Join Early Retirement Today
Reply
 
Thread Tools Display Modes
How to Compare Funds After Taxes?
Old 09-02-2018, 10:33 AM   #1
Dryer sheet aficionado
lust4adventure's Avatar
 
Join Date: Aug 2018
Posts: 31
How to Compare Funds After Taxes?

I'm comparing various Vanguard money market funds, tax-exempt New Jersey funds (I live in NJ), and corporate bond ETFs assuming that "dividends"/interest will be taxed at a 32% effective federal+state income tax rate. The after-tax yields (as of 2018-09-01) were easy to calculate—multiply by 0.68—but I'm wondering whether it's fair to subtract expense ratios from the after-tax yields to get net yields. I'm assuming I'll reinvest dividends/interest.

I've attached an XLS spreadsheet with my manual calculations.

If everything's right, it looks like parking my short-term funds in VMMXX (the prime money market fund), taxable bond funds in VNJTX (the long-term tax-exempt New Jersey muni fund), and tax-advantaged bond funds in a combination of VCIT and VCLT makes the most sense. VMMXX over VNJXX is a little surprising because people like Burton Malkiel, author of A Random Walk Down Wall Street, advise people in high tax brackets (me) to park money in tax-exempt funds. I guess I have to be an ultra-high income earner for that to make sense. But VNJTX for bonds is the clear winner unless I want to invest mostly in VCLT (long-term investment-grade corporates).

Thoughts?
__________________
“The greatest enemy of a good plan is the dream of a great plan.” Stick to the good plan.
— John Bogle, “The Little Book of Common Sense Investing”
lust4adventure is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 09-02-2018, 11:40 AM   #2
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 4,172
Expense ratios should already be taken out when you get the customer yields so no need to do that.
kaneohe is offline   Reply With Quote
Old 09-02-2018, 12:01 PM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Aug 2004
Location: Laurel, MD
Posts: 8,309
Are you using Taxable Equivalent Yield for the muni funds? If so, I don't see it in your spreadsheet. I also agree with Kaneohe.....expenses have already been deducted.

If you take these two items into account, the net return for VNJXX would be 2.029 instead of 1.22.
__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
jazz4cash is offline   Reply With Quote
Old 09-03-2018, 08:57 PM   #4
Dryer sheet aficionado
lust4adventure's Avatar
 
Join Date: Aug 2018
Posts: 31
Quote:
Originally Posted by jazz4cash View Post
Are you using Taxable Equivalent Yield for the muni funds? If so, I don't see it in your spreadsheet.
I didn't do that. The results are the same, though: The munis win.
Quote:
Originally Posted by jazz4cash View Post
I also agree with Kaneohe.....expenses have already been deducted.
Thanks, both of you! Hopefully others won't repeat my mistake when comparing funds.

Quote:
Originally Posted by jazz4cash View Post
If you take these two items into account, the net return for VNJXX would be 2.029 instead of 1.22.
Noted.
__________________
“The greatest enemy of a good plan is the dream of a great plan.” Stick to the good plan.
— John Bogle, “The Little Book of Common Sense Investing”
lust4adventure is offline   Reply With Quote
Old 09-04-2018, 04:43 AM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 10,252
How did you compare and account for the different risks in all the funds you are looking at?

bogleheads.org has a thread with a linked spreadsheet to look at tax costs:
https://www.bogleheads.org/forum/viewtopic.php?t=242137
but it does not look at risk, so it is mostly used to compare apples-to-apples such as one international fund to a substantially identical international fund.
LOL! is offline   Reply With Quote
Reply

Tags
bond funds index, bond investing strategies, money market, tax exemption


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
How does your stash compare to this? mickeyd FIRE and Money 32 02-19-2009 08:20 AM
Taxes, Taxes. Taxes mickeyd FIRE and Money 1 02-09-2008 12:18 PM
How do your ER costs compare to these? mickeyd FIRE and Money 9 01-02-2008 09:32 PM
How to compare funds? smooch FIRE and Money 4 05-06-2005 06:08 AM

» Quick Links

 
All times are GMT -6. The time now is 04:07 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.