Hello Bogleheads,
Our family is bound to maintain a relatively large emergency fund. Chances are we will not use it in the next 5 years - but if we have to use it, it better be there.
So far, VMFXX (Vanguard's settlement fund) worked well as EF with ~5% SEC yield. Dividends were mostly DCA-ed to a total market index fund.
Recently, I started thinking about moving from VMFXX to VUSXX (Vanguard Treasury MMF), but I found a few posts where municipal bond funds were discussed as an alternative. Looking at the VCTXX (California intermediate bond fund), I like everything about it - but I am not that familiar with specifics and caveats of bond funds in general. If I understand this correctly, when it comes to liquidity and safety of principal, municipal bond funds are definitely more risky compared to money markets - but yet it might not be a horrible idea to use them.
So my question is - can intermediate municipal bond funds be a part of the EF, or should they be seen as something completely different - just a tax-friendly version of a bond fund?
Our federal tax bracket is 32%, and our CA tax bracket is 9.3%.
Our family is bound to maintain a relatively large emergency fund. Chances are we will not use it in the next 5 years - but if we have to use it, it better be there.
So far, VMFXX (Vanguard's settlement fund) worked well as EF with ~5% SEC yield. Dividends were mostly DCA-ed to a total market index fund.
Recently, I started thinking about moving from VMFXX to VUSXX (Vanguard Treasury MMF), but I found a few posts where municipal bond funds were discussed as an alternative. Looking at the VCTXX (California intermediate bond fund), I like everything about it - but I am not that familiar with specifics and caveats of bond funds in general. If I understand this correctly, when it comes to liquidity and safety of principal, municipal bond funds are definitely more risky compared to money markets - but yet it might not be a horrible idea to use them.
So my question is - can intermediate municipal bond funds be a part of the EF, or should they be seen as something completely different - just a tax-friendly version of a bond fund?
Our federal tax bracket is 32%, and our CA tax bracket is 9.3%.
Statistics: Posted by ambidexter — Sun Oct 20, 2024 7:25 pm — Replies 3 — Views 183