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QVM Group's Comments Stream Stats
- 238 Comments, 17
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Bond ETF Yields in Historical Context
Your Question:
"Does the National Muni Bond ETF have the same tax advantages as a traditional Muni? "
Response:
Yes and No.
MUB is a national muni fund, with bonds from more than one state. Those bonds not from your state are not exempt ffrom state taxes for you, so only a portion, if any, of the interest is state income tax-free for you.
The iShares MUB Fact Sheet says the fund is, or tries to be, AMT free; meaning that none of the interest is expected to be subject to the federal Alternate Minimum Tax.
If you buy a single muni bond from your state, it will be state income tax free (unless there are states that don't play that way, of which I am not aware) and federal income tax free (unless the bond was for private purposes, in which case it would be subject to the federal Alternate Minimum Tax).
Capital gains on disposal or maturity of the bond is another matter outside of the issue of tax-free interest.
That is the big picture as we understand it, but we are not tax advisors, and you should not rely on this comment for tax planning or filing purposes. This comment is not intended as "tax advice" and should not be used as such.
If your information need goes beyond curiosity, you must consult your personal tax advisor for clarity, completeness and guidance before taking any investment or tax filing action.
Richard Shaw
Relative Performance of Asset Categories
Bye-Bye Dividends
The stock price would suffer, because (1) we are psychological machines, not computing machines -- fear and doubt would rise, and (2) those who bought because the need/want the cash flow would rotate out and it is not clear that others would necessarily rotate in.
Your argument is about the math equivalency of two states, which even if scientifically true, is not the way individuals and crowds think behave.
If the government said "no more dividends for bank stocks" for a while, their natural constituency for buying shares would diminish, and concern about what the government would do next would cause a level of uncertainty that is never good for prices.
Bye-Bye Dividends
I see some problems with your IRA suggestion. Since dividends have been taxed preferentially in the past few years, it would have increased the taxes to the maximum by putting dividends into an IRA, because all money coming out above cost basis is ordinary income.
For investors who have assets outside of their IRA, they need to do something with them and dividends may have been most consistent with their needs and goals.
Also some investors have far more outside of the IRA than inside. For example, if a person sold a business for millions and had hundreds of thousands in their IRA or other tax deferred vehicle, there would be no way to confine dividends to the IRA.
It may be that dividends will be taxed at ordinary rates in the future, in which case the IRA argument becomes more suitable. However, because of capital gains potential with common stocks, securities with the least cap gains and most ordinary income should go into the IRA first -- such as bonds.
Muni Bonds: Constructive in Current Portfolio Asset Allocation
There is nothing wrong with buying individual bonds, if you have sufficient capital to buy at size for low spreads, and diversely to minimize issue selection risk, and if you have the time and inclination.
It's virtually impossible to beat the risk reduction of a large bond fund on an individual basis. The Vanguard intermediate muni fund has about $20 billion in it and has over 1600 issues and charges only 8 basis points fee.
But, if you want to buy your own bonds that is a perfectly appropriate and feasible approach.
There is nothing in the article that would suggest you should not buy individual bonds. It is an article about funds, not an article about funds versus individual securities.
I would imagine that for the vast majority of readers, funds are the preferred route, but we have clients who own individual bonds too.
Muni Bonds: Constructive in Current Portfolio Asset Allocation
Thanks to all for the kind words.
I prefer funds over individual bonds to diversify issue selection risk. I prefer national funds over state specific funds is to diversify state specific risk. I would gravitate to concentration on general obligation bonds versus revenue bonds to minimize credit risk, and to concentrate what credit risk is assumed to sovereign risk backed by taxing power.
I agree that CA is a more problematic state than many others.
Key Asset Class Returns of the Week
Some Advice from Warren Buffet for Difficult Times
You may be right, but it is important to differentiate between holding forever, regardless of the facts, and holding steady during a storm with companies that continue to earn your confidence in general. That is perhaps the more important message. The fear reaction is so strong that investors tend to dump at the worst time and then fail to reopen positions they like until much of the loss they took has been recouped by the market, but not by the investor.
Some Advice from Warren Buffet for Difficult Times
Your request is a pretty tall order. I use so many sources that I actually have to keep a spreadsheet list of them so I don't forget them. I'd suggest you do the same, because it is sometimes difficult to find some sources a second time weeks, months or a year later when you need them.
Some in the international category you mentioned that are most frequently useful are:
MSCI BARRA,
S&P CITIGROUP GLOBAL INDICES
UNITED NATION,
OECD (Organization for Economic Cooperation and Development,)
CIA FACTBOOK.
There are others, but these are good "work horses".
As for the three magazines you mentioned, I personally find Barron's and the Economist more interesting than the WSJ, but all three are important to read regularly -- put Bloomberg and the Financial Times (London) in that list too.
I personally feel it is important to read the business news in other countries, such as the Kahleej Times (U.A.E.), Hindustan Times (India), China Daily (China), Nikkei Net (Japan).
A good multi-country new service (but for a subscription of $40/mo) is EINnews
Then when you find an article that intrigues you, Google the names of the people or the names of the institutions, companies or ideas and follow the trail around the web to fill out the news which comes from unpredictable places.
This is not a comprehensive answer, but it should give you a good start on your information quest.
All the best to you.
Richard
Some Advice from Warren Buffet for Difficult Times
what is the relevance of your comments to the dialog? perhaps some expansion of your thoughts would help
Major Asset Class 1, 3, 5, 10 & 15 Year Returns
No I have not studied separate commodities in this way yet, but I will put that sub-category study into my list of future studies. Some will be easier than others to gather information. HIstory for majors like gold and oil is easy, but minors may not be so easy to find.
Thanks.
Richard
A Closer Look at REIT-Treasury Yield Spreads (1971- Present)
you are correct that rising rates due to inflation or less of a flight to quality and liquidity in Treasuries could pose a real yield spread challenge to equity REITs
A Closer Look at REIT-Treasury Yield Spreads (1971- Present)
I prefer not to rely on secondary services for data, such as Yahoo, when the primary source is available. The primary source will generally offer more raw data elements, and perhaps for longer historical periods. I am not aware one way or the other about NAREIT data from Yahoo.
The chart that stimulated your comments combined data from the US Federal Reserve and FTSE/NAREIT, and was derived from a series of spreadsheet calculations on that data. I doubt any ready free source is available that would directly give you the spread information in that chart.
If you want to use market data going forward and for short historical periods, it might be just as effective to follow one of the REIT ETFs that are based on an index such as:
VNQ
MSCI US REIT Index
RWR and IYR
The DJ Wilshire REIT index
FTY
FTSE NAREIT Real Estate 50 Index
FRI
S&P Composite REIT index
A Closer Look at REIT-Treasury Yield Spreads (1971- Present)
you are correct that the analysis is not forward looking, although it does state that if events deteriorate so will the investment opportunity. it also does not assert to be a comprehensive analysis and specifically states that more is to follow. "failure" is a bit harsh as a judgement, although you are correct that not all factors have been given full weight. the article analyzes one dimension only and the headline indicates that. if it were meant to be a full multi-dimensional analysis, it would have said so and would have been much longer. add what it provides to your own thoughts and other important dimensions to come up with your own decision, which you appear to have done. thanks for commenting.
A Closer Look at REIT-Treasury Yield Spreads (1971- Present)
you can find the REIT data athttp://nareit.com/library/ind...