If you are making $200k then yes, you need to avoid paying the marginal tax rate on investments. At that amount of income you need to pay very close attention to tax efficiency. Below are some notes on bonds and bond equivalents.
For tax efficiency:
municipal bonds are federal tax exempt
municipal bonds for your state may be state tax exempt as well
treasury bonds are state tax exempt
cds are often state tax exempt but it will vary
you can buy preferred stocks that have qualified dividends
Here are some specific recommendations on what to buy:
Go here for Vanguard funds and see if they have one for your state:
I would not go crazy on a single state even if it is both federal and state tax exempt though. I would also put a lot into a national muni fund for diversification.
Vanguard Intermediate-Term Tax-Exempt Fund Admiral Shares (VWIUX)
You also might want some growth assets.
Vanguard Tax-Managed Balanced Fund Admiral Shares (VTMFX) -- this is 50/50 US stocks and muni bonds
Vanguard Tax-Managed Small-Cap Fund Admiral Shares (VTMSX) -- use this to get your small/mid cap tilt
Vanguard Global Minimum Volatility Fund Investor Shares (VMVFX) -- this fund will tilt towards lower volatility stocks which means that even though it is 100% stocks it may act more like a balanced fund that has 40%-50% bonds in it when it comes to the volatility, but you will not be paying any taxes on bond interest to get this reduced volatility. so its a neat way to reduce taxes.
Vanguard Total World Stock Index Fund Investor Shares (VTWSX) -- this is simply an index for the entire world with no factor weighting. i like to dump extra money into this when i don't have any better ideas at the time.
I personally would also add some CEFs (closed end funds).
John Hancock Tax-Advantaged Dividend Inc (HTD) -- this is a CEF that is 50/50 utility stocks and preferred stocks. it pays qualified dividends.
VanEck Vectors CEF Municipal Income ETF (XMPT) -- this is an ETF made up of municipal bond CEFs.
Nuveen Nasdaq 100 Dynamic Overwrite Fund (QQQX) -- this is a CEF that uses options on the Nasdaq. this is my preferred option income CEF as I think the Nasdaq is one of the best places to use options. like most option income CEFs you will receive mostly ROC (return of capital) which is tax free until your cost basis is reduced to zero at which point it is 15% tax rate.
You might also want to add some individual MLPs (master limited partnerships) as they also throw off mostly ROC. MLPs have been in the dog house for quite a while, the prices are cheap.