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Tax Efficient Balanced Funds

willmatt72
in Fund Discussions
Hello all,

Just curious about your options for using a balanced fund in a taxable account as a core holding. After getting hit with a rather large tax bill for 2016, I'm looking to put together a more tax efficient portfolio. I'm paring back on some income producing CEFs and looking to put that money to work in a more tame, tax efficient manner. Some options such as VBINX, CBLAX and VTMFX have appeared on my radar. Any other candidates? Thanks in advance.

Comments

  • VintageFreakVintageFreak
    Hard to imagine anyone beating VTMFX. In fact, I need to re-examine my allocation to VWELX.
  • willmatt72
    edited March 2017
    My largest holding is VWELX. Great fund but I think it should be held in a non-taxable account for sure.
  • Edmond
    Holding a balanced portfolio, comprised of muni-bonds and stocks, probably makes sense for many people.

    But, IMO, using the 'wrapper' of a balanced fund to do so, is not the approach I would take. Instead, I would own separate stock & muni-bond vehicles (probably ETFs or CEFs), held in the desired stock/bond allocation. Why? - When stocks (or bonds) drop, you can use the taxability of your account as an asset, rather than a liability -- sell the item which is 'down', harvest the tax loss, then buy a similiar-but-not-identical ETF.

    OTOH, the manager of a tax-aware balanced fund doesn't drive his/her decisions on what YOUR cost-basis is.

    jmo
  • JoeD
    FMUAX has muni's, so maybe a bit more tax efficient.
  • willmatt72
    Edmond said:

    Holding a balanced portfolio, comprised of muni-bonds and stocks, probably makes sense for many people.

    But, IMO, using the 'wrapper' of a balanced fund to do so, is not the approach I would take. Instead, I would own separate stock & muni-bond vehicles (probably ETFs or CEFs), held in the desired stock/bond allocation. Why? - When stocks (or bonds) drop, you can use the taxability of your account as an asset, rather than a liability -- sell the item which is 'down', harvest the tax loss, then buy a similiar-but-not-identical ETF.

    OTOH, the manager of a tax-aware balanced fund doesn't drive his/her decisions on what YOUR cost-basis is.

    jmo

    I think a problem with this plan occurs when you have little to no losses, but a lot of capital gains and income. This has been the case for me more often than not.
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