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Bonds: Calif vs. the rest of the U.S.
Old 05-11-2008, 09:30 PM   #1
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Bonds: Calif vs. the rest of the U.S.

I own some VCAIX (Vanguard Calif. Muni Bonds). I'm thinking of adding to my bond allocation. I still want the tax free variety bond fund. I'm thinking of adding more to VCAIX or to start up with VWITX (Vanguard Muni Tax Free Bonds). I think I come out ahead with the Calif bond fund, but I have concerns about having my entire tax-free bond allocation tied to one state (that be where I live, California). It seems like there's more risk with VCAIX, but I have no idea how much more risk. Any ideas on a reasonable way to go on this one?

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Old 05-12-2008, 05:40 AM   #2
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You'll be fine

Hi Redduck.

A good portfolio manager like Vanguard is aware of this risk and will ensure adequate diversification. If your Cal marginal tax rate is above 5% your net after tax yield will be worse with a national fund vs a Cal fund.

Of course, if you want to diversify the duration in your funds and only have Vanguard, Vanguard short term VWSTX or limited term VMLTX would be reasonable options.


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Old 05-12-2008, 06:32 AM   #3
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I'm becoming more and more wary of munis in general, given the concerns I have over mounting pension and retiree health care liabilities many cities and states are either facing or likely to be facing soon.
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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