Augustine <evandro[at]mailinator.com> writes:

- quote -

[Re: Vanguard Short-Term Tax-Exempt Fund Admiral Shares]

- quote -

8 basis points? That's astoundingly low.
Even the "investor" shares (with much lower minimums)
have only 15bp expenses.

- quote -

Yes, it is. Which, at the moment, for short-term
capital preservation (ie. cash equivalents) is about
all you can expect. Remember, the OP did *not* want
to risk the money.

- quote -

"tax exempt"

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On Mar 31, 4:07 pm, BreadWithS...[at]fractious.net wrote:
- quote -

I don't know... It's got fairly high expenses and the net return is
about the inflation rate. CD's seem to yield a better return. Or did
I miss something?

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raylopez99 <raylopez99[at]yahoo.com> writes:

- quote -

No problem. Wish I had more history handy.

Note with respect to VWSUX that up to 20% of the fund may
be invested in securities which are subject to AMT.

Aside from that consideration, it's about as good as a
short-term muni fund can be. Fantastic record, low expenses,
top notch management.

Over the same period I looked at for corporates, this one
has had only one single down quarter, and average returns
on the order of 2-4% annualized. (no time to run the numbers
the same way at the moment, sorry).

Hard to go wrong with that fund, again, aside from possible
AMT considerations.


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On Mar 31, 2:14*pm, Dave Dodson <dave_and_da...[at]juno.com> wrote:
- quote -

Oops. That was supposed to be CPI-U. Sorry.

Dave

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On Mar 31, 5:02*am, raylopez99 <raylope...[at]yahoo.com> wrote:

Thanks. I decided to recommend VWSUX--they are in the highest tax
bracket. Also thanks to breadwith for running the numbers on 3 yr
intervals.

RL

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On Mar 31, 4:02*am, raylopez99 <raylope...[at]yahoo.com> wrote:
- quote -

Preservation of capital on an after-tax, after-inflation basis is very
difficult over a three-year period in the current environment. The
February COI-U (urban) was 4% above February last year. Assuming a 25%
tax rate, you would need a return of 5.33% in a taxable investment or,
obviously, 4% in a tax-exempt muni. I'm not aware of any type of
investment vehicle that will return that much over three years without
significant risk. Some equity exposure probably would be required.
Perhaps a portfolio with 20-30% equities, 40% bonds, and 30-40% cash
has as good a shot as any at achieving it.

Dave

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raylopez99 <raylopez99[at]yahoo.com> wrote:

- quote -


Depending on his tax bracket, muni's might be interesting. Perhaps something
like VWSUX, Vanguard's Short Term Tax Exempt Fund. If he's in a state with
income taxes, he might look at state specific funds.

The short term nature will limit changes in capital and muni's are particularly
attractive right now.

-- Doug

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"John A. Weeks III" <john[at]johnweeks.com> writes:
- quote -


- quote -


- quote -

bonds][b]

A) The stock market can (and has) lost bunches of money in the
past which has taken several years to recover. It's easy to
find a sizeable handful of 3-year periods over the last couple
of decades where there were substantial losses. You have to
go to *very* long periods to lower the historical chances of
a loss. If capital preservation is important over a three
year period, stocks are out.

B) while corporate bonds don't move precisely with treasuries,
(the divergence is often discussed in terms of "spread" and
changes in spread), they do respond to changes in interest
rates. Just like treasury bonds, when interest rates go
down, corporate bonds go up and vice-versa. The longer the
term of the bond, the bigger the effect of those interest
rate moves. One way to protect against potential capital
losses in the face of interest rate moves is by having a
shorter term (or even having the bond mature right when
you're going to need the money and simply holding to term).

Note, of course, that unlike investing in treasuries (or
FDIC guaranteed CDs) if you're going to invest in corporates,
you need to take into account default risk and (or credit
risk in the event of, say, a downgrade on a company you
hold). One normally protects against issuer-specific risk
like that via diversification - which can be a huge pain
if you're trying to do this by holding individual bonds
instead of a fund. The flip side is that a fund doesn't
normally have a maturity date - so you can't buy a basket
of bonds which mature just when you need the cash.

Nevertheless, a short-term investment grade corporate
bond fund is very very unlikely to lose money over a
three year period. A quick glance at one just now shows
positive returns every single year over the last 7 and
only two negative quarters (which were separated by over
a year). Over the last 7 years (16 overlapping 3-year
periods), the average 3-year return was about 4%/yr,
the lowest was about 3%/yr and the highest was about 6%/yr.



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In article
<ceb2e8f5-c7a9-46c8-a354-7d8740cd7d62[at]m71g2000hse.googlegroups.com> ,
raylopez99 <raylopez99[at]yahoo.com> wrote:

- quote -

If capital preservation is the first goal, then market exposure
is out of the question for a 3 year time frame. You need to
be looking at something that is guaranteed. I'd be looking at
brokered CDs and maybe a few of the highest rated corporate bonds
if they are high enough to juice the returns a bit.

-john-

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On Mar 31, 5:02*am, raylopez99 <raylope...[at]yahoo.com> wrote:
- quote -

My guideline is 10% equities per year.

Meaning if money is needed in 3 years (more than 36 months), a maximum
exposure of 30% equities. At 24 months shift this to a maximum of 20%
equities and at 1 year shift to a maximum of 10% equities.

I would keep remainder in cash based assets and bonds.

There is principal risk associated with this technique.

Another different idea is a moderate mutual fund, such as PRPFX, which
is diversified enough to generally go up with returns greater than
cash accounts (I expect a 6%+ return from it). It invests in gold,
silver, growth stocks, swiss francs and US bonds and money markets.

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On Mar 31, 5:02*am, raylopez99 <raylope...[at]yahoo.com> wrote:
- quote -

Your friend should stick with CDs or money market funds if they need
to access the money in 3 yrs. There are countless ETFs that MIGHT
outperform CD rates over the next 3 yrs, but they all come with a risk
of capital loss. The higher the potential return, the higher the risk
of capital loss. If this wasn't true, no one would invest in CDs
until their rates increased to the point that is was true.

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An investor I know wants to have income, capital preservation (very
important) and some small capital gains for $500k to be invested with
a term of 3 years from today. Capital preservation is important, much
more so than capital gains. In fact, the investor has the entire $500k
in jumbo CDs. Ironically, after three years the investor intends to
speculate in commercial real estate. Go figure.

I suggested that in lieu of CDs, there's probably an ETF/mutual fund
that has short-term bond and/or conservative stock allocations that
should outperform CDs--is this true?

Please recommend which ETF/mutual funds (preferred over individual
issues) they should invest in.

RL

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