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Tax-Exempt Income Portfolio

5/2016 from Income Investing

This recommended investment portfolio is one of 20+ mutual fund portfolios that we've assembled for investors with different time horizons and risk-tolerance levels to consider. Visit our Portfolio Finder to see them all.

 
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Tax-Exempt Income Portfolio

For when taxes really matter.
 100% Bonds | 


 Data through December 31, 2017

FUND NAME SYMBOL % OF
PORTFOLIO
YTD
RETURN
1-YR
RETURN
3-YR
RETURN
5-YR
RETURN
10-YR
RETURN
MAX LOAD EXPENSE RATIO
BondBaird Intermediate Municipal Bond InvestorBMBSX15%2.97%2.97%1.37%1.38%3.19%none%0.55%
BondFidelity Intmed Muni IncomeFLTMX154.494.492.222.343.66none0.35
BondT. Rowe Price Tax-Free Short-IntermediatePRFSX151.741.740.830.982.38none0.49
BondSchwab Tax-Free BondSWNTX154.384.382.212.344.16none0.49
BondUSAA Tax Exempt Long-TermUSTEX6.255.85.83.243.414.69none0.48
BondVanguard California Long-Term Tax-Ex InvVCITX6.256.826.823.713.984.7none0.19
BondVanguard Long-Term Tax-ExemptVWLTX6.256.446.443.653.724.69none0.19
BondWells Fargo Municipal Bond AWMFAX6.255.955.953.13.65.144.500.75
BondMarket Vectors Lehman AMT-Free Shrt MuniSMB151.681.680.790.81none0.2
   1003.853.851.962.13.2 0.4
** Closed to new investors. # Closed to new investors; other share classes are available.
r Maximum redemption fee charged when you sell shares. s Front-end load; redemption fee may apply.
— Fund has not existed for the specified time. Source: Morningstar, Inc..

If you're in the maximum federal income-tax bracket, municipal bonds are a no-brainer. A yield of 2.3% in tax-exempt interest beats a 4% in taxable interest for someone who faces the top federal rate of 43.4%.

But lower-income taxpayers should consider munis, too — they're sound, poular investments with excellent vital signs.

Our portfolio has a mix of 30% short-term funds, 45% intermediate-term bonds, and 25% long-term. We steer clear of "junk" munis.