Which muni fund for Fidelity/Schwab

[andy123]

I am retired, moving from Vanguard to either Fidelity or Schwab.

I have a large allocation to VWIUX (Vanguard Intermediate Muni) at Vanguard. Unfortunately, this fund is not accepted at either Fidelity or Schwab. I have looked at the following choices. Note that I have unrealized losses to TLH, so switching will not incur a loss. Also note that I would really prefer to stay with VWIUX as I feel none of these choices is as good.


VWITX. Same fund, Investor shares. Will lose .09% per year due to higher expense ratio, a completely uncompensated difference. This amounts to thousands of dollars per year.

VTEB. Vanguard ETF, close to VWIUX, but not quite. Lower total return with lower income better NAV, similar average duration and quality, however, higher maturity, which means its bonds more likely to be called. The effect of this can be seen this year with the rise in rates, and VTEB has lagged.

MUB. ETF, does not perform as well, and I do not like its composition (a lot of internal iShares investments). Also, longer duration/etc

FLTMX. Fidelity fund, very similar to VWIUX, similar/same total return, but expense ratio is .23% more. I believe they get the same return as VWIUX by using less quality (showing up as less GO bonds). And while it has the same total return, it provides less income/better NAV, which is not a good tradeoff for a muni fund.

Thanks in advance for any perspectives/advice

 

[target2019]

If I really wanted VWIUX then I'd keep that at Vanguard. I wouldn't stress over it.

 

[COcheesehead]

Have Fidelity build you a muni ladder. They will do it at no extra charge. Just contact the bond desk.
Funds are likely in for a fun ride yet for awhile. With individual bonds you have a par level they will return to at maturity - a fund does not have that. They have redemption drag and management fee drag as well.
If you want income with capital preservation, individual bonds are where you want to be.

 

[andy123]

If I really wanted VWIUX then I'd keep that at Vanguard. I wouldn't stress over it.

I have been a long time Vanguard customer. I have watched for years as their service has degraded, their offerings become more limited, and their top tier advisors have become simply a gateway/bottleneck to gaining access to their "specialists", as these advisors are unable to answer questions on their own. Even their "specialists" have demonstrated a poor understanding of their own products and have provided risky, non-optimal advice when it comes to the mechanics of trading their own products.

The final "straw" happened when I finally got together an estate plan, one that requires the splitting of assets into two trusts, both of which my wife and I are co-trustees. Vanguard has certain limitations on managing these two trusts that Vanguard admits is because of technical limitations of their own platform.

Part of the estate planning process is making sure that my wife and kids will have the support they need if/when that time comes. While I feel I can provide workarounds to what Vanguard lacks, having a local representative that can speak face to face and has direct knowledge of their products and the industry will be important. I have been able to have multiple, detailed conversations with the local Schwab and Fidelity reps, and they are in a different class than anyone I have spoken with at Vanguard, including their "specialists"

I still want the Vanguard funds, and as someone who is self-directed and believes in low cost funds, I am frustrated that I have to choose between poor support/poor technology and leaving my family with a problem, or paying out a couple of hundred thousand dollars over the rest of my life simply to hold one of their funds at another brokerage.

So, yes, I am stressed out over this

 

[andy123]

Have Fidelity build you a muni ladder. They will do it at no extra charge. Just contact the bond desk.
Funds are likely in for a fun ride yet for awhile. With individual bonds you have a par level they will return to at maturity - a fund does not have that. They have redemption drag and management fee drag as well.
If you want income with capital preservation, individual bonds are where you want to be.

I have had them produce ladders for me in the past while I was investigating going down this path, at two different times. I asked the Fidelity rep to create a ladder that matched VWIUX characteristics. He tried, came close, but was not able to match the quality/duration with the performance. He acknowledged that this was so, was not able to say why.

In general, I have found this path lacking, and I have put a lot of thought/time into investigating.

Overall, in theory, a rolling bond ladder is not going to provide better results than a bond fund with the same characteristics, as long as you hold the fund for "long enough", which I do.

You may win with a ladder on finding "bargains" that a fund cannot afford to go after, but you also lose on prices/costs by not having enough bargaining power. If you have someone managing your ladder, you then have to consider which of their clients they are going to give the best "bargains", or how, for example, Fidelity (and others) manage the conflict between their individual client bond desk and their funds - their are conflicts of interest here.
Also, a bond ladder will only return your capital only if you buy new issues, otherwise you may actually guarantee to get less value upon maturity (in return for higher rates). Restricting yourself to new issues is not optimal.

You also lose tremendous flexibility, cannot buy/sell amounts you need (say to buy a car), and you lose TLH ability. With the recent bond downturn, I took a 10% TLH, of which I will eventually recover maybe 2% in tax savings elsewhere.

So, ladders are not for me, especially for someone who values simplicity and flexibility, and I have yet to see an edge in performance. Of course, if the bond fund breaks due to huge redemptions, you would be better off in a bond ladder.

 

[COcheesehead]

I have had them produce ladders for me in the past while I was investigating going down this path, at two different times. I asked the Fidelity rep to create a ladder that matched VWIUX characteristics. He tried, came close, but was not able to match the quality/duration with the performance. He acknowledged that this was so, was not able to say why.

In general, I have found this path lacking, and I have put a lot of thought/time into investigating.

Overall, in theory, a rolling bond ladder is not going to provide better results than a bond fund with the same characteristics, as long as you hold the fund for "long enough", which I do.

You may win with a ladder on finding "bargains" that a fund cannot afford to go after, but you also lose on prices/costs by not having enough bargaining power. If you have someone managing your ladder, you then have to consider which of their clients they are going to give the best "bargains", or how, for example, Fidelity (and others) manage the conflict between their individual client bond desk and their funds - their are conflicts of interest here.
Also, a bond ladder will only return your capital only if you buy new issues, otherwise you may actually guarantee to get less value upon maturity (in return for higher rates). Restricting yourself to new issues is not optimal.

You also lose tremendous flexibility, cannot buy/sell amounts you need (say to buy a car), and you lose TLH ability. With the recent bond downturn, I took a 10% TLH, of which I will eventually recover maybe 2% in tax savings elsewhere.

So, ladders are not for me, especially for someone who values simplicity and flexibility, and I have yet to see an edge in performance. Of course, if the bond fund breaks due to huge redemptions, you would be better off in a bond ladder.

I don’t agree with everything you say and some is completely inaccurate, but if you have chosen to go down the fund path, at least you understand some of the pitfalls of funds.

 

[target2019]

If I really wanted VWIUX then I'd keep that at Vanguard. I wouldn't stress over it.

I have been a long time Vanguard customer. I have watched for years as their service has degraded, their offerings become more limited, and their top tier advisors have become simply a gateway/bottleneck to gaining access to their "specialists", as these advisors are unable to answer questions on their own. Even their "specialists" have demonstrated a poor understanding of their own products and have provided risky, non-optimal advice when it comes to the mechanics of trading their own products.

The final "straw" happened when I finally got together an estate plan, one that requires the splitting of assets into two trusts, both of which my wife and I are co-trustees. Vanguard has certain limitations on managing these two trusts that Vanguard admits is because of technical limitations of their own platform.

Part of the estate planning process is making sure that my wife and kids will have the support they need if/when that time comes. While I feel I can provide workarounds to what Vanguard lacks, having a local representative that can speak face to face and has direct knowledge of their products and the industry will be important. I have been able to have multiple, detailed conversations with the local Schwab and Fidelity reps, and they are in a different class than anyone I have spoken with at Vanguard, including their "specialists"

I still want the Vanguard funds, and as someone who is self-directed and believes in low cost funds, I am frustrated that I have to choose between poor support/poor technology and leaving my family with a problem, or paying out a couple of hundred thousand dollars over the rest of my life simply to hold one of their funds at another brokerage.

So, yes, I am stressed out over this

I understand a bit more, so thanks. I had a long-tern state muni with VG until last year. I moved that to Schwab, and will likely move my SEP and Roth to Schwab eventually. But if I don't complete that, I'm not stressing over that, as I have bigger fish to fry...

I do hear that your muni fund is in taxable brokerage, with long term gains and so on. They only way for you to get the specs I'm reading in other replies is for you to hang with VG for that one fund. If you can't for whatever reason, then you have the answer and will need to invest in something similar at the other institution.