Where to invest?
- Thread starter LDB
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Not exactly true. You still get the coupon rate, but the value of the muni in the bond market goes down if it is sold. The fund compensates by reinvesting in a higher rate bond. Like any investment, management is key.
As you say, munis make more sense for those in the higher tax brackets as a way to diversify. I take mine with a spoonful of sugar.
It helps but the fund will need to wait for maturity at the lower coupon to become whole, if everything on both sides is at par for comparison sake. Yes management swings these bond deals.
Of course, if you want the tax free income, does not matter a wit.
SoFi is doing that, their money market (with DD) is up to 4.50% now. I'm considering the muni bond deal myself, the tax bill on interest is going to be rough this year.
I'm meeting with my CPA tomorrow afternoon but appreciate getting ideas to discuss with him. I just want a monthly reliable income amount without all the hassles and expenses that go with rental property. The simplest and easiest would be deposit in my local bank savings account and just transfer monthly to checking. But local banks pay nothing. I can put it in my Marcus account which is paying a tolerably good rate. Another where I transfer if/when. But I'm looking for the lazy way without soooo much work involved making 1 transfer a month, something that automatically does it every month. 
It's always a trade off; do you want relative security with known results or do you want the possibility of more gain over the longer term?I'm meeting with my CPA tomorrow afternoon but appreciate getting ideas to discuss with him. I just want a monthly reliable income amount without all the hassles and expenses that go with rental property. The simplest and easiest would be deposit in my local bank savings account and just transfer monthly to checking. But local banks pay nothing. I can put it in my Marcus account which is paying a tolerably good rate. Another where I transfer if/when. But I'm looking for the lazy way without soooo much work involved making 1 transfer a month, something that automatically does it every month.
That's why I strongly suggest talking to a Schwab rep.
Good luck.
Yeah I see Goldman is paying 4.3%. But no need to be in love with them. Any of the top rated brokerage places can do auto transfers. The interest (if monthly like a MM) will be end of the month. Then just have your transfer set up the 2nd or 3rd . Of course CD will interest drop on the termination date in that month, but still have your transfer for $1000 on 2nd or 3rd or whatever date.I'm meeting with my CPA tomorrow afternoon but appreciate getting ideas to discuss with him. I just want a monthly reliable income amount without all the hassles and expenses that go with rental property. The simplest and easiest would be deposit in my local bank savings account and just transfer monthly to checking. But local banks pay nothing. I can put it in my Marcus account which is paying a tolerably good rate. Another where I transfer if/when. But I'm looking for the lazy way without soooo much work involved making 1 transfer a month, something that automatically does it every month.
Pretty lazy way.
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I am not a fiduciary, so I won't tell you where to invest. However treasury bills are the deepest and considered the safest investment there is. If you purchase anything 2 years or longer you will get paid interest twice per year. If you hold to maturity - you will get the face value - which might be slightly more or less than you paid - dependent on how you purchased. If you do try to sell you may get more or less than face value dependant on which way interest rates have moved since you purchased.
Unfortunately right now the 10 year Note only pays around 4%. The short term bills, a year and less, pay significantly over 5%, but when it comes time to roll them who knows if the rates then will be up and down comparatively.
Given your in Texas the state income tax benefit of treasuries doesn't help you, so a CD may be better. My issue with CD's is you need to read the fine print on everything you look at, and I just don't have that kind of time. If you do go that route just make sure the ones your getting are FDIC insured - and most are but don't assume.
The world is getting crazier and crazier so I wouldn't get too risky.
Also, if you do decide to go that financial advisor route, before you do make sure you read up on annuities - because they will almost assuredly try to sell you one of those first, because they make the most money on them, and most of the time there not a good deal for you.
To each their own.
Unfortunately right now the 10 year Note only pays around 4%. The short term bills, a year and less, pay significantly over 5%, but when it comes time to roll them who knows if the rates then will be up and down comparatively.
Given your in Texas the state income tax benefit of treasuries doesn't help you, so a CD may be better. My issue with CD's is you need to read the fine print on everything you look at, and I just don't have that kind of time. If you do go that route just make sure the ones your getting are FDIC insured - and most are but don't assume.
The world is getting crazier and crazier so I wouldn't get too risky.
Also, if you do decide to go that financial advisor route, before you do make sure you read up on annuities - because they will almost assuredly try to sell you one of those first, because they make the most money on them, and most of the time there not a good deal for you.
To each their own.
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I am confused - are you talking about buying munis yourself, or muni bond funds?
If your buying funds, the fund manager can trade in and out of whatever however they see fit. Might be good, might be not good, but your not guaranteed anything - because the manager can do whatever. Lots of people lost lots of money in bond funds over the last couple years with rising rates. Maybe they come back, maybe not?
Managed Municipal Bond Fund
You're right, bond have taken it in the shorts the past couple years. In fact, the worst in many years. As you say, the strategy is up to the management team. The Wasmer Schroder fund, from a high level, uses a buy and hold strategy. So while the market value of the bond is reduced as rates rise, it is a paper loss only. You still get the interest and cost at maturity.
This is not for everyone; in my portfolio it makes sense.
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I don't think a fund of any type would meet the OP's requirements - because they can and do loose principal value and that sounded like not a risk they wished to take.
You may be right.
However there is a little more to it than that or no one would ever invest in them. Bonds lose market value when interest rates go up. They gain value as rates go down. There is no perfect investment. Muni bonds are relatively safe and tax advantaged. My muni bond fund may not be for him, but who am I to say? It depends on overall portfolio size and overall strategy.
My advice is to talk to a professional. I am pretty sure we can agree on that. All good.
I recommend investing the money in a great mutual fund. CD's are a waste of time with the USD values fluctuating the CD's rate will fall behind or break even with inflation. The stock market usually yields roughly 8-10% returns on the past 70 years average. Why settle with a 2-4% CD that can't even keep up with inflation. I highly recommend you read the book listed below. It's covers personal finances especially your scenario. You need to get a quick learning refresh on investments and sit with a financial advisor. Honestly most people on this forum mean good advice but it's not worth gambling several hundred thousand dollars over with advice from internet strangers 
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There is no perfect investment but your missing a big piece.
Bonds might loose market value - or more specifically loose purchasing power due to inflation, but if you buy a bond with $100 face value and hold to maturity - the treasury will hand you $100
A fund of any type - including a muni fund - can loose principal value. Meaning you could put $100 in, and in 10 years it may only be worth $90 for example. Many people in many situations are looking to avoid this.
You could make a pretty good argument as well that the stock market always goes up - given a long enough period of time. But there are many places on the chart that it went down, so its not a good spot for capital preservation either.
Capital preservation has no business in a managed fund, because by definition they can loose capital.
My goal is to replace the rent house monthly income with another monthly income source that doesn't come with the major expenses of school/MUD/county taxes, insurance, HOA and random repairs. Realistically I know the market value of the house could go down but pretty much it remains static or rises. So I'm looking for something that won't drop in value. I want the benefit of the money coming in without the $12k new roof last month and the (WAG $3K) new fence coming this month.
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The only investment I know of that pays interest you can access monthly is a money market or traditional bank savings account, however neither pay very much, not enough to keep up with inflation or make the income you want.
You could set up a bond / cd ladder, so that one is rolling over monthly - and skim the interest that way?
Realize none of these will appreciate like real estate, but as you mentioned, you loose all the work as well.
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I thought perhaps an annuity but haven't looked into them. I guess they pay something other than monthly. That's ok, I can deal with another timeframe and just apportion it out or let it sit in the interim. I just want similar annual income as the net after taxes etc. of the rent house without all the headaches.
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I wonder… pure swag here.
Leave 12k in cash, or a high yield savings account. Then put 12k in a 1yr CD. Maybe you can find a 2yr CD and put 12k there? Then find an index fund to park the rest. One that might not chase the market but is still above inflation. Once a year, pull 12k out.
The money that you don’t need for several years can be invested. Yes its a gamble but if you have a 2-3 years in cash at any time, when the market is down, don’t pull. When it is up, rebalance and increase your cash holdings. Maybe modify what I said above, maybe pull once a month (but only 1k) to replenish you cash, but when market is up, perhaps. Or maybe you pull regardless, the opposite of DCA.
CD rate might go down in the future, but for now, its a low risk ”gamble” for money you will need in short order. May have to change plan in the future if the rate drops—or not, since its money that you can’t have losses in.
Leave 12k in cash, or a high yield savings account. Then put 12k in a 1yr CD. Maybe you can find a 2yr CD and put 12k there? Then find an index fund to park the rest. One that might not chase the market but is still above inflation. Once a year, pull 12k out.
The money that you don’t need for several years can be invested. Yes its a gamble but if you have a 2-3 years in cash at any time, when the market is down, don’t pull. When it is up, rebalance and increase your cash holdings. Maybe modify what I said above, maybe pull once a month (but only 1k) to replenish you cash, but when market is up, perhaps. Or maybe you pull regardless, the opposite of DCA.
CD rate might go down in the future, but for now, its a low risk ”gamble” for money you will need in short order. May have to change plan in the future if the rate drops—or not, since its money that you can’t have losses in.
There are only three investments that are worth your time if you're a casual investor.
VMFXX - Vanguard Federal Money Market Fund
BRK.B - Berkshire Hathaway (Class B Shares)
VOO - Vangiard S&P 500 Index Fund ETF
The first one already provides 5.25% and has roughly 40% of its portfolio is exempt from state and local taxes. The other two usually beat other investment strategies in the long-term.
I invest in all three.
VMFXX - Vanguard Federal Money Market Fund
BRK.B - Berkshire Hathaway (Class B Shares)
VOO - Vangiard S&P 500 Index Fund ETF
The first one already provides 5.25% and has roughly 40% of its portfolio is exempt from state and local taxes. The other two usually beat other investment strategies in the long-term.
I invest in all three.
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