Tweet
Hi all, I have a question about municipal bonds. I have a taxable investment account that I am using as medium-term savings (5-10 years). So I want more growth than just a simple savings but less volatility than a straight-up growth fund. Basically looking for a balanced approach. In the account I currently own mostly index ETFs (trying to minimize capital gains). I have 25% in S&P 500 index, 25% in intermediate-bond index, 15% in short-term bond index, 13% in TIPS ETF, 10% in MSCI EAFE index, and 2% in small cap index.
The question I have is, I know the bond indexes are going to spin off a lot of capital gains and taxable income, so I was thinking of replacing them with equivalent term muni bond index ETFs. I am in 25% marginal tax bracket, so I think it is worth it. I am currently watching ITM and SHM. So could someone that knows about muni bonds and ETFs explain to me how the price of the ETF will vary with market conditions? It doesn't seem like they go up and down in correlation with the bond indexes I currently own. Also, is this a good idea or bad idea?
The question I have is, I know the bond indexes are going to spin off a lot of capital gains and taxable income, so I was thinking of replacing them with equivalent term muni bond index ETFs. I am in 25% marginal tax bracket, so I think it is worth it. I am currently watching ITM and SHM. So could someone that knows about muni bonds and ETFs explain to me how the price of the ETF will vary with market conditions? It doesn't seem like they go up and down in correlation with the bond indexes I currently own. Also, is this a good idea or bad idea?
Comment