|Expense Ratio (net)||0.17%|
|Category||Muni National Interm|
|Last Cap Gain||0.00|
|Morningstar Risk Rating||Average|
|Beta (3Y Monthly)||0.90|
|5y Average Return||N/A|
|Average for Category||N/A|
|Inception Date||Sep 1, 1977|
Morningstar Premium Members have access to full analyst reports such as this for more than 1,000 of the largest and best mutual funds. Vanguard Tax-Managed Balanced's effective tax-management, seasoned managers, and low fees justify its Morningstar Analyst Rating of Gold. This balanced fund is essentially a combination of Silver-rated muni fund Vanguard Intermediate-Term Tax-Exempt VWITX and Gold-rated equity fund Vanguard Tax-Managed Capital Appreciation VTCIX .
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.
Thanks to terrific gains from broadly diversified U.S. equity funds like Vanguard Tax-Managed Capital Apprecation, as well as the fact that the taxable portfolios contain slightly more equity exposure than the tax-deferred portfolios, the tax-efficient portfolios all gained more than the analogous tax-deferred Vanguard Retirement Saver portfolios. The tax-efficient portfolios also limited the drag of taxes.
The firm views tax costs as another line item that drags on investors' take-home returns, so it devotes research and educational efforts to matters of tax management. Many of its funds are designed with tax efficiency in mind. For example, the firm was an innovator in creating exchange-traded funds by making them share classes of already-existing index funds, a structure that enables shareholders in the firm's traditional index equity funds to enjoy tax efficiency on par with their ETF counterparts.
For retired investors in tax-deferred accounts, I've developed model bucket portfolios using Vanguard's lineup. In this portfolio series, tax efficiency takes center stage, with three bucket retirement portfolios geared toward Vanguard investors' taxable accounts. When investing inside of taxable accounts (that is, non-tax-advantaged retirement accounts), sensibly employing a few basic investment types can help limit taxable capital gains and taxable income distributions on an ongoing basis.