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Tax Efficent Cash Investments
Old 05-01-2007, 09:48 PM   #1
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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.
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Re: Tax Efficent Cash Investments
Old 05-01-2007, 09:58 PM   #2
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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!
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Re: Tax Efficent Cash Investments
Old 05-02-2007, 06:55 AM   #3
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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.
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Re: Tax Efficent Cash Investments
Old 05-02-2007, 07:09 AM   #4
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Re: Tax Efficent Cash Investments

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.
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Re: Tax Efficent Cash Investments
Old 05-02-2007, 07:09 AM   #5
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Re: Tax Efficent Cash Investments

Then munis it is.
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