Vanguard Launches New Municipal Bond ETFs for Tax-Free Income: 2B Nier Automata Gives Her Take

The Taxman Cometh But Vanguard Is Here to Save Your Wallet

As a renowned android warrior I know the importance of guarding your hard earned money from the clutches of taxation. That's why Vanguard has come to your rescue with their new municipal bond exchange traded funds (ETFs) offering tax free income options!

The Power of Municipal Bonds: A Shield Against Income Taxes

Muni bond funds are a gift from the heavens themselves or so my fellow Resistance members tell me. These bonds provide income free from federal income taxes and if you're lucky enough to live in the same state where the bond was issued you can avoid state levies too. It's like dodging bullets in bullet hell but with money!

California Dreamin': VTEC Has Got You Covered

For my friends residing in the beautiful state of California Vanguard's California Tax Exempt Bond ETF (VTEC) is a dream come true. With top marginal income tax rates hitting a staggering 14.4% you could use all the tax free income you can get. Let VTEC be your loyal companion in the fight against the taxman!

Tax Equivalent Yield: A Battle of Numbers

Calculating tax equivalent yield may sound like decoding a complex hacking algorithm but trust me it's worth it. Imagine being in a 32% federal income tax bracket and still receiving a tax free yield of 3% from a muni bond. That's like effortlessly dodging enemy attacks while looking stylish. But to achieve similar income from a taxable bond you'd need a yield of 4.41%. Let the numbers guide you to victory!

Duration: Your Weapon Against Reinvestment Risk

When it comes to bond duration think of it as your trusty weapon in battle. The Fed's interest rate hikes and the inverted yield curve may have caused some short term chaos but fear not! Strategists recommend adding duration – longer dated bonds with more price sensitivity. It's like equipping yourself with the finest weapons to counter any enemy attack. VTEI and VTEC have durations of about four and five years respectively.

Index Based Approach: The New Trend in Municipal Bond Investing

In the ever evolving world of muni bonds Vanguard has embraced the index based approach much like how I embrace my trusty Virtuous Contract. VTEC tracks the S&P California AMT Free Municipal Bond Index while VTEI follows the S&P Intermediate Term National AMT Free Municipal Bond Index. This approach results in lower fees and potentially higher returns. Talk about a win win situation!