Investing From A Taxable Bucket

It’s complicated. I wanted to start this post with the phrase ‘it’s complicated’ because if you don’t like complicated things then this post isn’t for you. In my post, “How I’m Investing My Buckets of Money: Taxable” bucket I gave an example of how I’m investing funds from my taxable bucket but I merely scratched the surface in that post and I wanted to dive deeper but it’s complicated.

Before I write a very long post explaining what I’m doing, it would be better for you to watch this video from Safeguard Wealth Management that explains the intricacies of growth, taxation and outcomes of investing in a taxable bucket.

And here is a supplemental video with five key rules (summary below video).

Key Rules

1. Don’t Hold Mutual Funds in a Taxable Account
2. Don’t Hold Taxable Bonds or Taxable Fixed Income Assets
3. Don’t Hold High Dividend Stocks / Re-invest dividends
4. Don’t Hold Multi-Asset Funds (e.g. Target Date Funds)
5. Don’t Actively Short Term Trade

My Current Investments

Here’s what is in my current taxable bucket portfolio but keep in mind that they are small positions:

1. SPGP – The fund generally will invest at least 90% of its total assets in the securities that comprise the underlying index. Strictly in accordance with its guidelines and mandated procedures, the index provider compiles, maintains and calculates the underlying index, which is designed to track the performance of approximately 75 growth stocks in the S&P 500® Index with relatively high quality and value composite scores.
2. Cash – Most of my money is sitting in cash, the S&P 500 is, in my opinion, way overvalued so rather than get burned holding it when it corrects, I will wait and deploy capital on major corrections.
3. O – Real Estate Investment Trust that pays a monthly dividend.

As you can see, I’m breaking some of the rules and I have had to take huge tax hits because my cash earning interest at 5%+ is being taxed at 32% leading me to a $15,000 tax bill this year.

My Future Investments

I am leaning more towards doing a 50/30/20 approach to my future taxable bucket investment portfolio so watch this video to learn what I’m referring to but I will modify the investments to be a bit more conservative since I’m not in my 20s or 30s.

In essence the goal here is to get a high income ETF to feed growth ETFs balanced with volatility control. The key candidates in the video are SCHD 50% (growth), TQQQ 20% (leverage), JEPI 30% (high income), however my ETF candidates are SPGP for growth, JEPI or JEPQ for income, and a bond portfolio for income (TLT, TLTW, or HIGH).

I am still running models so I haven’t decided to do anything and I’m in no rush as I won’t implement any changes until this market corrects 10% or more.

Tax Goals

The ultimate goal with the taxable bucket of money is to invest it for tax optimization and reduce the 32% tax bracket. For now it looks like I will simply move to a municipal bond fund like NEA to avoid federal income tax.