Avoid behavioral mistakes with Vanguard’s Tax-Managed Balanced Fund (VTMFX)

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kkmmrrpp996
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Re: Avoid behavioral mistakes with Vanguard’s Tax-Managed Balanced Fund (VTMFX)

Post by kkmmrrpp996 »

NiceUnparticularMan wrote: Sun Mar 13, 2022 6:48 am So I think you COULD use it as your only taxable fund, if munis made sense for you, and particularly if you had significant tax-protected accounts which could be used to at least partially address the lack of ex-US and its exclusive use of munis, and otherwise to approximate your asset allocation (like if VTMFX had too much or too little stock for you, you could offset that in tax-protected).

And personally, I am planning to use it in combination with some other ETFs I have in taxable with large gains, such that the combination will at least start pretty close to my preferred allocation.

Now if I then spent a lot of time monitoring and rebalancing and such as a result of those ETFs being included in the plan, it would severely undermine the behavioral benefits.

But my plan is I will just not rebalance! Well, outside of what VTMFX does itself, and possibly to the extent I am ever adding money or reinvesting income.

Should be interesting to see how that goes.

You are not alone. I’m doing the same thing with vtmfx and adding vxus in a taxable account. Essentially making it approximately a 60/40 AA.
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sf_tech_saver
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Re: Avoid behavioral mistakes with Vanguard’s Tax-Managed Balanced Fund (VTMFX)

Post by sf_tech_saver »

I currently treat this as my 'bond' fund, as I learned I didn't want to think about rebalancing actively, and I was always tempted to when markets were down (sell bonds to buy stocks). I'm great at never selling stocks (buy, never sell, live off dividends is my mindset) -- but because I love equities SO much, I was always tempted to swap my municipal bonds for stocks.

So now I switched to treating VTMFX as my 'bond' fund, which has been much better for my equities-craving personality. As needed, I buy more VTMFX to get me back to my target AA (90/10).

I'm in a 53% marginal tax bracket in CA so I can justify the munis. I buy/sell it ONLY in my Vanguard account though as otherwise the transaction fees are brutal.

I think its a great way to hold bonds, and I've found it keeps me from reaching for beyond intermediate bond duration for returns as I count on the equities blend to help boost that over the long term far more than the extra .5% duration risk boost.
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OpenMinded1
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Re: Avoid behavioral mistakes with Vanguard’s Tax-Managed Balanced Fund (VTMFX)

Post by OpenMinded1 »

BogleBuddy12 wrote: Sat Mar 12, 2022 12:24 pm I would never consider a Target Retirement fund for a taxable account.
Yes using a target retirement fund in a taxable account is usually a big mistake. Some are relatively tax efficient when a long way from the target date because they are mostly invested in stocks at that point. However, an increasing percentage is allocated to bonds as they get closer to the target date. This causes them to become a lot less tax efficient.as.time goes on. For someone that has invested a considerable amount of money and gotten a decent return over many years using the target date fund, how does that person get out of the now tax inefficient fund without incurring a huge tax bill?
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