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should I keep VWAHX ?
Old 09-15-2007, 02:06 PM   #1
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should I keep VWAHX ?

I have a position in VWAHX (Vgd High-Yield Tax-Exempt) and
wondering if I should sell. My marginal taxrates are 25%/7%
(fed/state) so the multiplier of taxable vs state-tax only income
is (100-7)/(100-25-7) = 1.37. Thus the 4.5% yield on VWAHX
is equivalent to about 6.15% taxable.

Only one Vanguard bond fund does better than 6% - VWEHX
Corporate High-Yield - and one about equals it - Long-Term
Investment Grade.

Long-term is not exciting due to interest-rate sensitivity. VWEHX
is rated "low quality" (Morningstar style box) while VWAHX is
"high quality". Which seems odd since both are "high yield".

So I'm tempted to stick with VWAHX, in the spirit of diversification.
(I also have a position in VWEHX).
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Old 09-15-2007, 11:11 PM   #2
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Lots of the academic types don't like high yield bonds of any type, especially wrt diversification. They tend to be highly correlated to stocks since when the market tanks, defaults go up.

I've also heard that the AMT hit on those munis can potentially reduce your yield, but I haven't looked at that fund in detail.

But as long as you understand what you've got there and it works for your situation, I don't see any reason to sell.
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