October 1, 2018: Taxable vs. Tax Exempt High Yield Bonds
by MyPlanIQ | Oct 2, 2018 | Asset-Allocation, Bonds, Economy, Feature, Gold, Headline, Income, Inv, Investments, IRA, Markets, Mutual-Funds, newsletter, Portfolios, Retirement
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As a reminder to expert users: advanced portfolios are still re-balanced based on their original re-balance schedules and they are not the same as those used in Strategic and Tactical Asset Allocation (SAA and TAA) portfolios of a plan.
Please note that we now list the next re-balance date on every portfolio page.
Taxable vs. Tax Exempt High Yield Bonds
We continue our discussion on high yield bonds from last week’s newsletter. We are particularly interested in comparing taxable high yield bonds with tax exempt high yield bonds. First, let’s take a look at the recent returns.
Tax exempt high yield bonds are performing well
Taxable high yield vs. tax exempt high yield bond funds (as of 10/1/2018):
* Taxable Equivalent Yield is based on the highest federal tax bracket (35%)
It stands out that tax exempt bond funds (especially Nuveen fund NHMAX) have had a comparable or even better return than taxable fund VWEHX, even before tax consideration. For example, for the last 5 years, NHMAX returned 7.9% annually compared with VWEHX’s 5.1%.