual issues I inherited.

With $6.6+mil mostly in a vanguard TSM fund I can't see a reason leaving the 4.3995% MMF without something more drastic happening.
Unless your in California or New York you'll be hard pressed to find a muni consistently doing better. I know my FLTMX (federal) is only at 2.3% and reasonably happy with it.

[jebmke]

so, you're market timing. Let us know how it works out.

Hmm. Is interest rate watching the same as market timing? When you're living on interest and dividends, I dont see how you can ignore them.

not the watching, the switching. IMO market timing is moving in and out of investments based on some theory that one knows what future returns will be.

You understand that the switching out of VWIUX was to effect some tax loss harvesting, right? Im generally a total buy and hold investor, except for some very occasional TLH .

Yes; I do that all the time. I move to a similar duration vehicle. I never TLH to something that I am unwilling to stay in forever.

[teamDE]

I dunno, i think it's pretty easy to stay on top of interest/MM rates as well as bond market rates. I'm happily in VMFXX at the moment.

[Hogan773]

I am looking at this conundrum too. I had big chunks in Intermediate Term Tax Exempt and High Yield Tax Exempt and did a big TLH in December, now sitting in the Muni Money Mkt Fund as that is just always what I had used....but now trying to figure out 1) if I should move all the MM stuff over to VUSXX and then also 2) should I be reinvesting in Intermediate Term and High Yield or spend some time in the MM funds. I think the distribution yield on Intermediate is similar, and on High Yield Tax Exempt still higher, on a tax adjusted basis. So I guess that gets back to market timing.....only if I believe that rates overall like in the 5-7yr part of the yield curve) are going to rise further from here should I just wait in MM, but otherwise I am risking further NAV "loss" if rates go down and the NAV rises and I miss that rise (since the MM fund principal is fixed steady)

[Ricola]

While I dont know for sure, the FED doesnt seem like it wants to lower rates any time soon and the increase as recently as last week was another 25 basis points. Im watching the SEC yield on the VMFXX daily as well as the inflation rate, and once it starts to trend downward, thats when I intend to cash out and reinvest in either VWIUX, or another bond asset. But as long as cash is doing so well, is there any reason to give it up just yet?

Your plan sounds good to me. As money tightens cash is king again.

[paul e]

I am looking at this conundrum too. I had big chunks in Intermediate Term Tax Exempt and High Yield Tax Exempt and did a big TLH in December, now sitting in the Muni Money Mkt Fund as that is just always what I had used....but now trying to figure out 1) if I should move all the MM stuff over to VUSXX and then also 2) should I be reinvesting in Intermediate Term and High Yield or spend some time in the MM funds. I think the distribution yield on Intermediate is similar, and on High Yield Tax Exempt still higher, on a tax adjusted basis. So I guess that gets back to market timing.....only if I believe that rates overall like in the 5-7yr part of the yield curve) are going to rise further from here should I just wait in MM, but otherwise I am risking further NAV "loss" if rates go down and the NAV rises and I miss that rise (since the MM fund principal is fixed steady)

Yes Hogan, its tough. If youre like me, you did your TLH and of course the proceeds take up residence in the VMFXX.. Normally, youd find a similar fund to put the proceeds in so youre not out of the market.. But then, you look those crazy high high SEC yields youre getting in the settlement fund, and suddenly, youre in a quandry. My way of thinking is loaded with recency bias, but given that, I see no harm in letting the proceeds earn what you cant get almost anywhere else until the tide turns. Im suffering no delusion that these rates will persist.. But every month I leave the proceeds there, Im racking up income I wont get elsewhere. The dilemma is that already interest rates in the Muni fund are coming down, and the NAV is up about 30 cents since I TLH out of it. But until sec yields and t-bills start falling, I think Im staying put and enjoy the income I'll be getting , at least, for now.

[aristotelian]

If interest rates fall faster than expected you will have been better off locking up the yield of current nominal long term bonds. Whether that happens or not is impossible to say. The current long term rates are based on the aggregation of market participants, so whether to stay in VMFXX should depend on your long term investment strategy and whether it fits your risk/return expectations.

[Hogan773]

If interest rates fall faster than expected you will have been better off locking up the yield of current nominal long term bonds. Whether that happens or not is impossible to say. The current long term rates are based on the aggregation of market participants, so whether to stay in VMFXX should depend on your long term investment strategy and whether it fits your risk/return expectations.

I am looking at this conundrum too. I had big chunks in Intermediate Term Tax Exempt and High Yield Tax Exempt and did a big TLH in December, now sitting in the Muni Money Mkt Fund as that is just always what I had used....but now trying to figure out 1) if I should move all the MM stuff over to VUSXX and then also 2) should I be reinvesting in Intermediate Term and High Yield or spend some time in the MM funds. I think the distribution yield on Intermediate is similar, and on High Yield Tax Exempt still higher, on a tax adjusted basis. So I guess that gets back to market timing.....only if I believe that rates overall like in the 5-7yr part of the yield curve) are going to rise further from here should I just wait in MM, but otherwise I am risking further NAV "loss" if rates go down and the NAV rises and I miss that rise (since the MM fund principal is fixed steady)

Yes Hogan, its tough. If youre like me, you did your TLH and of course the proceeds take up residence in the VMFXX.. Normally, youd find a similar fund to put the proceeds in so youre not out of the market.. But then, you look those crazy high high SEC yields youre getting in the settlement fund, and suddenly, youre in a quandry. My way of thinking is loaded with recency bias, but given that, I see no harm in letting the proceeds earn what you cant get almost anywhere else until the tide turns. Im suffering no delusion that these rates will persist.. But every month I leave the proceeds there, Im racking up income I wont get elsewhere. The dilemma is that already interest rates in the Muni fund are coming down, and the NAV is up about 30 cents since I TLH out of it. But until sec yields and t-bills start falling, I think Im staying put and enjoy the income I'll be getting , at least, for now.

PaulE, remember though that the Muni funds are also making monthly distributions that are pretty good too....the Intermediate Tax Exempt has an SEC yield of 2.96% right now and the last distribution yield was 2.58% which at the 35% tax bracket equates to a taxable yield of 3.97%, so not too far off from the taxable MM funds. So IF you believe that market rates will continue to rise and thus the NAVs will fall on the Muni Bond Funds, you can wait and try to get a lower re-entry NAV. But for you and I, while we were hanging out for 31 days in a money market fund, the NAVs fell a LOT and so we lost 2-3% on the sell/buy which we wouldn't have if we had swapped to another muni bond fund with similar duration. So what's done is done and not the end of the world here, but it all depends whether market rates in that 5-7yr part of the curve keep rising or not. Unfortunately that is not up to the Fed, that is up to the MARKET, and the market tries to read the future beyond the Fed and speculate when the Fed will start cutting, etc, so it isn't as simple. Yes the taxable MM yields should remain high and maybe even go higher if the Fed raises more, but that doesn't necessarily mean the 5-7yr part of the rates curve has to follow.


EDIT - I went ahead and ordered a transfer of everything out of the VMSXX to VUSXX for now, to pick up the extra yield that I am missing because the VMSXX SEC yield is so low. I will watch it periodically and if it rises back up to beat VUSXX then I can always flip flop back. And then I am also going to continue to do some Dollar Cost Averaging back into the Intermediate Term Tax Exempt and High Yield Tax Exempt. Yes I know that is market timing but since I am already down 2-3% on NAV since the TLH, and since rates are right now rising again maybe I will get lucky and catch a few lower NAV ticks in the coming days and weeks as I complete the reinvest back to my original levels before the TLH.

[paul e]

If interest rates fall faster than expected you will have been better off locking up the yield of current nominal long term bonds. Whether that happens or not is impossible to say. The current long term rates are based on the aggregation of market participants, so whether to stay in VMFXX should depend on your long term investment strategy and whether it fits your risk/return expectations.

I am looking at this conundrum too. I had big chunks in Intermediate Term Tax Exempt and High Yield Tax Exempt and did a big TLH in December, now sitting in the Muni Money Mkt Fund as that is just always what I had used....but now trying to figure out 1) if I should move all the MM stuff over to VUSXX and then also 2) should I be reinvesting in Intermediate Term and High Yield or spend some time in the MM funds. I think the distribution yield on Intermediate is similar, and on High Yield Tax Exempt still higher, on a tax adjusted basis. So I guess that gets back to market timing.....only if I believe that rates overall like in the 5-7yr part of the yield curve) are going to rise further from here should I just wait in MM, but otherwise I am risking further NAV "loss" if rates go down and the NAV rises and I miss that rise (since the MM fund principal is fixed steady)

Yes Hogan, its tough. If youre like me, you did your TLH and of course the proceeds take up residence in the VMFXX.. Normally, youd find a similar fund to put the proceeds in so youre not out of the market.. But then, you look those crazy high high SEC yields youre getting in the settlement fund, and suddenly, youre in a quandry. My way of thinking is loaded with recency bias, but given that, I see no harm in letting the proceeds earn what you cant get almost anywhere else until the tide turns. Im suffering no delusion that these rates will persist.. But every month I leave the proceeds there, Im racking up income I wont get elsewhere. The dilemma is that already interest rates in the Muni fund are coming down, and the NAV is up about 30 cents since I TLH out of it. But until sec yields and t-bills start falling, I think Im staying put and enjoy the income I'll be getting , at least, for now.

PaulE, remember though that the Muni funds are also making monthly distributions that are pretty good too....the Intermediate Tax Exempt has an SEC yield of 2.96% right now and the last distribution yield was 2.58% which at the 35% tax bracket equates to a taxable yield of 3.97%, so not too far off from the taxable MM funds. So IF you believe that market rates will continue to rise and thus the NAVs will fall on the Muni Bond Funds, you can wait and try to get a lower re-entry NAV. But for you and I, while we were hanging out for 31 days in a money market fund, the NAVs fell a LOT and so we lost 2-3% on the sell/buy which we wouldn't have if we had swapped to another muni bond fund with similar duration. So what's done is done and not the end of the world here, but it all depends whether market rates in that 5-7yr part of the curve keep rising or not. Unfortunately that is not up to the Fed, that is up to the MARKET, and the market tries to read the future beyond the Fed and speculate when the Fed will start cutting, etc, so it isn't as simple. Yes the taxable MM yields should remain high and maybe even go higher if the Fed raises more, but that doesn't necessarily mean the 5-7yr part of the rates curve has to follow.


EDIT - I went ahead and ordered a transfer of everything out of the VMSXX to VUSXX for now, to pick up the extra yield that I am missing because the VMSXX SEC yield is so low. I will watch it periodically and if it rises back up to beat VUSXX then I can always flip flop back. And then I am also going to continue to do some Dollar Cost Averaging back into the Intermediate Term Tax Exempt and High Yield Tax Exempt. Yes I know that is market timing but since I am already down 2-3% on NAV since the TLH, and since rates are right now rising again maybe I will get lucky and catch a few lower NAV ticks in the coming days and weeks as I complete the reinvest back to my original levels before the TLH.

Hogan, Maybe I misunderstood. but I sold VWIUX on 12/30 at 13.36. As of yesterday, its at 13.69. So Ive lost about $25k in NAV which I would have had had I TLH'd into a similar holding. I earned about $3600 from VMFXX in January though. Not sure I understand when you say the NAV fell a lot. To buy back in now is hard to stomach since its more expensive, although far from it's high.

[Hogan773]

Hogan, Maybe I misunderstood. but I sold VWIUX on 12/30 at 13.36. As of yesterday, its at 13.69. So Ive lost about $25k in NAV which I would have had had I TLH'd into a similar holding. I earned about $3600 from VMFXX in January though. Not sure I understand when you say the NAV fell a lot. To buy back in now is hard to stomach since its more expensive, although far from it's high.

Nope, my bad, I meant "I LOST MONEY" by selling low and now having to buy back at a higher NAV. I described it incorrectly but yes the same thing has happened to both of us. Had I swapped into another muni bond fund with some duration to it, presumably I would have rode that one up the 2-3%. Problem is then you get "stuck" in that fund potentially, which I guess may not be the worst thing in the world, but I was just hoping I could hide in money market for 31 days and the NAV would be pretty similar (or maybe I would even get lucky and NAV would fall). Of course it didn't

[paul e]

Hogan, Maybe I misunderstood. but I sold VWIUX on 12/30 at 13.36. As of yesterday, its at 13.69. So Ive lost about $25k in NAV which I would have had had I TLH'd into a similar holding. I earned about $3600 from VMFXX in January though. Not sure I understand when you say the NAV fell a lot. To buy back in now is hard to stomach since its more expensive, although far from it's high.

Nope, my bad, I meant "I LOST MONEY" by selling low and now having to buy back at a higher NAV. I described it incorrectly but yes the same thing has happened to both of us. Had I swapped into another muni bond fund with some duration to it, presumably I would have rode that one up the 2-3%. Problem is then you get "stuck" in that fund potentially, which I guess may not be the worst thing in the world, but I was just hoping I could hide in money market for 31 days and the NAV would be pretty similar (or maybe I would even get lucky and NAV would fall). Of course it didn't

Right.. We got greedy and were wowed by its nearly high record yield. In the end it may work out, but that depends on factors we dont know yet.. Stay tuned.

[Hogan773]

Hogan, Maybe I misunderstood. but I sold VWIUX on 12/30 at 13.36. As of yesterday, its at 13.69. So Ive lost about $25k in NAV which I would have had had I TLH'd into a similar holding. I earned about $3600 from VMFXX in January though. Not sure I understand when you say the NAV fell a lot. To buy back in now is hard to stomach since its more expensive, although far from it's high.

Nope, my bad, I meant "I LOST MONEY" by selling low and now having to buy back at a higher NAV. I described it incorrectly but yes the same thing has happened to both of us. Had I swapped into another muni bond fund with some duration to it, presumably I would have rode that one up the 2-3%. Problem is then you get "stuck" in that fund potentially, which I guess may not be the worst thing in the world, but I was just hoping I could hide in money market for 31 days and the NAV would be pretty similar (or maybe I would even get lucky and NAV would fall). Of course it didn't

Right.. We got greedy and were wowed by its nearly high record yield. In the end it may work out, but that depends on factors we dont know yet.. Stay tuned.

I wasn't thinking to be greedy but I guess I just foolishly assumed that the NAV wouldn't move THAT MUCH in 31 days and I wasn't giving up much on the yield either at this point, obviously I was wrong on the NAV part. I have started to dollar cost average back in to Intermediate Term and High Yield Tax Exempt especially as rates popped up here in the past couple days, so I guess in that way I am "locking in my mistake" but who knows it could also keep moving further away from us too here if inflation shows more cooling. I also tell myself that I have a nice chunk of TLH losses that will help at tax time and are valued much more than the 2-3% NAV move we are talking about, so it was still good to do this, just not as 100% optimal as if I had swapped into a true TLH twin so I wasn't exposed to the NAV move.....

[Kookaburra]

Maybe it’s just me, but … if you sell a security at a loss and move the proceeds into a cash position indefinitely, this isn’t tax loss harvesting as much as it is locking in a loss.

[Hogan773]

Maybe it’s just me, but … if you sell a security at a loss and move the proceeds into a cash position indefinitely, this isn’t tax loss harvesting as much as it is locking in a loss.

For me at least it wasn't "indefinitely" it was supposed to be 31 days.....but yes I take your point, if you don't swap to a TLH twin sister then you are locking in a loss at that point and may or may not be able to buy back at the same or better price later

[jebmke]

Maybe it’s just me, but … if you sell a security at a loss and move the proceeds into a cash position indefinitely, this isn’t tax loss harvesting as much as it is locking in a loss.

For me at least it wasn't "indefinitely" it was supposed to be 31 days.....but yes I take your point, if you don't swap to a TLH twin sister then you are locking in a loss at that point and may or may not be able to buy back at the same or better price later

That's why I only swap to something I am willing to keep forever. My equity is all dated 3/16/2009 and it will stay that way until I croak.

[Random Poster]

What degree of tax-free is VMFXX? A recent Allan Roth article mentions VUSXX Vanguard Treasury Money Market Fund as being Fed and State Tax-free. I can't see where this can be verified anywhere.

Treasuries are not federal tax free...only state tax free. So VUSXX would be mostly state tax free...they don't guarantee it is 100% state tax free, as they are able to invest in repurchase agreements per their fund summary, but I believe it is usually pretty close to 100%.

Indeed. See below.

What degree of tax-free is VMFXX? A recent Allan Roth article mentions VUSXX Vanguard Treasury Money Market Fund as being Fed and State Tax-free. I can't see where this can be verified anywhere.

Neither is federally tax free.

VUSXX "Treasury MMF" is state tax free. VMFXX "Federal MMF" is state tax free for the proportion of dividends attributable to Treasurys and the like, except for those states that require certain thresholds for tax exemption (because VMFXX didn't meet them last year; that fact could change annually). See Vanguard's tax year 2022 update on the subject.

VUSXX may not be completely state tax free anymore (or at least for February).

See this post: viewtopic.php?p=7105903#p7105903

Received from Vanguard January 2023.
Vanguard Treas. MM Fund (VUSXX) invests a portion of its portfolio in Federal Reserve repo agreements. - - - - Based on current market conditions,
you should expect a portion of the fund's 2023 income to come from Fed Repo. Income generated by investing in Fed Repo is generally taxable at both the state and local levels. ------ You do not need to take any action. Vanguard will generally provide the percentage of the fund's ordinary dividends attributable to direct U.S. govt. obligations (which does not include Fed Repo) along with your IRS Form 1099-Div and will also make that information available on vanguard.com. ----- Please consult with a tax professional etc. ------ The previous communication from Vanguard seems to negate the general understanding that VUSXX income is not subject to state taxation?

How did you receive the above communication?

Vanguard’s own information says that VUSXX is composed of 6.5% government obligations and 93.5% treasury bills. No repo agreements are mentioned, at least for what I can see.

The VUSXX page says 23% of the portfolio is repos and 4.3% is govt obligations? So I also don't think all of it is free from state taxation? Can someone confirm?

This Vanguard doc for 2022 tax information seems to say that 100% of the dividend income was from US govt obligations, so I guess for 2022 it should all be tax exempt, but maybe not going forward?

[UpperNwGuy]

so, you're market timing. Let us know how it works out.

Hmm. Is interest rate watching the same as market timing? When you're living on interest and dividends, I dont see how you can ignore them.

Yes, it is market timing.

[bmcgin]

More often than not, buying or selling goes in the wrong direction initially. (At least, that's how it seems to me.)

VWIUX is up 2.24% YTD--that's not a lot. There are 224 days left in the year. What is the probability it will dip below 13.36 this year? And if that happened, would you buy it? There's a high probability that January is not the bottom of this year's market, and there will be another chance to enter the position if you want. That's just speculation based on the mess that we find things today.

You also mentioned that you'd like more dividends than VWIUX delivers. That's 100% reasonable. I am not retired and can't speak from experience. I plan to morph into a dividend-centered portfolio. My ideal plan is to put everything in fixed and not care if it loses to inflation. As I m not a rockstar, that's probably not going to happen. The next best thing for my personality is to go the dividend route.

Anyway, just a few thoughts. Sorry that that trade went the wrong way.

[paul e]

Maybe it’s just me, but … if you sell a security at a loss and move the proceeds into a cash position indefinitely, this isn’t tax loss harvesting as much as it is locking in a loss.

Very good point. The key word there is 'indefinitely', something I definitely dont intend to do. Im just parking it there till the inflation/fed reaction becomes a little clearer. One option is to buy back in to the national muni and with a little luck it will be lower than it is now; kind of like a longer term TLH completion; another would be T-Bills for more income.

[paul e]

More often than not, buying or selling goes in the wrong direction initially. (At least, that's how it seems to me.)

VWIUX is up 2.24% YTD--that's not a lot. There are 224 days left in the year. What is the probability it will dip below 13.36 this year? And if that happened, would you buy it? There's a high probability that January is not the bottom of this year's market, and there will be another chance to enter the position if you want. That's just speculation based on the mess that we find things today.

You also mentioned that you'd like more dividends than VWIUX delivers. That's 100% reasonable. I am not retired and can't speak from experience. I plan to morph into a dividend-centered portfolio. My ideal plan is to put everything in fixed and not care if it loses to inflation. As I m not a rockstar, that's probably not going to happen. The next best thing for my personality is to go the dividend route.

Anyway, just a few thoughts. Sorry that that trade went the wrong way.

Yeah, it certainly didnt quite work out the way I had planned. Serves me right for abandoning basic Boglehead principles.

[bmcgin]

Yeah, it certainly didnt quite work out the way I had planned. Serves me right for abandoning basic Boglehead principles.

It could have gone worse. I tax harvested $30k of an oil ETF and went right into a different oil ETF only to find it dropping just the same. Since then I was able to come back to profit by day/swing trading it.

[Caleb4387]

Cap one is offering a 5% cd now.

[Hogan773]

More often than not, buying or selling goes in the wrong direction initially. (At least, that's how it seems to me.)

VWIUX is up 2.24% YTD--that's not a lot. There are 224 days left in the year. What is the probability it will dip below 13.36 this year? And if that happened, would you buy it? There's a high probability that January is not the bottom of this year's market, and there will be another chance to enter the position if you want. That's just speculation based on the mess that we find things today.

You also mentioned that you'd like more dividends than VWIUX delivers. That's 100% reasonable. I am not retired and can't speak from experience. I plan to morph into a dividend-centered portfolio. My ideal plan is to put everything in fixed and not care if it loses to inflation. As I m not a rockstar, that's probably not going to happen. The next best thing for my personality is to go the dividend route.

Anyway, just a few thoughts. Sorry that that trade went the wrong way.

Yeah, it certainly didnt quite work out the way I had planned. Serves me right for abandoning basic Boglehead principles.

Hey I'm not beating myself up too much either. Live and learn and at least in my case, I have a LOT of tax losses that will prove very useful in tax time for shielding taxes on capital gains distributions etc. That is real money. So WORST CASE if my dollar cost averaging back in ends up meaning didn't get off scott free on the NAVs and I ended up truly buying back at 2% higher NAV on average, oh well, the tax losses I harvested will have more than made up for it. It's not like I exposed myself to a 20% loss on equities in those 31 days or something where I ended up losing way more money than the tax loss benefit. I'm sure similar situation for you.

[paul e]

More often than not, buying or selling goes in the wrong direction initially. (At least, that's how it seems to me.)

VWIUX is up 2.24% YTD--that's not a lot. There are 224 days left in the year. What is the probability it will dip below 13.36 this year? And if that happened, would you buy it? There's a high probability that January is not the bottom of this year's market, and there will be another chance to enter the position if you want. That's just speculation based on the mess that we find things today.

You also mentioned that you'd like more dividends than VWIUX delivers. That's 100% reasonable. I am not retired and can't speak from experience. I plan to morph into a dividend-centered portfolio. My ideal plan is to put everything in fixed and not care if it loses to inflation. As I m not a rockstar, that's probably not going to happen. The next best thing for my personality is to go the dividend route.

Anyway, just a few thoughts. Sorry that that trade went the wrong way.

Yeah, it certainly didnt quite work out the way I had planned. Serves me right for abandoning basic Boglehead principles.

Hey I'm not beating myself up too much either. Live and learn and at least in my case, I have a LOT of tax losses that will prove very useful in tax time for shielding taxes on capital gains distributions etc. That is real money. So WORST CASE if my dollar cost averaging back in ends up meaning didn't get off scott free on the NAVs and I ended up truly buying back at 2% higher NAV on average, oh well, the tax losses I harvested will have more than made up for it. It's not like I exposed myself to a 20% loss on equities in those 31 days or something where I ended up losing way more money than the tax loss benefit. I'm sure similar situation for you.

It is. Im curious what percentage of the TLH amount are you dollar cost averaging back into VWIUX and at what interval(s). Im thinking of following a similar plan..

[aristotelian]

Maybe it’s just me, but … if you sell a security at a loss and move the proceeds into a cash position indefinitely, this isn’t tax loss harvesting as much as it is locking in a loss.

Very good point. The key word there is 'indefinitely', something I definitely dont intend to do. Im just parking it there till the inflation/fed reaction becomes a little clearer. One option is to buy back in to the national muni and with a little luck it will be lower than it is now; kind of like a longer term TLH completion; another would be T-Bills for more income.

You don't have a definite plan to buy back in. Sounds to me like you have locked in a loss and moved into cash indefinitely. Y

You are waiting for the Fed plan to "become clearer" but there is always risk of rates rising due to unexpected events. Remember, it seemed "clear" to everyone in 2020 that we were entering a new world of negative interest rates. The conventional wisdom was right for a time until it wasn't.

Cash seems the intuitive place to go when the yield curve is inverted but the market believes that the Fed will reverse course and begin lower rates soon. If the Fed goes according to plan, long term rates should be what they are now, but if they reverse course harder or faster than expected, you will have missed out on the current price and opportunity to lock in higher yields. Of course, there is also the risk that you are afraid of, that rates will continue to rise longer than the market thinks. If you cannot tolerate that risk, you should stay in cash forever (but should never have been in bonds in the first place).

[muffins14]

so, you're market timing. Let us know how it works out.

Hmm. Is interest rate watching the same as market timing? When you're living on interest and dividends, I dont see how you can ignore them.

not the watching, the switching. IMO market timing is moving in and out of investments based on some theory that one knows what future returns will be.

You understand that the switching out of VWIUX was to effect some tax loss harvesting, right? Im generally a total buy and hold investor, except for some very occasional TLH .

But you didn’t TLH. you “sold low”, are holding cash, and are considering “buying high” when the yield on VWIUX is favorable from your perspective. TLH would have been to buy another fund of similar duration.

Bond prices have been going up for the last 90 days, so you’ve already missed out on price appreciation over that time.

Note that just because money markets are yielding a lot right now, that doesn’t mean it will be the case in 3 months or 6 months or 5 years. The nice thing about bonds is that they provide fixed coupon payments. So if yields go from 4% to 1% on a money market, your bond fund may have been paying a steady 2.5% the entire time, as an example. Sometimes having a stable $2500 for 10 years is preferred to having $3000 for 2 years, and $2000 for years 3-4, and $1500 for years 5-10

In other words, what you may be gaining in interest payments this year, you may be sacrificing in future income if things don’t work out the way you’re planning

[paul e]

Maybe it’s just me, but … if you sell a security at a loss and move the proceeds into a cash position indefinitely, this isn’t tax loss harvesting as much as it is locking in a loss.

Very good point. The key word there is 'indefinitely', something I definitely dont intend to do. Im just parking it there till the inflation/fed reaction becomes a little clearer. One option is to buy back in to the national muni and with a little luck it will be lower than it is now; kind of like a longer term TLH completion; another would be T-Bills for more income.

You don't have a definite plan to buy back in. Sounds to me like you have locked in a loss and moved into cash indefinitely. Y

You are waiting for the Fed plan to "become clearer" but there is always risk of rates rising due to unexpected events. Remember, it seemed "clear" to everyone in 2020 that we were entering a new world of negative interest rates. The conventional wisdom was right for a time until it wasn't.

Cash seems the intuitive place to go when the yield curve is inverted but the market believes that the Fed will reverse course and begin lower rates soon. If the Fed goes according to plan, long term rates should be what they are now, but if they reverse course harder or faster than expected, you will have missed out on the current price and opportunity to lock in higher yields. Of course, there is also the risk that you are afraid of, that rates will continue to rise longer than the market thinks. If you cannot tolerate that risk, you should stay in cash forever (but should never have been in bonds in the first place).

I was 'in bonds' as part of my asset allocation strategy mostly in Munis because of their tax treatment (I have VBTLX in my ira).. For the purpose of limiting the inherent volatility of my large stock holding, cash will work at least as well as bonds especially given their loose correlation lately, , and these days, yields of the former make it preferable. In terms of growth potential, the VWIUX I had over the long haul, had none.(its up 1.86% over the last 20 years!). So Im favoring cash at the moment .. Yes I locked in a loss but if rates continue, that will be more than made up shortly.. And, if not, the muni fund price may approach that which I sold it at.

[paul e]

delete

[aristotelian]

I was 'in bonds' as part of my asset allocation strategy mostly in Munis because of their tax treatment (I have VBTLX in my ira).. For the purpose of limiting the inherent volatility of my large stock holding, cash will work at least as well as bonds especially given their loose correlation lately, , and these days, yields of the former make it preferable. In terms of growth potential, the VWIUX I had over the long haul, had none.(its up 1.86% over the last 20 years!). So Im favoring cash at the moment .. Yes I locked in a loss but if rates continue, that will be more than made up shortly.. And, if not, the muni fund price may approach that which I sold it at.

Yes, cash and bonds are both part of fixed income but they are different. If you view them as interchangeable, so be it, but most here view them as different and do not advise attempting to time the market moving back and forth between them. You seem to have already made up your mind so I don't understand why you bothered to ask the question. Regardless, you should undertand you have locked in a loss, you are trying to time the market, and you are risking further underperformance the longer you go on with a market timing strategy.

The last sentence makes no sense. If rates fall, the muni fund price will rise. I'm not sure why you would view that as a good thing.

My biggest concern is not the difference between cash and muni bonds but rather the precedent being set by a series of irrational behaviors. (For example, if you think market situations can be "clarified," why would you also stay invested in stocks during a time of rising interest rates and projected recession?).

[paul e]

I was 'in bonds' as part of my asset allocation strategy mostly in Munis because of their tax treatment (I have VBTLX in my ira).. For the purpose of limiting the inherent volatility of my large stock holding, cash will work at least as well as bonds especially given their loose correlation lately, , and these days, yields of the former make it preferable. In terms of growth potential, the VWIUX I had over the long haul, had none.(its up 1.86% over the last 20 years!). So Im favoring cash at the moment .. Yes I locked in a loss but if rates continue, that will be more than made up shortly.. And, if not, the muni fund price may approach that which I sold it at.

Yes, cash and bonds are both part of fixed income but they are different. If you view them as interchangeable, so be it, but most here view them as different and do not advise attempting to time the market moving back and forth between them. You seem to have already made up your mind so I don't understand why you bothered to ask the question. Regardless, you should undertand you have locked in a loss, you are trying to time the market, and you are risking further underperformance the longer you go on with a market timing strategy.

The last sentence makes no sense. If rates fall, the muni fund price will rise. I'm not sure why you would view that as a good thing.

My biggest concern is not the difference between cash and muni bonds but rather the precedent being set by a series of irrational behaviors. (For example, if you think market situations can be "clarified," why would you also stay invested in stocks during a time of rising interest rates and projected recession?).

Yes,youd think so. But VWIUX hasnt exactly behaved that way lately. Both the Yield AND the NAV have come down over the last several days. I presume that will change. So what are you suggesting at this point? Should I ignore the high rate Im getting on cash and plow back into the Muni? Should I dollar cost average out of cash into the Muni? Should I do something else? I cant correct what Ive already done, but at this point Im just trying to decide where is the best place to park that $1m. Can you help with that? I dont need to keep hearing I locked in a loss. Whats done is done.. lets move forward.

[aristotelian]

Yes,youd think so. But VWIUX hasnt exactly behaved that way lately. Both the Yield AND the NAV have come down over the last several days. I presume that will change. So what are you suggesting at this point? Should I ignore the high rate Im getting on cash and plow back into the Muni? Should I dollar cost average out of cash into the Muni? Should I do something else? I cant correct what Ive already done, but at this point Im just trying to decide where is the best place to park that $1m. Can you help with that? I dont need to keep hearing I locked in a loss. Whats done is done.. lets move forward.

OK, that is progress. Moving forward, yes, you should ignore market rates and trying to exploit an inefficiency in the yield curve, "clarity", the Fed etc. You should figure out a long term plan that you can stick with it. I can't really say what that is. Cash is fine (lower risk, lower expected return), so are bond funds as well as individual bonds. Generally, a good guideline is that you should pick a fund or bond with a duration appropriate to the time when you might need the funds. It sounds like you do not have the risk tolerance to stay in a bond fund with the volatility of VWIUX so perhaps you should stay in cash.

If you decide to move forward with a bond fund, "dollar cost averaging" when you have a lump sum to invest could be seen as a form of market timing if you are doing so on the assumption that the present is more risky than the future, etc. But if DCA would better enable you to stick with a long term plan I would say it is fairly harmless. However, that brings me back to your risk tolerance. The fact that you are asking about DCA tells me you really don't want to see a lump sum investment in a bond fund go down, so that tells me again that you may be better off simply staying in cash for the long term.

[paul e]

Yes,youd think so. But VWIUX hasnt exactly behaved that way lately. Both the Yield AND the NAV have come down over the last several days. I presume that will change. So what are you suggesting at this point? Should I ignore the high rate Im getting on cash and plow back into the Muni? Should I dollar cost average out of cash into the Muni? Should I do something else? I cant correct what Ive already done, but at this point Im just trying to decide where is the best place to park that $1m. Can you help with that? I dont need to keep hearing I locked in a loss. Whats done is done.. lets move forward.

OK, that is progress. Moving forward, yes, you should ignore market rates and trying to exploit an inefficiency in the yield curve, "clarity", the Fed etc. You should figure out a long term plan that you can stick with it. I can't really say what that is. Cash is fine (lower risk, lower expected return), so are bond funds as well as individual bonds. Generally, a good guideline is that you should pick a fund or bond with a duration appropriate to the time when you might need the funds. It sounds like you do not have the risk tolerance to stay in a bond fund with the volatility of VWIUX so perhaps you should stay in cash.

If you decide to move forward with a bond fund, "dollar cost averaging" when you have a lump sum to invest could be seen as a form of market timing if you are doing so on the assumption that the present is more risky than the future, etc. But if DCA would better enable you to stick with a long term plan I would say it is fairly harmless. However, that brings me back to your risk tolerance. The fact that you are asking about DCA tells me you really don't want to see a lump sum investment in a bond fund go down, so that tells me again that you may be better off simply staying in cash for the long term.

Ok, thank you. I guess the fact that Im 74 years old and 80% in stocks probably means Im not all that totally risk averse and have no desire to bail when we're in a bear market.. What Ive become aware of lately is that while Bonds are supposed to level the volatility of stocks with bonds going up when stocks go down, that certainly hasnt been whats happening as of last year. True bonds have not declined as much as stock, theyve certainly gone down. File under the best laid plans. But at least thats something, but they certainly havent moved in opposite directions. And at the 24% tax bracket, Im not at all sure I need to be in tax exempt holdings; I think I can probably do better in cash if its income Im looking for. At 4+% interest I'll make up that loss in NAV I locked in before too long. A few months maybe. So, if cash is the answer, Im thinking a T Bill ladder might be something to look at to potentially lock in better returns than a somewhat more ephemeral VMFXX. And as has been reported here, Cap 1 has a 5% CD now. Decisions, decisions.

[muffins14]

I’m almost certain it is expected to be better for both your portfolio value and withdrawal rate stability to have a portfolio like 80/20 stocks/bonds than 80/20 stocks/cash

i still you’re over-optimizing for the next 3-6 months vs thinking about the next 10-15 years.

Do you rebalance between stocks and bonds in your portfolio? If so, why? If not, why not?

What do you do with your dividend income from stocks?
How do you generate money for your living expenses? Do you live purely off bond coupons and dividends, or do you sell shares as needed?

[paul e]

I’m almost certain it is expected to be better for both your portfolio value and withdrawal rate stability to have a portfolio like 80/20 stocks/bonds than 80/20 stocks/cash

i still you’re over-optimizing for the next 3-6 months vs thinking about the next 10-15 years.

Do you rebalance between stocks and bonds in your portfolio? If so, why? If not, why not?

What do you do with your dividend income from stocks?
How do you generate money for your living expenses? Do you live purely off bond coupons and dividends, or do you sell shares as needed?

My living expenses are well covered by my dividend and interest income, plus 2 small-ish pensions and SS. Havent sold any shares except as needed in IRA for RMD. Ive stayed the course with asset allocation without rebalancing, and have done very well maintaining an asset allocation between 70 and 80% stocks .

[MrJedi]

This is just interest rate market timing if this is not short term money. Which is fine, but you just need to understand what you're getting into. It implies that you believe the yield curve will stay inverted for a longer term.

[muffins14]

I’m almost certain it is expected to be better for both your portfolio value and withdrawal rate stability to have a portfolio like 80/20 stocks/bonds than 80/20 stocks/cash

i still you’re over-optimizing for the next 3-6 months vs thinking about the next 10-15 years.

Do you rebalance between stocks and bonds in your portfolio? If so, why? If not, why not?

What do you do with your dividend income from stocks?
How do you generate money for your living expenses? Do you live purely off bond coupons and dividends, or do you sell shares as needed?

My living expenses are well covered by my dividend and interest income, plus 2 small-ish pensions and SS. Havent sold any shares except as needed in IRA for RMD. Ive stayed the course with asset allocation without rebalancing, and have done very well maintaining an asset allocation between 70 and 80% stocks .

I think if your expenses are "very well covered" by dividend and interest income, then you probably do not need to sell much of your portfolio, perhaps ever. It is likely better for you long-term to just keep your 80/20 stock/bond portfolio rather than selling low and buying high, or trying to play games for short-term yield. Yes you locked in a loss, yes your interest payments will make up for it eventually, but by the same token *not selling anything*, your interest payments would have indeed also eventually made up for the short-term price decrease of your bond fund. (whose price doesn't matter to you anyway, because you are not selling investments regularly for spending)

This is a good example where the advice of "don't just do something, stand there" applies

edited to add: There is still the chance of a deflation recession too. Bonds will increase in price then whereas money-market funds will not. So, do the degree an upcoming recession is inflationary (seems unlikely, since we just had one), you are hedging against that by holding cash. To the degree that an upcoming recession is deflationary (seems more likely, since rates are projected to go down and inflation is falling), you are exposing yourself to more risk that you could have mitigated by keeping nominal bonds.

[Hogan773]

Well in any case we are getting a nice little increase in interest rates as Powell sounds hawkish so that is helping deflate the NAV on the two bond funds that I am dollar cost averaging into.

[HENRYGRUGER]

What degree of tax-free is VMFXX? A recent Allan Roth article mentions VUSXX Vanguard Treasury Money Market Fund as being Fed and State Tax-free. I can't see where this can be verified anywhere.

I cut and pasted this from the VUSXX Prospectus...

"Tax Information

The Fund’s distributions may be taxable as ordinary income or capital gain. If you are investing through a tax-advantaged account, such as an IRA or an employer-sponsored retirement or savings plan, special tax rules apply."