Tax Efficent Cash Investments

Culture · 05-01-2007, 09:48 PM

I am closing on a property in the next 60 days that will provide cash equal to 33% of my current portfolio (thus 25% of my total assets). I have considered this property to be the cash portion of my portfolio and therefore have been about 90-95% in equities in my other investments. Therefore, I want to move the proceeds into cash (Bonds, etc). My goal is 35% cash, 65% equities in my portfolio.

I plan to convert all of my 401(k) that is not already bonds or REITs to more bonds to cover as much as possible. Unfortunately, this will only put me at about 15-20% cash. Thus, I will have to purchase a significant amount of cash assets in my non-tax sheltered accounts.

What should I consider when investing this cash? My plan is to just just suck up the taxes and invest in a Vanguard Short- or Intermediate-Term bond fund. Should I consider Municipal bonds? Other options? Please give me some ideas to investigate.

I don't mind paying taxes if the after tax returns beat the alternatives.

Supplemental Information:
Marginal tax rate is 33%.
I do not need any dividends or interest for the next five years.

Alex · 05-01-2007, 09:58 PM

Based on your tax situation, IMHO you should consider a tax free muni fund or tax free money market fund at Vanguard. If you live in one of the larger states you can get into a state specific Muni Bond fund that is exempt from State and Federal taxes.
M* has a calculator to determine the tax equivalent yield. http://screen.morningstar.com/BondCa...n=toolsbondcal

Good luck!

brewer12345 · 05-02-2007, 06:55 AM

Yeah, munis probably would work for you. Also look into treasuries or agencies if you are in a high state income tax place.

Culture · 05-02-2007, 07:09 AM

Quote:

Originally Posted by brewer12345

YAlso look into treasuries or agencies if you are in a high state income tax place.

No state taxes where I live.

brewer12345 · 05-02-2007, 07:09 AM

Then munis it is.

05-01-2007, 09:48 PM	#1
Culture Recycles dryer sheets Join Date: Apr 2007 Posts: 239	Tax Efficent Cash Investments I am closing on a property in the next 60 days that will provide cash equal to 33% of my current portfolio (thus 25% of my total assets). I have considered this property to be the cash portion of my portfolio and therefore have been about 90-95% in equities in my other investments. Therefore, I want to move the proceeds into cash (Bonds, etc). My goal is 35% cash, 65% equities in my portfolio. I plan to convert all of my 401(k) that is not already bonds or REITs to more bonds to cover as much as possible. Unfortunately, this will only put me at about 15-20% cash. Thus, I will have to purchase a significant amount of cash assets in my non-tax sheltered accounts. What should I consider when investing this cash? My plan is to just just suck up the taxes and invest in a Vanguard Short- or Intermediate-Term bond fund. Should I consider Municipal bonds? Other options? Please give me some ideas to investigate. I don't mind paying taxes if the after tax returns beat the alternatives. Supplemental Information: Marginal tax rate is 33%. I do not need any dividends or interest for the next five years.

05-01-2007, 09:58 PM	#2
Alex Full time employment: Posting here. Join Date: May 2006 Posts: 696	Re: Tax Efficent Cash Investments Based on your tax situation, IMHO you should consider a tax free muni fund or tax free money market fund at Vanguard. If you live in one of the larger states you can get into a state specific Muni Bond fund that is exempt from State and Federal taxes. M* has a calculator to determine the tax equivalent yield. http://screen.morningstar.com/BondCa...n=toolsbondcal Good luck! __________________ Oh, you hate your job? Why didn't you say so? There's a support group for that. It's called EVERYBODY, and they meet at the bar.--Drew Carey

05-02-2007, 06:55 AM	#3
brewer12345 Give me a museum and I'll fill it. (Picasso) Give me a forum ... Join Date: Mar 2003 Posts: 9,248	Re: Tax Efficent Cash Investments Yeah, munis probably would work for you. Also look into treasuries or agencies if you are in a high state income tax place. __________________ “When you realize that you are one of the rare few who observe moral principles in their relationships with others, there is a temptation to sink into amorality, not out of conviction or pleasure but simply to avoid further pain, because there is no greater suffering than being an angel in hell, whereas a devil feels at home wherever he goes.” – Martin Page, How I Became Stupid

05-02-2007, 07:09 AM	#5
brewer12345 Give me a museum and I'll fill it. (Picasso) Give me a forum ... Join Date: Mar 2003 Posts: 9,248	Re: Tax Efficent Cash Investments Then munis it is. __________________ “When you realize that you are one of the rare few who observe moral principles in their relationships with others, there is a temptation to sink into amorality, not out of conviction or pleasure but simply to avoid further pain, because there is no greater suffering than being an angel in hell, whereas a devil feels at home wherever he goes.” – Martin Page, How I Became Stupid

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