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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 October 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%3.39%0.97%1.51%1.47%3.4%none%0.55%
BondFidelity Intmed Muni IncomeFLTMX154.211.672.32.353.74none0.35
BondT. Rowe Price Tax-Free Short-IntermediatePRFSX152.230.840.971.042.53none0.49
BondSchwab Tax-Free BondSWNTX154.181.562.232.334.21none0.49
BondUSAA Tax Exempt Long-TermUSTEX6.254.662.053.153.34.53none0.48
BondVanguard California Long-Term Tax-Ex InvVCITX6.255.82.333.73.894.63none0.19
BondVanguard Long-Term Tax-ExemptVWLTX6.255.372.313.623.64.66none0.19
BondWells Fargo Municipal Bond AWMFAX6.255.492.323.193.675.094.500.75
BondMarket Vectors Lehman AMT-Free Shrt MuniSMB152.470.940.930.92none0.2
   1003.81.472.062.133.26 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.