I wrote about the exhausting time consuming research I had been doing on municipal bonds here, here and here. I’ve come to the conclusion that I need to take a break from research and just start buying funds to get some time back so here are the two that I ended up landing on.
NEA
Nuveen has some closed ended funds that offer municipal bonds at a very generous yield of 7.64% under ticker NEA. I’ve owned this CEF for some time now and my cost basis is around $11.17. I am DRIP’ing the dividend (re-investing the dividend) and now have about 1000 shares. I realized that I was getting too heavy so I decided I needed to diversify.
Caution: This CEF has a high expense ration at a whopping 1.4% so depending on your financial objectives, this may not be a long term hold for you. These funds are also known to use leverage so if that concerns you then avoid the fund. I own it for the tax free income and it sits in a taxable account. I don’t plan on owning this for decades but I do expect capital appreciation when the Fed cuts rates.
MLN
MLN is VanEck Long Muni ETF fund. I liked the diversified bond holdings that included bonds from NC, CA, TX, NY, MA. It has 576 holdings but only 500m in holdings. The expense ratio for this fund is 0.24% but the yield is much lower at 3.51% but is also tax free. I already setup the automatic purchases that will start this week and continue on until I decide to do something different.
VWAHX
After reviewing dozens and dozens of ETFs and CEFs I finally had landed on VWAHX as an alternate to NEA. However Fidelity doesn’t allow recurring purchases of this fund for some reason and I wanted something automated. If Fidelity changes their mind, I will add this to my portfolio as well.
Why These Funds?
The key growing issue I/We have right now is getting pushed onto higher tax brackets due to our high income. You can read my tax autopsy here and my subsequent decision to buy $30,000 of munis here.
Right now, having large sums of cash in reserves earning interest acts as a income tax penalty as that interest pushes our income level to a higher tax bracket and interest is taxed as ordinary income.
Share The Wealth
Do you have an investment plan for large sums of cash in a taxable account? If so, share the wealth and let me know in the comments below.