Mutual Funds and Bond Funds You Like

[Justin Bilyj]

Anyone have any particular growth funds or bond funds they like? Doesn't matter the time frame.
What do you think is a better conservative income strategy, bond(s)(fund) or indexed annuity? What's a better laddering tool, muni bonds or a fixed term/myga?
Any insight is appreciated!

 

[Tahoe Ray]

Anyone have any particular growth funds or bond funds they like? Doesn't matter the time frame.
What do you think is a better conservative income strategy, bond(s)(fund) or indexed annuity? What's a better laddering tool, muni bonds or a fixed term/myga?
Any insight is appreciated!

I typically prefer ETFs over funds but if I had to pick, Vanguard, Fidelity and T Rowe all have some pretty good options.

If you have an advisor that runs a DFA shop, they're solid as well.

Muni bonds are probably a better laddering tool than MYGAs but you really need someone who can get you favorable pricing and understands that market.

 

[Justin Bilyj]

Of course! I forgot, muni is tax free compared to annuity gains taxed as ordinary income, duh..

 

[scagnt83]

but you really need someone who can get you favorable pricing and understands that market.

How much will that typically run you in fees??

 

[Tahoe Ray]

How much will that typically run you in fees??

It normally won't. If an advisor has a market in munis, they are probably compensated via markups, not advisor fees.

For the advisor that just dabbles in munis or purchases them via funds, you might be able to negotiate a discounted fee.

 

[jmhalvo]

It normally won't. If an advisor has a market in munis, they are probably compensated via markups, not advisor fees. For the advisor that just dabbles in munis or purchases them via funds, you might be able to negotiate a discounted fee.

muni ladders will not make sense unless you are in the very top tax brackets, and you will need a very long time horizon. The long durations needed to get a reasonable return are a set up for a few very bad years on a total return basis as rates rise. Unless, of course, you are ok with trading away interest rate risk for credit risk. As an advisor, that can get dicey. MYGAs don't have this issue, but muni buyers are muni buyers, period.

 

[Justin Bilyj]

besides the fact that these muni's seem like they are a hairs breadth away from becoming Detroit (check out many states unfunded liabilities), they will contribute to the client having their Social Security benefits taxed, why would they want to trade the risk and taxation for a potentially higher bond gain?

 

[Tahoe Ray]

muni ladders will not make sense unless you are in the very top tax brackets, and you will need a very long time horizon. The long durations needed to get a reasonable return are a set up for a few very bad years on a total return basis as rates rise. Unless, of course, you are ok with trading away interest rate risk for credit risk. As an advisor, that can get dicey. MYGAs don't have this issue, but muni buyers are muni buyers, period.

That's why it pays to work with someone who specializes in this market instead of dabbles in it. Favorable pricing and active management can mitigate some of what you're referencing, even in a lower rate environment.

As far as the tax brackets go, I'm assuming that you don't have many clients in NY or CA.

As you pointed out, muni bond buyers are muni bond buyers...normally for good reason. They have money.

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besides the fact that these muni's seem like they are a hairs breadth away from becoming Detroit (check out many states unfunded liabilities), they will contribute to the client having their Social Security benefits taxed, why would they want to trade the risk and taxation for a potentially higher bond gain?

I don't agree with the "all munis=detroit" argument but your second point is valid.

That being said, RMDs can cause your SS to be taxed so should you not invest in qualified accounts?

Most people buying individual munis have money so this is going to be an issue regardless.

 

[jmhalvo]

besides the fact that these muni's seem like they are a hairs breadth away from becoming Detroit (check out many states unfunded liabilities), they will contribute to the client having their Social Security benefits taxed, why would they want to trade the risk and taxation for a potentially higher bond gain?

you misunderstood me. When we speak of trading int rate risk for credit risk, it means having a higher coupon via lower quality which mitigates duration (or int rate risk). If you ask about taxable vs nontaxable, that's simple math. Which pays more on a Tax EquivBasis?

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Plus most everyone is taxed on Soc Sec income; should not be relevant for a muni buyer