|Expense Ratio (net)||0.36%|
|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|
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