Im looking for a near guaranteed non taxable return, thought maybe some type of municipal ETF , I know Ill give up greatly on potential return but Im looking for diversification. Any input would be appreciated.
Looking for low risk non taxable ETF
- Thread starter huskerfan1000
- Start date
Are you that worried about taxes on the dividends? If not just put half in QQQ and half in SPY. That way you can mirror the overall movements of the two main stock indexes. Both have very low expense ratios. If you’re then feeling confident enough to time the market you can switch to their inverses when the bear market takes hold. I would avoid leveraged ETFs personally unless it’s a short term thing and you are very confident as those can turn your portfolio upside down pretty quickly.
Just to be clear I’m not a financial advisor of any kind so I may not know what I’m talking about.
Just to be clear I’m not a financial advisor of any kind so I may not know what I’m talking about.
Are you that worried about taxes on the dividends? If not just put half in QQQ and half in SPY. That way you can mirror the overall movements of the two main stock indexes. Both have very low expense ratios. If you’re then feeling confident enough to time the market you can switch to their inverses when the bear market takes hold. I would avoid leveraged ETFs personally unless it’s a short term thing and you are very confident as those can turn your portfolio upside down pretty quickly.
Just to be clear I’m not a financial advisor of any kind so I may not know what I’m talking about.
Did you miss the diversification part? I agree with you, but he did say diversification, so am assuming he already has something similar to qqq or spy. Both great investments, btw.
Yes I am familiar with QQQ and SPY and have owned them in the past, but Im getting older, and now want to diversify to a conservative type of guaranteed investment. I havent got clarity thru my research on the internet.
SPY alone is enough diversity alone if you are buying and holding for long periods of time. I remember reading a story prior to the election that went over the two candidates stock portfolios. HRC and BC only owned SPY and that supposedly was what was suggested to them by Warren Buffet. He stated that over the long haul it’s a low risk 7% compounding annually. So unlikely to be a strategy to make you fabulously wealthy but you can still be pretty safe and have better returns then you would get in the bond market. You do of course run the risk of needing the money during a downturn in the overall market. But if you have enough in savings that shouldn’t be a big issue barring a economic cataclysm
Diversification is more than just stock market diversification. He is talking about asset allocation diversification... something other than stocks.
Fair enough. He brought up
stocks and bonds so I thought we were talking specifically about securities rather
than all types of asset classes. If we’re talking simply about securities then given robust savings to bridge the troughs of Bear markets SPY is a diverse enough basket of stocks IMO to achieve security in the long haul.
Now 7 percent annually is pretty low hanging fruit so I can certainly understand those that would want to go another route.
There are three risks with municipal bond funds:
1. Default risk - if the portfolio is all investment grade, weighted fairly heavily with "A" and above bonds, this risk will be minimal
2. Interest rate risk - when bond rates rise, as they have been for the past few months, the market value of existing bonds will decline. In theory that decline will eventually be balanced out with the reinvestment of maturing bond proceeds into higher yielding bonds, but it can take years for the values to rebalance if rate keep rising.
3. Some municipal bonds are free from federal income tax, but they are AMT bonds and the interest is subject to the alternative minimum tax calculation.
IBMK is an ETF which invests only in investment grade, non-AMT bonds with maturities of 2022, so it probably meets your criteria of nearly guaranteed, but the yield is just 1.45%. There may be similar ETFs with target maturity dates longer than 2022 which would increase the yield some, but with what you are asking the yields are going to be very modest.
Yes Im diversified across asset classes , I guess I was hoping for something like a guaranteed 4% non taxable return from an etf , maybe that was optimistic.
For low rates it's tough to beat Vanguard. They have a variety of funds, should be something that will suit your needs with very little taken off the top. I personally have a good chunk of their Windsor II fund and it has done really nicely.
Why so risk averse? You looking to cash it out within 5 years? If not, it pays to be aggressive but diversified. Lots of people were moaning in 2009 when the market was down, but look how far above that point it rose in a relatively short time frame.
If you were parked on the sidelines in late 2009 and beyond, you missed massive returns.
Why so risk averse? You looking to cash it out within 5 years? If not, it pays to be aggressive but diversified. Lots of people were moaning in 2009 when the market was down, but look how far above that point it rose in a relatively short time frame.
If you were parked on the sidelines in late 2009 and beyond, you missed massive returns.
Well Ill be winding down my career and dont need more money. I understand the concepts that are being put forward regarding long term ebbs and flows in the market, dollar cost ave etc, but when your not working or plan to work again capital preservation and certainty becomes a goal.
I knew of a business person here in Lincoln who retired in his early 60s in the late 1990s, when the markets crashed early 2000s he had to scamble to find employment to to live after havin been set, thats what Im guarding against.
I have familiarity with alot of types of investments but not on these very low risk vehicles and am not finding much on them.
I knew of a business person here in Lincoln who retired in his early 60s in the late 1990s, when the markets crashed early 2000s he had to scamble to find employment to to live after havin been set, thats what Im guarding against.
I have familiarity with alot of types of investments but not on these very low risk vehicles and am not finding much on them.
As I'm sure you know, the "tax free" is your problem here. For some reason, our government doesn't like to offer a bunch of tax free investments. You can buy municipal bonds directly (avoiding the bond fund problem mentioned above), which are free from federal income tax, and depending upon the state, may be free of state income tax as well. Just be careful as many local/state governments are broke or are heading in that direction via pension issues.
The holy grail of tax free accounts come in an HSA (Health Savings Account), in which money going in is deductible, investment earnings are not taxed (meaning you can in vest in whatever you want), and money taken out for medical purposes is not taxed either. If you are retired, this may not be an option.
The holy grail of tax free accounts come in an HSA (Health Savings Account), in which money going in is deductible, investment earnings are not taxed (meaning you can in vest in whatever you want), and money taken out for medical purposes is not taxed either. If you are retired, this may not be an option.
Understandable, there can be less obvious downsides to getting very conservative with retirement savings. 1) You may live a lot longer than you thought or 2) Your cost of living suddenly increases (most commonly due to medical issues). When people plan and budget they tend to imagine their cost of living will stay the same. It almost always increases.
Easy for me to say at 35, but I'd rather have my retirement funds still earning returns with a potential to outgrow my RMD. If you're truly investing and not gambling, and if you truly don't need more money, you shouldn't be exposed to busting out due to a year or two of bear market.
I guess I have questions about this story of the guy. Why did he suddenly have no money due to a down market unless he sold in the middle of a down market? A loss is not a loss until you lock it in by selling. If he was into a well-diversified collection of large caps, any losses should have reversed and then some within a few years. Sounds like a case of eggs in one basket.
By all means do what you're comfortable with, it just kills me to see people look at down markets as permanent. If you don't NEED the money TODAY the worst thing you can do is sell in a dip. You see these headlines about how people like Bezos or Zuck "lost billions" because their stock dipped for a week. No they didn't. Nor did they "gain billions" when it was up. Just like I'm not worth the alleged price of my house. It's not worth anything until you sell it, and the going rate on that day could be quite different.
Have you looked at the tax 20 and 22 act in Puerto Rico?
https://www.forbes.com/sites/janetn...-americans-to-its-own-emigrants/#51bab3df2735
I'm in the process of moving there now.
He said earlier that he doesn't need any more money, which is why he doesn't care about growth and is also very tax conscious (probably a higher rate).
Well the Puerto Rico thing is interesting, if you dont mind it would be interesting to hear about your plans.
Puerto Rico is an interesting situation. They are a US Territory, so everyone there is a US Citizen, but they do not pay US Taxes. Federal taxes are instead paid to the "Hacienda" or the "House". Spanish is the predominant language, but there is always somebody that speaks English. PR is in a weird no mans land, in that they have their own government, but yet use the US dollar. Like many other latin countries, there is corruption (this exists everywhere). But this has lead to the island being broke and dependent on the the US Govt annual budget distribution (I heard 20 billion) and tax revenues mostly coming from sales taxes (high at 10-11%).
This is what has lead to the tax acts, to encourage mainland Americans and business owners to relocate there.
I sold my house in Omaha last year and came to Florida where I have some family and then spent some time in Asia and tried to figure out my next step. I am heavily involved in crypto currencies and also starting an online business, so both tax acts in PR are very attractive. One covers capital gains, the other taxes profits at 4%. So I did a lot of research and realized I had to go there to scout and see the situation there for myself.
As for the hurricane last fall, everything is pretty much back to normal. Some places up in the mountains are still without power, but the only real effects I could see where the trees were still pretty decimated.
I ended up renting a pretty nice house in a city called Isabela. It's like a high plains farm type area.. due to the topology, it has a good breeze and the elevation also helps keep it not so hot, and you don't have to deal with so many hills either and I also like that there is an airport nearby.
Moving there is going to cost a lot, but I have sold most everything off last year, so that sort of helps. I am just going to be mailing the rest of my stuff to myself using USPS. I'm also going to have to ship my dog and my vehicle, which makes it a bit more expensive to make the move.
Apparently filing the paperwork is all but $10, but you can find an attorney to help you set it up, but it will cost you a grand or two.
There is a Walmart about a mile from where I am and if there is anything specific I can't find, you can always go into San Juan, about an hour and half drive. Most people say to avoid San Juan, and I didn't spend much time there. I found most of the stores you see in the states, but some prices are a little higher due to the increased shipping charges.
I particularly liked the more laid back environment. There is still hustle and bustle, but it was the right mix for me in Isabela and reminded me of home a little bit in that regard.
The scenery is absolutely stunning. The prices of real estate is very inexpensive if you are looking to buy. I don't mind renting for a little while to see how it goes first. You have to have a car in PR. I didn't really see any public transportation, and very few motorcycles. There is a very active boating community, with marinas on at least 3 coasts (I am not sure on the southern coast, but likely too)
The people I met were all very friendly and had no issues during my time there. I am going to put forth the effort to learn some Spanish. Not to make anything political, but from a practical standpoint, it will be beneficial to know some of the language, and it isn't that hard to learn (I spend 1 hour a day on free youtube spanish videos
I guess to me, it's a bit of a new adventure, I get to avoid dealing with the IRS for about 17 years, and keep more of what I earn, and live in a beautiful place. There are tradeoffs of course, and it depends on what is important for you and what stage you are at. As with anything, having a positive outlook tends to reap more positive results
Hope this helps
You can put it in a municipal money market fund and get over 1%. Taxable equivalent yield of around 1.7%. I would wait for yields to increase before jumping into bonds.
I’m willing to bet you’ll feel differently in 15 years. I’ve also seen others who have had their retirement funds decimated by large market drops and had to go back to work. The closer you get to retirement the more conservative you get about risk/reward.
I appreciate everyone who took the time to post, this site is a great place to solicit opinions on various subjects.
