Tax Exempt Bonds


Recycles dryer sheets
Feb 16, 2005
For those who want the utmost in smplicity, what is wrong with the strategy of placing the bulk of one's portfolio in tax exempat bond funds, such as Vanguard's CA LT Tax Exempt Investor fund:

1 Year 3 Year 5 Year 10 Year Since Inception
CA LT Tax-Exempt Investor 2.65% 5.99% 6.38% 6.33% 7.00%

Except for the past year (2.65%) the fund seems to perform much better than the 4% FIRE standard. ...7% average return since 1986. Plus, if you live in California, NO TAXES!!!

Is this too simlistic??
Hmmm, but the one year is 2.65%, can you live on that without drawing down principle, nevermind adjusting for COLA? Methinks the "I" word is the thing you'd have to worry about. I believe it's been noted that we've had great returns on funds like this over the last decade that may not be repeated. The direction returns are going doesn't look good either.

Good points. I can see why someone should not depend on such funds too heavily. In my particular case, I am not planning to RE until my COLA pension can support a basic lifestyle 100%. My additional savings are "gravy" above and beyond the basics. Therefore, I should be able to not withdraw funds for an indefinite period of time.
Also, the default risk should NOT be minimized. CA is broke, as are many cities, counties, etc. Most states are broke. the US is broke.

I think that many muni bondholders are in for stormy weather- and this "AAA insured muni" racket is a joke. Research what Weiss Research says about the most poorly regulted securities market- the muni bond market.
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