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I read charles bolin's review of muni funds in the Febr commentary. Im in retirement and look at munis all the time. One of my holdings is FHMIX, Federated Hermes Conservative Muni, bought it through fidelity. Its an under the radar short term holding.
Ultra-ultra-short munis is an interesting idea. There don't seem to be many competitors, though access to any of them (including FHMIX) can be challenging. Clearly such funds are best used in taxable accounts.
FHMIX - Fidelity, TF, $25K min. Elsewhere $1M min. ATOIX - Schwab, TF, $1min. Elsewhere $1M min. ATOAX - Various, NTF, $100-$2500 min. TFCAX - Fidelity & TIAA, TF, $100K min. Elsewhere access limited.
These funds are useful if they return more, after tax, than MMFs. They may be useful even if their after-tax returns are similar to MMFs if one is seeking to reduce AGI.
For example, Medicare surcharges (IRMAA) are based on one form of MAGI. Deductibility of IRAs is based on another form of MAGI. And so on.
But if AGI is not a concern, I would take a MMF over any bond fund that didn't significantly beat the MMF in after-tax performance. This is why I tossed in FSIXX (NTF, $1min at Merrill) for comparison. Its current APY of 4.3% in a 25% bracket gives 3.23% after tax. Assuming a 5% state income tax, that's equivalent to a national muni fund pre-tax yield of 3.4%. Not too much different from these zero-ish duration muni funds.
I really like the idea of these funds, but I'll need to see them do better before I'm sold.
Here's a comparison of these three funds by Fidelity, including durations, SEC yields, and a graph of performances.
good discussion. been having a running chat with charles bolin on regular+timed asset shifts to tax-free options, and have yet to find an attractive low cost active fund with a goal (not mandate) to invest across a wider duration (preferably 1-8 years). i dislike myself having to weight between short vs. mid, and all these highly rated groups (e.g., baird, but preferably with lower cost) have the skills to do so.
again, looking for the MANAGER to choose across 1-8 yr span, not for me to select short vs mid duration fund weights.
value can be added, otherwise why dozens of active options? i suggest reading baird select fund reports. fidelity also has a good record , but reports are very brief.
Have you considered Baird Strategic Municipal Bond Fund? I'm not sure how the fund's targeted duration would align with your preferred 1 yr. - 8 yr. period.
"It targets an average maturity in the short to intermediate-term range, investing across the 1-15 year segment of the yield curve. The team utilizes yield curve positioning in the investment management process to capture pricing inefficiencies and optimize yield and 'roll' while striving for tax efficiency."
"While obligations of any maturity may be purchased, under normal circumstances, the Fund’s dollar-weighted average effective maturity is generally expected to be between three months and ten years. The Fund has a targeted duration of +/- 2 years to its benchmark."
yes in 2024, i meant baird strategic, there is no baird select. other than the high(ish) fees, i was not comfortable with their stake in charter school bonds. maybe that becomes a "homerun" with no Dept Of Education.
anyways, baird strategic is more along the lines of flexibility that not easy to find in tax-free, but easy to find in taxable at lower fees.
yes in 2024, i meant baird strategic, there is no baird select. other than the high(ish) fees, i was not comfortable with their stake in charter school bonds. maybe that becomes a homerum with no DOE. [snip]
BSNIX has a 0.30% expense ratio with a $10,000 minimum initial investment. The expense ratio and minimum initial investment seem very reasonable. But if you're not comfortable with the fund's stake in charter school bonds, then it's a definite no-go.
I own Baird Strategic Municipal Bond BSNIX (current duration 4.28 year) as well as Vanguard Intermediate-Term Tax-Exempt VWIUX (current duration 5.6 years). In the past, I have used them for tax-loss harvesting and currently have a much larger position in BSNIX.
I am please with BSNIX and have concluded that the additional 21 basis points in the ER has been well worth it. BSNIX 12 month, 3-year, and 5-year returns have been significantly better, with a higher 3-year alpha and a lower Standard Deviation. I had also looked at NSAOX, but the considerably higher Standard Deviation scared me away.
what about FEHAX, much, much, much higher SD than any of the above funds but much higher returns as well? or is it too far-out there for this particular discussion?
As I mentioned in David Snowball's thread, I too was concerned about the new MAGA trying to raise revenue by getting rid of tax exempt status of muni bonds. I had also posted that Alliance Bernstein article. After further reflection, I think that is a low probability outcome for the next four years because they are playing a long game. Sorry if I inadvertently alarmed others about this.
For a muni fund with a wide range of duration, one can look outside the box (national muni funds).
STWTX / STWVX (Hartford Schroders Tax-Aware Bond Fund) was classified as a muni fund through 2018. Since then it's been classified as a taxable bond fund. As M* describes the fund:
It often holds 70%-80% of assets in munis but will make big shifts to this allocation when its managers see more value there. [In 2020-2021 it dropped munis to 50%-60% of the portfolio. Since 2022 munis have constituted 70%+ of the fund.]
Currently, 93% of its assets are muni bonds.
With respect to duration:
The Fund may invest in fixed income securities of any maturity or duration. The Fund’s effective duration may vary overtime
M* shows that over the past five years, the fund's style box has ranged from short term/middle grade to long term/high grade. In words, M* writes:
duration stood at just under 4.0 years for most of 2019 through the end of 2021, but it extended again throughout 2022 and 2023 to over 9.0 years
Where the rubber meets the road:
Even on a pre-tax basis, BSNIX has performed significantly better. But as its prospectus says, it does not go long. (See also its fixed income style map here.) Both funds are five star funds. I'd stick with the lower risk, higher performing Baird fund.
Wide ranging funds, even five star funds, are not always what they're cracked up to be.
Contributions to an IRA cannot be deducted if MAGI exceeds certain amounts. For 2025, they are $146K (MFJ) and $89K. You can still contribute (assuming you have taxable compensation); you just can't deduct the contributions.
MAGI for IRA deductibility purposes follows Worksheet 1-1 in Pub 590-A. This adds in a half dozen other amounts, but does not add in tax-exempt income.
More generally,
Your modified adjusted gross income (MAGI) is your adjusted gross income with some of those adjustments added back. It determines whether you qualify for certain deductions, credits and other tax benefits, and how much you qualify for. MAGI is calculated differently for each benefit.
I guess you meant to say, "Deductibility of IRA [contribution]s is based on another form of MAGI" If so, that missing word made it difficult to understand.
of the short term variety, I like ATOIX over MEAR (best ETF to my eye) for ATOIX's near straight line chart. Their Jan distributions are nearly similar ~3%.
Edit: both ATOIX and MEAR are only ~$800M AUM funds. I bought MEAR today but any additional purchases into this category will go to an OEF.
@a2z I am studying bond ETFs that have maturities of one year for the purpose of building bond ladders for Treasuries, Corporate, High Yield, and Municipals:
In addition, they have ETFs that invest in the ETFs with target maturities, in effect, creating a ladder and maintaining it for you. They have these Ladder ETFs for all but Munis.
I like the idea of using the ETFs that mature, and your principal is returned to you, but the idea of having a rolling ETF bond ladder seems odd to me. I will have to think about it.
Target-maturity funds (OEFs or ETFs) don't promise par or anything specific at the end. They progressively turn into cash as maturity approaches and you get whatever that ends up being.
Hold individual Treasuries or bonds if you want the return of principal on maturity.
@a2z Some of the best performing Municipal bond funds that I track are:
Duration, Symbol, Name 0.2, FHMIX, Federated Hermes Conservative Municipal Microshort Inst 1.8, SUB, iShares Short-Term National Muni Bond ETF 3.9, SHYD, VanEck Short High Yield Muni ETF 4.0, DFNM, Dimensional National Municipal Bond ETF 4.2, BSNSX, Baird Strategic Municipal Bond Inv 4.7, BMNIX, Baird Core Intermediate Municipal Bond Inst 6.3, MUB, iShares National Muni Bond ETF 7.0, HYMU, iShares High Yield Muni Income Active ETF 8.5, HTAB, Hartford Schroders Tax-Aware Bond ETF EVSM, Eaton Vance Short Duration Municipal Income ETF
Dfa Dimensional National Municipal Bond ETF (DFNM) is 42% invested in long term Muni bonds, 35% short term Munis, and 14% intermediate term. (close to barbell strategy)
iShares National Muni Bond ETF (MUB) is 65% invest in long term Muni bonds, 14% short term Munis, and 20% intermediate term. (close to bond ladder strategy)
Assuming I am not worried about the transaction fees and the minimums, should I have a preference between ATOIX and FHMIX?
For example, a good reason could be if any of you had a bad experience with the respective fund family administration, such as redemption proceeds not being deposited into your account the next day when you sell their fund.
Assume I plan to buy and hold, except I plan to sell some if and when opportunities arise in equities.
FHMIX handled better the increase in interest rates in 2022 but I do not understand why FHMIX NAV is not as steady as ATOIX in the past six months (you could end up buying on an up day and sell on a down day). FHMIX was not in existence during Covid but ATOIX handled Covid very well.
Target-maturity funds (OEFs or ETFs) don't promise par or anything specific at the end. They progressively turn into cash as maturity approaches and you get whatever that ends up being.
Hold individual Treasuries or bonds if you want the return of principal on maturity.
i would like to mention that vwalx has many criteria i like in a tax-free fund, and have been a longtime holder. i wish they (wellington) would get rid of the high-yield mandate and had the flexibility to move wider across credit\duration space as they see opportunities.
for those interested, verdad (private manager) has done some fantastic quant work on forecasting bond re-rating as a strategy. would pair nicely with any of these bond shops that also take a more fundamental\narrative approach with each issuer.
Comments
FHMIX - Fidelity, TF, $25K min. Elsewhere $1M min.
ATOIX - Schwab, TF, $1min. Elsewhere $1M min.
ATOAX - Various, NTF, $100-$2500 min.
TFCAX - Fidelity & TIAA, TF, $100K min. Elsewhere access limited.
These funds are useful if they return more, after tax, than MMFs. They may be useful even if their after-tax returns are similar to MMFs if one is seeking to reduce AGI.
For example, Medicare surcharges (IRMAA) are based on one form of MAGI. Deductibility of IRAs is based on another form of MAGI. And so on.
But if AGI is not a concern, I would take a MMF over any bond fund that didn't significantly beat the MMF in after-tax performance. This is why I tossed in FSIXX (NTF, $1min at Merrill) for comparison. Its current APY of 4.3% in a 25% bracket gives 3.23% after tax. Assuming a 5% state income tax, that's equivalent to a national muni fund pre-tax yield of 3.4%. Not too much different from these zero-ish duration muni funds.
I really like the idea of these funds, but I'll need to see them do better before I'm sold.
Here's a comparison of these three funds by Fidelity, including durations, SEC yields, and a graph of performances.
i dislike myself having to weight between short vs. mid, and all these highly rated groups (e.g., baird, but preferably with lower cost) have the skills to do so.
there is also a related chat on whether tax-free arena can be a safe place from MAGA\DOGE\trump related volatility.
it seems too boring for them, but anyplace they dont have a stake is a potential target for any crony with an agenda.
see
https://www.alliancebernstein.com/corporate/en/insights/investment-insights/will-a-red-wave-affect-municipal-bonds-tax-exempt-status.html
ST Muni (Indexed) SUB, SHM, VTES
ST Muni (Active) MEAR, SMMU
Ultra-ST (Active) FUMB
again, looking for the MANAGER to choose across 1-8 yr span, not for me to select short vs mid duration fund weights.
value can be added, otherwise why dozens of active options? i suggest reading baird select fund reports.
fidelity also has a good record , but reports are very brief.
Have you considered Baird Strategic Municipal Bond Fund?
I'm not sure how the fund's targeted duration would align with your preferred 1 yr. - 8 yr. period.
"It targets an average maturity in the short to
intermediate-term range, investing across the
1-15 year segment of the yield curve. The
team utilizes yield curve positioning in the
investment management process to capture
pricing inefficiencies and optimize yield and
'roll' while striving for tax efficiency."
"While obligations of any maturity may be
purchased, under normal circumstances, the
Fund’s dollar-weighted average effective
maturity is generally expected to be between
three months and ten years. The Fund has a
targeted duration of +/- 2 years to its
benchmark."
https://www.bairdassetmanagement.com/siteassets/pdfs/fact-sheets/bond-strategic-muni-fact-sheet.pdf
other than the high(ish) fees, i was not comfortable with their stake in charter school bonds.
maybe that becomes a "homerun" with no Dept Of Education.
anyways, baird strategic is more along the lines of flexibility that not easy to find in tax-free, but easy to find in taxable at lower fees.
BSNIX has a 0.30% expense ratio with a $10,000 minimum initial investment.
The expense ratio and minimum initial investment seem very reasonable.
But if you're not comfortable with the fund's stake in charter school bonds, then it's a definite no-go.
I am please with BSNIX and have concluded that the additional 21 basis points in the ER has been well worth it. BSNIX 12 month, 3-year, and 5-year returns have been significantly better, with a higher 3-year alpha and a lower Standard Deviation. I had also looked at NSAOX, but the considerably higher Standard Deviation scared me away.
I do not think I follow this (can you pl elaborate, may be with an example)?
"Deductibility of IRAs is based on another form of MAGI"
STWTX / STWVX (Hartford Schroders Tax-Aware Bond Fund) was classified as a muni fund through 2018. Since then it's been classified as a taxable bond fund. As M* describes the fund: Currently, 93% of its assets are muni bonds.
With respect to duration: Summary Prospectus.
M* shows that over the past five years, the fund's style box has ranged from short term/middle grade to long term/high grade. In words, M* writes: Where the rubber meets the road:
Even on a pre-tax basis, BSNIX has performed significantly better. But as its prospectus says, it does not go long. (See also its fixed income style map here.) Both funds are five star funds. I'd stick with the lower risk, higher performing Baird fund.
Wide ranging funds, even five star funds, are not always what they're cracked up to be.
https://secure.ssa.gov/poms.nsf/lnx/0601101010
Contributions to an IRA cannot be deducted if MAGI exceeds certain amounts. For 2025, they are $146K (MFJ) and $89K. You can still contribute (assuming you have taxable compensation); you just can't deduct the contributions.
MAGI for IRA deductibility purposes follows Worksheet 1-1 in Pub 590-A. This adds in a half dozen other amounts, but does not add in tax-exempt income.
More generally, https://www.irs.gov/e-file-providers/definition-of-adjusted-gross-income
I guess you meant to say, "Deductibility of IRA [contribution]s is based on another form of MAGI" If so, that missing word made it difficult to understand.
Edit: both ATOIX and MEAR are only ~$800M AUM funds. I bought MEAR today but any additional purchases into this category will go to an OEF.
https://www.ishares.com/us/literature/brochure/ishares-ibonds-etfs-building-better-bond-ladders-investor-guide-en-us.pdf
In addition, they have ETFs that invest in the ETFs with target maturities, in effect, creating a ladder and maintaining it for you. They have these Ladder ETFs for all but Munis.
https://www.ishares.com/us/literature/brochure/ishares-ibonds-etfs-building-better-bond-ladders-investor-guide-en-us.pdf
I like the idea of using the ETFs that mature, and your principal is returned to you, but the idea of having a rolling ETF bond ladder seems odd to me. I will have to think about it.
Hold individual Treasuries or bonds if you want the return of principal on maturity.
Duration, Symbol, Name
0.2, FHMIX, Federated Hermes Conservative Municipal Microshort Inst
1.8, SUB, iShares Short-Term National Muni Bond ETF
3.9, SHYD, VanEck Short High Yield Muni ETF
4.0, DFNM, Dimensional National Municipal Bond ETF
4.2, BSNSX, Baird Strategic Municipal Bond Inv
4.7, BMNIX, Baird Core Intermediate Municipal Bond Inst
6.3, MUB, iShares National Muni Bond ETF
7.0, HYMU, iShares High Yield Muni Income Active ETF
8.5, HTAB, Hartford Schroders Tax-Aware Bond ETF
EVSM, Eaton Vance Short Duration Municipal Income ETF
Dfa Dimensional National Municipal Bond ETF (DFNM) is 42% invested in long term Muni bonds, 35% short term Munis, and 14% intermediate term. (close to barbell strategy)
iShares National Muni Bond ETF (MUB) is 65% invest in long term Muni bonds, 14% short term Munis, and 20% intermediate term. (close to bond ladder strategy)
For example, a good reason could be if any of you had a bad experience with the respective fund family administration, such as redemption proceeds not being deposited into your account the next day when you sell their fund.
Assume I plan to buy and hold, except I plan to sell some if and when opportunities arise in equities.
FHMIX handled better the increase in interest rates in 2022 but I do not understand why FHMIX NAV is not as steady as ATOIX in the past six months (you could end up buying on an up day and sell on a down day). FHMIX was not in existence during Covid but ATOIX handled Covid very well.
i would like to mention that vwalx has many criteria i like in a tax-free fund, and have been a longtime holder.
i wish they (wellington) would get rid of the high-yield mandate and had the flexibility to move wider across credit\duration space as they see opportunities.
for those interested, verdad (private manager) has done some fantastic quant work on forecasting bond re-rating as a strategy. would pair nicely with any of these bond shops that also take a more fundamental\narrative approach with each issuer.
can move this thread as needed, but FYI :
vanguard ind. advisor has posted its first premium article covering the entire breadth of bond funds.