Tax Free Municipal Bond Investments Review
We introduced our tax free municipal bond portfolios in April last year April 25, 2016: Tax Free Municipal Bond Funds & Portfolios. In this newsletter, we will review and discuss these investments.
First, let’s briefly recap the benefits of municipal bond investments. The following is the synopsis of the benefits.
- Tax free municipal bonds enjoy federal tax free for their interests or dividends. For state sponsored municipal bonds, they also enjoy tax free for the state that issues these bonds. Thus, they are attractive to high tax bracket investors.
- Most tax free municipal bond investors are high tax bracket individual investors, making these investment free from professional or institutional traders. Thus they are often more stable and exhibit more stable price trend. This property makes the trend based tactical investment strategy suitable.
- However, before the tax free consideration, these bonds sometimes can have very comparable or even higher interests. Thus, sometimes, these bonds can be even useful for taxable accounts. So these investments shouldn’t be easily discarded completely by tax unconscious investors.
2016 Municipal Bond Portfolio Performance
First, let’s look at the municipal bond segment performance:
|Ticker/Portfolio Name||2016||1Yr AR||3Yr AR||5Yr AR||10Yr AR|
|VWSUX (Vanguard Short-Term Tx-Ex Adm)||0.4%||0.4%||0.6%||0.7%||1.7%|
|VWIUX (Vanguard Interm-Term Tx-Ex Adm)||0.0%||-0.9%||3.0%||2.6%||4.0%|
|VWLUX (Vanguard Long-Term Tax-Exempt Adm)||0.1%||-0.6%||4.4%||3.6%||4.4%|
|VWAHX (Vanguard High-Yield Tax-Exempt)||0.5%||-0.3%||4.6%||3.9%||4.5%|
|VBMFX (Vanguard Total Bond Market Index Inv)||2.3%||1.0%||2.2%||1.9%||4.2%|
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