Took over Dad's portfolio - Muni funds (junk bond, IRA, trading)
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My father passed away about a year ago. Since then I took over managing this portfolio for my mom. They have an IRA, which holds most of their money, and a checking account.
There are two funds in his non-IRA account. Both have been doing terrible and I was thinking of selling them. But they are muni funds, which from my understanding are good for tax purposes. I think he put them into the checking account as a source of income. But they have both been losing money since I've been watching them over the past year.
Here are the funds with a brief synopsis:
HYD-VanEck Vectors High-Yield Municipal Index ETF. Dividends 4.34%
NXJ-Nuveen New Jersey Quality Municipal Income Fund: Dividends 5.06%
Can anyone tell me why I should keep these funds?
Thanks.
PS. There isn't that much money in each account, only about $10,000. So the dividends aren't much.
My father passed away about a year ago. Since then I took over managing this portfolio for my mom. They have an IRA, which holds most of their money, and a checking account.
There are two funds in his non-IRA account. Both have been doing terrible and I was thinking of selling them. But they are muni funds, which from my understanding are good for tax purposes. I think he put them into the checking account as a source of income. But they have both been losing money since I've been watching them over the past year.
Here are the funds with a brief synopsis:
HYD-VanEck Vectors High-Yield Municipal Index ETF. Dividends 4.34%
NXJ-Nuveen New Jersey Quality Municipal Income Fund: Dividends 5.06%
Can anyone tell me why I should keep these funds?
Thanks.
PS. There isn't that much money in each account, only about $10,000. So the dividends aren't much.
I am familiar with NXJ and used to own it. I have other Nuveen state funds at present.
NXJ certainly pays a decent dividend and as you say it's tax exempt.....however the state of NJ is not in very good financial shape. Have you looked on the Nuveen website to see what this fund is holding? I'd check that out, and then I'd think about rotating into a better run state like Arizona (NAZ) or Virginia (NPV)
Location: Was Midvalley Oregon; Now Eastside Seattle area
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Quote:
Originally Posted by fred44
My father passed away about a year ago. Since then I took over managing this portfolio for my mom. They have an IRA, which holds most of their money, and a checking account.
There are two funds in his non-IRA account. Both have been doing terrible and I was thinking of selling them. But they are muni funds, which from my understanding are good for tax purposes. I think he put them into the checking account as a source of income. But they have both been losing money since I've been watching them over the past year.
Here are the funds with a brief synopsis:
HYD-VanEck Vectors High-Yield Municipal Index ETF. Dividends 4.34%
NXJ-Nuveen New Jersey Quality Municipal Income Fund: Dividends 5.06%
Can anyone tell me why I should keep these funds?
Thanks.
PS. There isn't that much money in each account, only about $10,000. So the dividends aren't much.
They were for Income dividends not for investing in the Market. You Mom will continue to collect the Income regardless of the market price of the fund. The market price of bond funds will trend downwards as interest rates go up.
You do what you deem best for Mom. If the Market goes down and Mom holds equity, be prepared to face Mom and tell her that she has to take less Income. If you think you can get better safety and income from other funds then this is a consideration.
HYD-VanEck Vectors High-Yield Municipal Index ETF. Dividends 4.34%
NXJ-Nuveen New Jersey Quality Municipal Income Fund: Dividends 5.06%
There isn't that much money in each account, only about $10,000.
I am familiar with NXJ and used to own it. I have other Nuveen state funds at present.
NXJ certainly pays a decent dividend and as you say it's tax exempt.....however the state of NJ is not in very good financial shape. Have you looked on the Nuveen website to see what this fund is holding? I'd check that out, and then I'd think about rotating into a better run state like Arizona (NAZ) or Virginia (NPV)
Purely from spending a few minutes looking around on morningstar (so caveat that's source of everything and I've just skimmed each, double check everything for yourself):
Mixed feelings about NXJ. There's some strong arguments both for and against it. Tax advantaged (especially in NJ) + it's a closed end fund trading at a ~12% discount to NAV. Coupon is about 5%, underlying asset price is 107% of par, and with the discount to NAV you're effectively getting the portfolio for under par and over 5% yield, turns to the 5% flat distribution rate after fees. For tax advantaged debt. That's nice. Really nice. No Puerto Rico debt tucked into the portfolio which would be really bad and would be a concern at that yield level. So that's nice too. Long duration is neither here nor there.....wouldn't want that myself but fine for generating retirement income. Uses leverage in a bond fund which is kind of ugly. You buy bonds to de-risk, and being leveraged up works directly against that. If there is a duration mismatch between the leverage and the underlying bonds (which I dunno, not going to do that level of research, you can/should) that adds even more interest rate risk (both upside and downside) than already exists in a long duration bond portfolio, which is not so nice from a risk perspective. Of course, that's how you get that 5% yield (really 4.5% with a discount to NAV).
HYD is a lot simpler. It looks like pretty much a well diversified municipal junk bond fund. I wouldn't mind holding a bit of it in a portfolio which was mostly stocks and other types of bonds for diversification but IMO it shouldn't be a large percentage of someone's holdings, so depends on the size and composition of that IRA.
Purely from spending a few minutes looking around on morningstar (so caveat that's source of everything and I've just skimmed each, double check everything for yourself):
Mixed feelings about NXJ. There's some strong arguments both for and against it. Tax advantaged (especially in NJ) + it's a closed end fund trading at a ~12% discount to NAV. Coupon is about 5%, underlying asset price is 107% of par, and with the discount to NAV you're effectively getting the portfolio for under par and over 5% yield, turns to the 5% flat distribution rate after fees. For tax advantaged debt. That's nice. Really nice. No Puerto Rico debt tucked into the portfolio which would be really bad and would be a concern at that yield level. So that's nice too. Long duration is neither here nor there.....wouldn't want that myself but fine for generating retirement income. Uses leverage in a bond fund which is kind of ugly. You buy bonds to de-risk, and being leveraged up works directly against that. If there is a duration mismatch between the leverage and the underlying bonds (which I dunno, not going to do that level of research, you can/should) that adds even more interest rate risk (both upside and downside) than already exists in a long duration bond portfolio, which is not so nice from a risk perspective. Of course, that's how you get that 5% yield (really 4.5% with a discount to NAV).
HYD is a lot simpler. It looks like pretty much a well diversified municipal junk bond fund. I wouldn't mind holding a bit of it in a portfolio which was mostly stocks and other types of bonds for diversification but IMO it shouldn't be a large percentage of someone's holdings, so depends on the size and composition of that IRA.
My father passed away about a year ago. Since then I took over managing this portfolio for my mom. They have an IRA, which holds most of their money, and a checking account.
There are two funds in his non-IRA account. Both have been doing terrible and I was thinking of selling them. But they are muni funds, which from my understanding are good for tax purposes. I think he put them into the checking account as a source of income. But they have both been losing money since I've been watching them over the past year.
Here are the funds with a brief synopsis:
HYD-VanEck Vectors High-Yield Municipal Index ETF. Dividends 4.34%
NXJ-Nuveen New Jersey Quality Municipal Income Fund: Dividends 5.06%
Can anyone tell me why I should keep these funds?
Thanks.
PS. There isn't that much money in each account, only about $10,000. So the dividends aren't much.
high yield is a dangerous place to be as a total investment . the low hanging fruit has been picked and the interest rate risk and credit risk now have high yield very over valued .
nxj has lost almost 2% of its value over the last year . a 5% dividend is only a 3% return when you take 2% out of the other pocket .
your total return on hyd the last year is less than a money market at .50% . these are dangerous places to be now .
don't be fooled by the high dividends . it is the over all value of your investment that counts .
if any one doubts it i will gladly pay you more than those dividends but i keep your principal .
They're not the same as high yield corporate bonds. They have low correlation to high yield corporate bonds as well as to stocks. The performance during stock bull and bear markets is very stable.
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