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Posted by on February 22, 2008, 5:10 pm
Some people have advised that the bond portion of one's portfolio
should be in tax-deferred or tax-free accounts such as IRAs and
401(k)'s and that stocks should be in the taxable account. Currently,
the ratio of municipal bond yields to Treasury bond yields is so high
http://www.bloomberg.com/markets/rates/ that I think it makes sense to
own municipal bonds in the taxable account and stocks in the tax-
deferred account. Comments?
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Posted by Default User on February 22, 2008, 6:05 pm
beliavsky@aol.com wrote:
> Some people have advised that the bond portion of one's portfolio
> should be in tax-deferred or tax-free accounts such as IRAs and
> 401(k)'s and that stocks should be in the taxable account. Currently,
> the ratio of municipal bond yields to Treasury bond yields is so high
> http://www.bloomberg.com/markets/rates/ that I think it makes sense to
> own municipal bonds in the taxable account and stocks in the tax-
> deferred account. Comments?
One obvious one is that you're ignoring investment-grade corporate
bonds.
Brian
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Posted by John A. Weeks III on February 22, 2008, 6:58 pm
In article
beliavsky@aol.com wrote:
> Some people have advised that the bond portion of one's portfolio
> should be in tax-deferred or tax-free accounts such as IRAs and
> 401(k)'s and that stocks should be in the taxable account.
Some people advise sticking it all in your mattress and buying
high powered weapons. That doesn't mean that it is good advice,
or that some potentially good advice applies in your situation.
I don't like to see anyone in the bottom 95% of wealth owning
bonds when they are under 80 years old. But that is just my
opinion.
-john-
--
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John A. Weeks III 612-720-2854 john@johnweeks.com
Newave Communications http://www.johnweeks.com
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Posted by Sandra Loosemore on February 22, 2008, 7:45 pm
beliavsky@aol.com writes:
> Some people have advised that the bond portion of one's portfolio
> should be in tax-deferred or tax-free accounts such as IRAs and
> 401(k)'s and that stocks should be in the taxable account. Currently,
> the ratio of municipal bond yields to Treasury bond yields is so high
> http://www.bloomberg.com/markets/rates/ that I think it makes sense to
> own municipal bonds in the taxable account and stocks in the tax-
> deferred account. Comments?
The "asset location" strategy described in this article from Forbes
that was posted here the other day doesn't mention munis, but they are
certainly one of the top candidates to hold in a taxable account.
http://www.forbes.com/forbes/2008/0225/040.html
Personally, I'm in a situation where I have about twice as much money
in my taxable account as in my Roth IRA, and about twice as much in
the Roth as in pre-tax retirement accounts. Even if I made the
pre-tax accounts 100% bonds, I'd be well short of my overall target
AA, which is now around 30-35% bonds. So the rest is munis in the
taxable account. As the Forbes article suggests, my Roth is 100%
equities, including the more tax-inefficient of the actively-managed
funds I hold. Again, taxable account gets what's left over.
-Sandra the cynic
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Posted by Avrum Lapin on February 23, 2008, 10:25 pm
In article
beliavsky@aol.com wrote:
> Some people have advised that the bond portion of one's portfolio
> should be in tax-deferred or tax-free accounts such as IRAs and
> 401(k)'s and that stocks should be in the taxable account. Currently,
> the ratio of municipal bond yields to Treasury bond yields is so high
> http://www.bloomberg.com/markets/rates/ that I think it makes sense to
> own municipal bonds in the taxable account and stocks in the tax-
> deferred account. Comments?
>
Makes a lot of sense if your Federal tax bracket is 25% or higher.
Makes even more sense if you live in a high tax state and you buy bonds
from that state.
As the muni bonds yields/ to treasury bond yield ratio moves back to its
historic levels you will also achieve a capital gain.
Having said that you need to watch what you buy (revenue bonds are not
such a good idea) and remember that the guy who insured the bond may not
survive the current credit crunch. Also muni bonds are not as liquid as
treasury (you may take a beating if you have to sell before maturity)
Muni bond funds might be a better idea.
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Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
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