There are CEFs that offer significantly more tax free yield over indexed ETFs. For comparison sake, NAD has high quality and it yields over 5%. CEFs are leveraged, but many also trade a discount below NAV which makes this yield sustainable. CEFs also have many more options for state tax fee municipal bonds. In addition, the Fed has signaled lower rates in the near future and CEF leverage will magnify the NAV appreciation.
You can also buy state focused muni funds that are both federal and state tax exempt. Nuveen has a number of these CEF's. If you live in Minnesota for example they offer NMS which has a 7%+ tax free yield.
My incredibly wealthy 92-year-old Uncle told me 40 years ago to always be a growth investor. It crushes everything else. He has always been 95% in growth stocks and 5% in cash. Never owned any bonds.
I think if you can afford to be all growth, that works. If you are stretching a smaller amount in retirement that can be risky. I keep a larger amount in cash and bonds because I have several at risk investments. In this case, I'm just moving some "cash" and short term bond investments into munis.
If I recall correctly, Groucho Marx invested heavily in bonds and someone told him he couldn't make any money in bonds. His response? You can if you own a lot of them
+10 family vacation. You can't put a price on those. Higher for longer has been a blessing for the cash forward investor, but I agree the party can't last forever. I've been looking at dropping some short term treasuries and adding some tax-free muni options after climbing into the 32% bracket last year for the first time. Mercy...37% must be horrible. By the tax calculation, I'm right on the tipping point of break even muni vs. ST treasuries. More research on my part is needed. Thanks for the kick in the butt to get me motivated.
Great videoJosh...I'm in the 22% tax bracket....remember that little old formula? If a muni bond has 3.25 yield...3.25/.78=4.16....so I can get 5.35 on intermediate term corporate bond etf..spib....should I bother with munis? Thanks
Taxable bond yields are considered income, so this additional income can eliminate tax credits that you might otherwise qualify for, in addition to pushing you into a higher bracket. Moreover, municipal bonds issued in your state will give you state tax free income. Another consideration with corporate bonds is that they fail much more frequently compared to municipal bonds. Municipal general obligation (GO) bonds are the highest quality and nearly as safe as T Bills. Congress can and always has bailed out municipalities, but it rarely bails out companies after bankruptcy.
MQY is tax free yield of 5.1%... GBAB is a taxable muni with yield of 9% , anyone in a tax bracket like yours might look into a MYGA.. a cd type of investment from insurance companies that pay tax deferred interest.. Canvas annuity direct buy has a 6.55% on a 7 year MYGA.. this works out nice if you are going to retire in a lower bracket in 7 years or less.. or just roll over the Myga into another one in 7 years and continue to defer the tax on the interest.
Hey Dave, I currently hold my cash in a money market fund to earn interest as I wait for opportunities to deploy cash during a dip to buy equities where I can sell my money market position pretty easily/highly liquid. Probably a dumb question but given the Fed likely cutting rates maybe this year and interest rates going down in my money market fund, I'm guessing a tax-free muni etf wouldn't play the same role as a money market fund in the scenario above, would it? The interest earned on the muni etf is tax free but any capital gains is taxable (short or long-term)?
I have a fair amount of BKN (Blackrock Muni Fund w leverage) pays 5.7% which for me is >9% tax effective yield. I think >75% chance 10-30yr Yields drop by 50-100 bp over next 6-12 months so this fund should rise 10-20% for capital appreciation on top of good yield, Any thoughts on BKN?
Just an aside but those particular businesses you mentioned, Disney and Delta, have also lost a lot of business in the past few years due to their involvement in political activism. That can also be a factor driving their cut in rates. They’re trying to drum up business.
Best to talk to a tax pro which I am not. My understanding is they will be fed tax free. State tax MAYBE applied depending on your state. IF you want to avoid state tax, buy direct municipal bonds from your state. Here is a breakdown for VTEB from 2023: investor.vanguard.com/content/dam/retail/publicsite/en/documents/taxes/inbst-2024.pdf
@wealthadventures I guess by saying you are doing your own TLTW, you mean you own TLT and sell calls on it. I'm owning TLTW and sell naked puts on TLT and TMF. Collect the dividend and the premium. I won't let the puts hit. As with AGGH, I own it, but it's not moving up, and the dividend is about 8%. I'm looking to move it to QQQI, if we get some more correction on NASDAQ. What do you think?
Likely as an alternative to cash. If the fed starts to cut rates, cash in money market accounts will start paying less. Bond ETFs with duration exposure will go up in value. The opposite of what happened over the last several years while interest rates climbed.
There are CEFs that offer significantly more tax free yield over indexed ETFs. For comparison sake, NAD has high quality and it yields over 5%. CEFs are leveraged, but many also trade a discount below NAV which makes this yield sustainable. CEFs also have many more options for state tax fee municipal bonds. In addition, the Fed has signaled lower rates in the near future and CEF leverage will magnify the NAV appreciation.
You can also buy state focused muni funds that are both federal and state tax exempt. Nuveen has a number of these CEF's. If you live in Minnesota for example they offer NMS which has a 7%+ tax free yield.
Thanks for sharing those moments!
Ready to go back!
Welcome back. Missed your videos. Great video as usual. Thank you.
My incredibly wealthy 92-year-old Uncle told me 40 years ago to always be a growth investor. It crushes everything else. He has always been 95% in growth stocks and 5% in cash. Never owned any bonds.
I think if you can afford to be all growth, that works. If you are stretching a smaller amount in retirement that can be risky. I keep a larger amount in cash and bonds because I have several at risk investments. In this case, I'm just moving some "cash" and short term bond investments into munis.
If I recall correctly, Groucho Marx invested heavily in bonds and someone told him he couldn't make any money in bonds. His response? You can if you own a lot of them
Congratulations on achieving the 37% tax bracket Dave! Well done.
explains the $12k vacation without flinching.
Touche!
Hi Dave, Long time, no see! Good video. Thanks
Welcome back!
+10 family vacation. You can't put a price on those. Higher for longer has been a blessing for the cash forward investor, but I agree the party can't last forever. I've been looking at dropping some short term treasuries and adding some tax-free muni options after climbing into the 32% bracket last year for the first time. Mercy...37% must be horrible. By the tax calculation, I'm right on the tipping point of break even muni vs. ST treasuries. More research on my part is needed. Thanks for the kick in the butt to get me motivated.
Thanks Bruce! I like to go shopping for state muni's in Ohio as well. Sometimes those can offer better returns and they are state tax free for me.
Great videoJosh...I'm in the 22% tax bracket....remember that little old formula? If a muni bond has 3.25 yield...3.25/.78=4.16....so I can get 5.35 on intermediate term corporate bond etf..spib....should I bother with munis? Thanks
Taxable bond yields are considered income, so this additional income can eliminate tax credits that you might otherwise qualify for, in addition to pushing you into a higher bracket. Moreover, municipal bonds issued in your state will give you state tax free income. Another consideration with corporate bonds is that they fail much more frequently compared to municipal bonds. Municipal general obligation (GO) bonds are the highest quality and nearly as safe as T Bills. Congress can and always has bailed out municipalities, but it rarely bails out companies after bankruptcy.
Look into muni bond CEFs that use leverage, like VMO or some Black rock products
MQY is tax free yield of 5.1%... GBAB is a taxable muni with yield of 9% , anyone in a tax bracket like yours might look into a MYGA.. a cd type of investment from insurance companies that pay tax deferred interest.. Canvas annuity direct buy has a 6.55% on a 7 year MYGA.. this works out nice if you are going to retire in a lower bracket in 7 years or less.. or just roll over the Myga into another one in 7 years and continue to defer the tax on the interest.
Thanks! Will check these out. Appreciate the good info.
I was hoping to hear more about Sedona! But the bonds help too.
Ha! Sedona was great. Will be going back in the future.
@@wealthadventures I'd love to see a vid on your trip! Thanks for the info!
Hey Dave, I currently hold my cash in a money market fund to earn interest as I wait for opportunities to deploy cash during a dip to buy equities where I can sell my money market position pretty easily/highly liquid. Probably a dumb question but given the Fed likely cutting rates maybe this year and interest rates going down in my money market fund, I'm guessing a tax-free muni etf wouldn't play the same role as a money market fund in the scenario above, would it? The interest earned on the muni etf is tax free but any capital gains is taxable (short or long-term)?
Correct. Gains in the ETF could be taxed and rate would be based on if you hold it over 1 year.
@@wealthadventures The gains would only be taxed if you sell? i believe that is true.
@@openfor45 Yes. Tax free federal monthly distributions. If you sell the ETF, gains would be taxed.
I have a fair amount of BKN (Blackrock Muni Fund w leverage) pays 5.7% which for me is >9% tax effective yield. I think >75% chance 10-30yr Yields drop by 50-100 bp over next 6-12 months so this fund should rise 10-20% for capital appreciation on top of good yield, Any thoughts on BKN?
Not familiar with it but will take a look.
Just an aside but those particular businesses you mentioned, Disney and Delta, have also lost a lot of business in the past few years due to their involvement in political activism. That can also be a factor driving their cut in rates. They’re trying to drum up business.
That could be true. I'm also seeing empty seats on other airlines. We will see what Mr. Powell says today!
IAU 15.50% ytd buy on drops
How much of the $12k was gambling loses?
$300 in sleeping bags. $11700 in gambling losses...😆
Wealthfront has a new Automated Bond Ladder which sounds interesting.
EWO 7.37% Developed markets
How did you find that one?
Nice Dave, just put $350,000 at 3.6% and “save” for your next vacation 😅😂😂
Are both of these tax free from federal and state?
Best to talk to a tax pro which I am not. My understanding is they will be fed tax free. State tax MAYBE applied depending on your state. IF you want to avoid state tax, buy direct municipal bonds from your state. Here is a breakdown for VTEB from 2023:
investor.vanguard.com/content/dam/retail/publicsite/en/documents/taxes/inbst-2024.pdf
@@wealthadventures I mostly want to avoid federal tax. Thanks for responding. Thanks for the videos
How about TLTW, AGGH, and TMF?
I like doing my own TLTW. I still own AGGH.
@wealthadventures I guess by saying you are doing your own TLTW, you mean you own TLT and sell calls on it. I'm owning TLTW and sell naked puts on TLT and TMF. Collect the dividend and the premium. I won't let the puts hit.
As with AGGH, I own it, but it's not moving up, and the dividend is about 8%. I'm looking to move it to QQQI, if we get some more correction on NASDAQ. What do you think?
@@Reza16888 AGGH is part of my bond holdings so I just hold it. I have 200 shares of TLT and sell calls and puts. I think I can outperform TLTW.
Why would anyone invest in ETFs like HYE? Make a total of 3% return in 5 years after accounting for yield and capital loss!
Likely as an alternative to cash. If the fed starts to cut rates, cash in money market accounts will start paying less. Bond ETFs with duration exposure will go up in value. The opposite of what happened over the last several years while interest rates climbed.
Nobody wants to hear your affiliates and links!
Of course they do!