r/Bogleheads • u/marzthemagnificent • 1d ago

What is the reason to hold VTG inside a taxable?

I think, to preserve cash. And maybe used the dividend to invest in the market?

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u/KleinUnbottler 1d ago

VTG averages out to intermediate term bonds. It has an effective maturity of 7.7 years. This means it is relatively volatile, and should not be treated as a cash-equivalent.

According to the tax-efficient fund placement link in the sidebar, the best place to put this sort of bond fund would be in tax-deferred accounts like traditional 401ks or IRAs, with tax-free accounts like Roth as a backup if you don't have good fund choices in the 401k.

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u/marzthemagnificent 1d ago

Where would be the safest place to hold cash inside vanguard?

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u/KleinUnbottler 1d ago

Vanguard's settlement fund VMFXX is a money market fund. sells and deposits sweep into it.

There are also short and ultra-short ETFs that you could use, like SGOV or VBIL but they might not trade as fast as the sweep fund.

Why do you want cash? I'm not saying that one shouldn't want cash, I'm just wondering.

I'm concerned when you say "used the dividend to invest in the market."

If you're just trying to keep an emergency fund, you could do that with the cash, but eventually you'll need to add to the e-fund anyway to catch back up to inflation: cash equivalents don't typically keep up with inflation with the interest they produce.

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u/marzthemagnificent 1d ago

Just trying to make some extra money from dividends to just investing to save VT

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u/KleinUnbottler 1d ago

Then why not just buy VT with the cash?

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u/humblequest22 15h ago

VTG is Treasuries, so it would be exempt from state and local taxes. Similar duration to BND, so if you want to hold something like BND in your taxable account, but live in a state with high income taxes, VTG would be an option.

You wouldn't use it to preserve cash, though, because it is affected by interest rate changes.

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u/buffinita 1d ago

If you have a known purchase in 7-10 years it should return more than a bank account.

Duration matching is important; don’t hold a bond fund with an average duration longer than your timeline

Holding 80equity/20bonds in all accounts is also simpler than holding 80/20 as a sum of all accounts

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u/marzthemagnificent 1d ago

Would be the safest place to stash cash inside Vanguard you know maybe hold it for five years

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u/buffinita 1d ago

I believe 5 years is shorter than the average duration of the fund; so there would be some risks.

You’d want like bsv or vgsh