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Is this a wise "keep it simple" idea?
Old 10-20-2013, 09:20 PM   #1
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Is this a wise "keep it simple" idea?

Here is a general question I have about investing. I have an IRA that I am not taking anything from at this time. I also have a non-qualified account that I am using for income.

I recently had a good percentage of this account in municipal bond mutual funds that went down about 7% in a short time just on the rumor of the fed stopping their bond buying. My take on it was that I had too much in "one segment of the market", and I sold before it went down even more.
This is the money I am now considering putting into Wellesley.

Would it be unwise to have this account set up 20% money market (for spending) and 80% Wellesley for the dividends and capital gains? I realize that this is not the best move to avoid taxes but it is a balanced fund that pays good dividends and would be more stable.

Just looking for opinions thank you.
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Old 10-20-2013, 09:46 PM   #2
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Wellesley will get you balance, but if you are not making withdrawals, why do you want 20% in cash for "spending"?
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Old 10-21-2013, 07:52 AM   #3
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For your fund to go down 7%, I think you must be in a long duration fund vs. intermediate or short. If so, you probably had too much so long. Yes, intermediate doesn't pay as much, but doesn't drop so much either when interest rates rise.
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Old 10-21-2013, 08:53 AM   #4
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Wellesley will get you balance, but if you are not making withdrawals, why do you want 20% in cash for "spending"?
GrayHare, the 20% cash is in the non-qualified account. I am spending from that. I am not withdrawing from the IRA. This question is only about the non-qualified account.
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Old 10-21-2013, 09:03 AM   #5
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For your fund to go down 7%, I think you must be in a long duration fund vs. intermediate or short. If so, you probably had too much so long. Yes, intermediate doesn't pay as much, but doesn't drop so much either when interest rates rise.
gerntz, you are right because ftabx and fhigx are long and fltmx is intermediate. I was using these for the tax free income while thinking that I would sell them before the fed actions might affect them. Just the rumor of the fed action sent them down 7% very quickly.
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Ok, so let me narrow my question down....
Old 10-21-2013, 09:11 AM   #6
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Ok, so let me narrow my question down....

In a non-qualified fund, let's use an example of 500K, would it be a mistake to have half of it in "municipal bond mutual funds" for the dividends because that would be too much % in one segment of the market?

Would it make more sense to put all of it in Wellesley because there is better balance for more stability over the long haul?
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Old 10-21-2013, 09:46 AM   #7
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You should look at your AA across taxable and tax-deferred accounts, so whether Wellesley is a good choice would depend on that the IRA is in and what your target AA is and how your actual AA would compare to your target AA if you bought Wellesley.

It would be easy for you to look at it by using Portfolio Tester if you are a Vanguard customer or M* Instant-XRay or some similar tool.

Unless you are in a high marginal tax bracket, I would question having any munis at all. I don't and haven't for quite a while even when I was in a higher tax bracket as the difference between munis and after-tax yields on corporates were not attractive.
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Old 10-21-2013, 10:04 AM   #8
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You should look at your AA across taxable and tax-deferred accounts, so whether Wellesley is a good choice would depend on that the IRA is in and what your target AA is and how your actual AA would compare to your target AA if you bought Wellesley.
Yes I understand what you'r saying and Wellesley is so balanced that purchasing more of it won't make much difference in over all AA.
I also have a couple of Roth IRAs and try to have a balanced approach to all of it and that is another reason I thought that having too much in the municipal bond segment just wasn't a good idea even though it brought dividends that weren't federally taxed.
I guess the more I discuss it, the more I'm answering my own question.
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