|Expense Ratio (net)||0.37%|
|Category||Muni National Interm|
|Last Cap Gain||0.00|
|Morningstar Risk Rating||Below Average|
|Beta (3Y Monthly)||0.83|
|5y Average Return||N/A|
|Average for Category||N/A|
|Inception Date||Apr 15, 1977|
For more than a decade, income investors have been plagued by paucity wrapped in misery. The bellwether 10-year Treasury note has doled out an average 2.6% interest since 2008. Although the Federal Reserve has nudged its target interest rate range to 2.25% to 2.50%, it has signaled that it's done raising rates for now.Even worse, the yield on the 10-year T-note briefly sank below the yield on the three-month T-bill--an unusual inversion that can sometimes herald a recession and lower yields ahead. The takeaway: Locking your money up for longer periods is rarely worth the negligible increase in yield. What could increase your yield these days? Being a little more adventurous when it comes to credit quality. When you're a bond investor, you're also a lender, and borrowers with questionable credit must pay higher yields. Similarly, stocks with above-average yields probably have some skeletons in their balance sheets. You can ameliorate credit risk--but not eliminate it--through diversification. Invest in a mutual fund, say, rather than a single issue. And invest in several different types of high-yielding investments--for example, investment-grade bonds, preferred stocks and real estate investment trusts--rather than just one category.Despite such caveats, income investing is not as bad as it was in 2015, when it was hard to milk even a penny's interest out of a money market. Now you can get 3.3% or more from no-risk certificates of deposit at a bank. We'll show you 33 ways to find the best yields for the risk you're willing to take, ranging from 2% all the way up to 12%. Just remember that the higher the payout, the greater the potential for some rough waters. SEE ALSO: 20 of Wall Street's Newest Dividend Stocks
Once you've made all of those 401(k) and IRA contributions, investing in a taxable account may be your only option. You'll also want to employ a taxable account if you expect to tap the account prior to retirement. Whereas tax-sheltered retirement-savings vehicles generally carry at least some strictures to pulling your money out early (save for withdrawals of Roth IRA contributions, which are always tax- and penalty-free), you can come and go as you please in a taxable account.
The classic minimalist portfolio consists of three funds: one broad-market U.S. stock index fund, one broad-market international-stock index fund, and a total bond market index fund. Such a portfolio, the likes of which I wrote about last week, is cheap, well-diversified, and low-maintenance.
The key reason is to limit your oversight responsibilities to help you focus on the parts of your investment program that can really move the needle--namely, your savings rate and your asset allocation. Alternatively, you could employ simple index funds or exchange-traded funds as building blocks, as in the portfolios below. In contrast with an all-in-one fund strategy, employing multiple funds allows you to exert some control over your asset allocation, customizing your portfolio's risk level to suit your situation.
Ultrasafe investments, like short-term Treasuries, are an effective way to diversify an all-stock portfolio as they tend to hold up well during periods of market distress. Treasuries are backed by the full faith and credit of the U.S. government, so they don't carry the credit risk that is embedded in corporate bonds. Schwab Short-Term U.S. Treasury ETF SCHO provides great exposure to these stable assets.
Inspired by organizing consultant Marie Kondo's Netflix show and best-selling book, "The Life-Changing Magic of Tidying Up," people are filling up dumpsters with possessions that no longer "spark joy." Perhaps not coincidentally, Goodwill Stores have also seen a spike in donations of items that have done their jobs (and presumably have been thanked for their service). With fewer accounts and holdings, you can better focus on the really big determinants of your financial success: your asset allocation, your savings or spending rate, and your proximity to reaching your goals.
The veteran manager of this Kiplinger 25 fund has retired, but the new leaders have proven ready since taking the reins last year.
Historically, gaining access to municipal bonds through an index strategy has been difficult because the muni bond market is much more fragmented and expensive to trade than other fixed-income markets. An index-tracking fund like Vanguard Tax-Exempt Bond ETF VTEB now features exceptionally low tracking error, making it a solid choice for exposure to the broader municipal-bond market. VTEB offers broad exposure to investment-grade municipal bonds and is one of the cheapest funds in the muni national intermediate Morningstar Category, earning a Morningstar Analyst Rating of Silver.
Note: This article is part of Morningstar's 2019 Portfolio Tuneup week. A version of this article appeared on Sept. 11, 2018. Tightening up all of the costs in a portfolio is one of the best ways to enhance your take-home return.
The couple is also comfortable on the financial front: Even though they retired during the financial crisis, the market has performed exceptionally well since then, and their portfolio currently weighs in at nearly $1 million.
Thanks to an exceptionally strong equity market and decent, if not spectacular, bond market performance, our tax-efficient Bucket Portfolios for Vanguard investors have delivered solid returns over the past three years. The portfolios have performed so well, in fact, that they've beaten our model Vanguard portfolios that were created without regard for tax efficiency. A dash of small-cap exposure has been a boon, as has the fact that the two tax-managed U.S. equity funds in the portfolio both maintain a bias toward growth stocks, which have dramatically bested value and blend names over the trailing three-year period.
The group's annual conference, with Bogle himself as the headliner, typically sells out in a matter of days. Because the firm fields a competitive offering in every key market segment, building portfolios composed of Vanguard's funds is a breeze. Ultralow costs mean the firm's bond funds are invariably contenders in their categories, and Vanguard also fields a lineup of topnotch index products (traditional index funds and exchanged-traded funds) as well as fine actively managed offerings.
Note: Christine Benz's Portfolio Makeover Week is coming this fall. To learn more about having your portfolio considered for a makeover, click here. When I launched my model Retirement Bucket and Saver Portfolios in September 2015, the timing looked less than auspicious.
Thus, despite Fidelity's recent launch of two new zero-cost index funds that are rivals to existing holdings in the tax-efficient portfolios, my review of my Fidelity Tax-Efficient Retirement Saver Portfolios didn't result in any changes.
My tax-efficient Bucket portfolios for Fidelity investors provide a worthy case study. Part of the reason is philosophical: I've designed my tax-efficient portfolios to be ultra-minimalist, low-maintenance, and low-turnover, because there's no better way to trigger tax bills than to engage in frequent trading.
The Fidelity of the 1980s and 1990s was all about domestic-stock funds and the rock-star managers who ran them: Magellan FMAGX , Low-Priced Stock FLPSX , Dividend Growth FDGFX , and Contrafund FCNTX , to name some of the biggies. Fidelity's lineup evolved, too. The firm's fixed-income prowess makes it a particularly appropriate destination for retirees, whose portfolios typically include larger stakes in safe assets than is the case for younger investors.
My initial Fidelity bucket portfolios--conservative, moderate, and aggressive--were geared toward investors in tax-deferred accounts like IRAs. With healthy allocations to bonds, including stakes in tax-unfriendly categories like TIPS and commodities, these portfolios are not going to be particularly tax-efficient over time. The firm's municipal-bond lineup has long been one of Morningstar's favorites, featuring reasonable costs, experienced management, and strong analytics.
A rising-rate environment poses challenges for income investors. After all, when interest rates rise, bond prices fall. At times like this, a seasoned bond-fund manager can be an income investor's best friend. At Kiplinger, we prefer mutual funds with solid long-term records - and managers with tenures to match. Also, we prefer funds with below-average volatility for their category, and we keep a close eye on a fund's size because a gargantuan asset base makes managing a fund difficult. And, of course, low operating costs are crucial for our funds - all actively managed - to overcome the biggest advantage of index funds: microscopic expense ratios. When it comes to investing for income in choppy markets, these six bond funds - culled from the list of our favorite low-fee mutual funds - stand out. SEE ALSO: 53 Best Dividend Stocks for 2018 and Beyond