Conference nyoss1::market_investing

    
    Re: .0
    
>    I have a T-bill that's maturing (expiring?) soon and I want to find
>    an investment that has a better yield but (1) is still relatively safe 
>    and (2) has some tax advantages. 

As rule of thumb in investing, yield always work opposite direction against
safety/stability. 

If you live in Mass/CA/NY, then I would suggest you go for tax-free fund
as you mentioned. If you are in high tax bracket, double wages earner, then
you will gain more benefit.   

>    Does anyone have any advice about tax-free funds? In particular, I'm 
>    thinking of the T. Rowe Price Tax-Free High Yield Fund. The interest 
>    income is exempt from federal income taxes, but the capital gains 
>    aren't.

Humm, High Yield Fund ?? I would take second close look of the prospectus.
In my definition, high Yield = Junk Bond fund, unless the rating of their
portfolio is BBB or B++ above. 
   
>    Will this investment be comparable to buying Treasuries directly?
>    Or does someone have a better recommendation for a $10,000 investment?
    
No, it's not equivalent to T-Bill, which is relatively stable and safe,
except interest rate fluctuate rapidly. For junk bond, there's always risk
of default and wiped out principal quickly. 

To meet your criteria, I would put $6K into one of tax-exempt (MA) high
quality government bond fund (Choose 3-5 yr maturity), put another $4K
into Money Mkt Fund (4% return now) if you need it within 12 monthes. 
Otherwise, I would put 4K into one of better Growth and Income fund 
(8-10% return) for one yr period.

FWIW
Michael...

    Tax Exempts MM Funds invest in municipal funds.  
    
    Read the prospectus, however, since many funds are structured to keep
    money elsewhere.  That means any figures for yield must be tax adjusted
    for the percentage of non-muni investments.  State taxes come into
    play, as well.  If you are a Mass resident, for instance, you would do
    best with a fund that has Mass munis since those would be tax exempt
    from Mass as well as Fed.  However, just because a fund is advertized
    as a Mass Tax Exempt, that does not mean that ALL of its investments
    are in Mass munis.
    
    The funds seem to generally fall into one of three categories, regular,
    high yield, and aggressive.  The higher the yield, the lower rated the
    bonds within the fund.  Within each category, it seems as if all funds
    offer about the same yield.
    
    I have a chunk of change in Fidelity High Yield Tax Exempt. The NAV
    fluctuates +/- a few cents each week, however the yield has been over
    6.5% for the last few months.  Again, this is about what I have seen
    for other High Yield munis.  I chose this fund because the Fidelity
    funds are generally well managed and it LARGE.  The larger the fund,
    the lower the risk that any one default will be noticed in the yield.
    As a NH resident, all I needed was a Fed tax exempt fund.
    
    You can do as well with High Yield Munis from Vanguard, Dreyfus, etc.
    
    Remember, of course, that Capital Gains are taxed at a maximum of 28%
    so you might be better investing in a quality Stock fund.  If all you
    get from the stock fund is 10%, for instance, your net return is 7.2%. 
    That is better than the yield from Tax Exempts, today.  There are a TON
    of stock funds that have provided better than 10% consistently.  The
    only real problem is liquidity; since all stock funds cycle a bit, you
    might not get the gain you want exactly when you want it.  But then, a
    T-Bill is not liquid either.
    
    FWIW
    
    Dave

Thanks for the information, .1 and .2.

>>>    If you are a Mass resident, for instance, you would do
>>>    best with a fund that has Mass munis since those would be tax exempt
>>>    from Mass as well as Fed.

Yeah, I do live in Massachusetts. Does anyone know a good fund that invests in
Massachusetts municipals?

Vicki Meagher

Scudder has a tax-free Mass fund, intermediate muni-bonds, I believe.
Don't have the number or performance info.   Bet you can find the number in this
conf somewhere though.

John Piekos

    
    Here's more from yesterday's Boston Globe:
    
    Fidelity short-term Bond fund, 12.12% yield last yr  (Highest risk,
    lowest quality)
    
    T. Rowe. Price Short-term Bond fund, 8.82 yield for 52 week (More
    conservative, with holding to bond rating A or better)
    
    Scudder Short Term Bond fund, 9.86% gain and paying out 7.28% for 52
    weeks. (below average for risk)
    
    Although, all three are not tax-free fund. However, you may consider
    based upon your own taxes bracket. According to current economy
    climate, for conservative/ low risk/ seeking better yield than MMK
    fund, you can't beat the above.
    
    I go for Scudder.
    
    Michael.. 

    I think you would be interested in the Scudder Mass Tax Free Bond Fund.
    It is free of both federal and Mass taxes (excepting capital gains as
    mentioned earlier), has a minimum $1,000. first purchase requirement
    and the fund manager is absorbing expenses until January 1993. The
    yield is about 6.2%-6.5% which is approximately equivilent to a 10% 
    taxable yield.  Call Scudder in Boston for a prospectus. 
    
    Another similar fund is available from the Boston Company, again
    no-load and $1,000 minimum.  The Boston Co is a subsidiary of American
    Express.
    
    Dan
     
    

            <<< Note 208.6 by AKOCOA::ANDON >>>
>    I think you would be interested in the Scudder Mass Tax Free Bond Fund.
>    It is free of both federal and Mass taxes (excepting capital gains as
>    mentioned earlier), has a minimum $1,000.

	I am new to this so please excuse my ignorance; 
I do not understand what the advantange of a TAX FREE fund is if you have to 
pay capital gain tax ? How do you calculate whats taxable ?

I to am interested in investing in a tax free bond fund. Can someone please
direct me to a telephone number or name to get more information on this fund ?

Thanks, Bob

    RE .7,
    Bob,
    You only pay a capital gain when you SELL the fund.
    For instance, I've been in Fidelity Spartan Limited Term Gov't fund for
    over a year or so. In the meantime, I've been getting about 6-7.5%
    while my money has been parked there. It's money that I don't need
    today or tomorrow, so I decided going in that it was "long term money".
    Rather than leaving it in a money market and getting 4.5-5.5 %, I've
    gotten about a 2% better return in the meantime and as long as I don't
    sell it, I don't pay a capital gain. 
    It's the same for Mass tax-free bond funds. As long as you don't need
    the money short term (a year or so...), I think that it's better to be
    in a bond fund than the money market.
    

    Funds that incur capital gains as a result of their day-to-day tradings
    will declare these gains at least once a year, usually in December.  As
    of the date of distribution, YOU will have a capital gain of record; you
    will need to declare that on your Schedule D.
    
    The declaration is usually in the form of a distribution of additional
    shares in the fund (although you could elect to have cash instead). 
    THOSE shares have a cost basis as of the distribution date. 
    
    Dave
    

>>>I to am interested in investing in a tax free bond fund. Can someone please
>>>direct me to a telephone number or name to get more information on this fund ?

I called Scudder at 800-225-5163 and they're going to send me a prospectus,
etc. on the Scudder Massachusetts Tax Free Fund.

Incidentally, they also have:

Scudder California Tax Free Fund
Scudder New York Tax Free Fund
Scudder Ohio Tax Free Fund
Scudder Pennsylvania Tax Free Fund

Vicki Meagher

    One major drawback with buying municipal bonds right now is: if the
    long rates go even lower and you sell the bonds for a capital gain, 
    you pay federal tax on the capital gain; however if rates go higher 
    and you sell them for a loss, you probably can't claim a capital loss. 
    You can only write off the portion of the loss that exceeds any 
    tax-exempt interest you received on the bonds (i.e. if, heaven forbid,
    your total return is negative). As usual, the federal government 
    gets you coming and going on this one.
    
    Presumably at *some* point one is going to sell, even if the bonds 
    were "held for the long term". So I think it's important to 
    think about where the rates are headed in the long run. 
    In my opinion, the long bond yields an incredibly low rate 
    given the steadily worsening federal debt situation, so
    the long-run direction of rates is most likely upwards.  
    
    - Ganesh.   

I looked into Scudder, Fidelity, and Dreyfus Mass tax-free funds.  I ended
up with Fidelity's High-Yield fund.  I believe that Scudder doesn't have
check-writing.  BTW, all of Fidelity's investments are in investment-grade
munis despite the "high-yield" in the name (though they're allowed to invest
in lower-grade bonds).

    FYI, RE: .12    CAUTION !!!
    
    *********************************************************
    If I read .12 correctly , he is planning on writing checks from
    Fidelity Mass tax free high yield bond fund. Each and every check that
    you write will be a taxable transaction( redemption) as far as the IRS
    is concerned. The money market fund is OK to write checks against(price
    equals $1.00 each day) , but the bond fund price varies daily, so each
    check as each check is cashed you are actually selling shares of the bond 
    fund to redeem the check.
    

Which simply means that you may have a small capital gain or loss.  If you keep
all your statements, it's not that hard to figure out.  The fact that your
redemptions are by check (rather than sending written instructions or whatever)
makes no difference.

Capital Growth Management has announced a new Tax Free fund.  If you research
this mutual fund company you will discover their track record to be one of, if
not the best in the industry.  They currently have 3 funds (Captial Development
which is closed to new investment, Mutual Fund, and Fixed Income).  The Tax
Free fund is their latest offering.  I'm not sure if it's availible to anyone
yet (we received the information because we are a prefered customer), but it's
probally worth a call if your interested.  The company will absorb the entire
management fee for the first year (much like they did with the Fixed Income
fund when it was introduced last year).  They are also offering a minimum of
$1000 instead of $2500 for early comers (again don't know if the offer is made
to everyone or just prefered customers).  The phone number is 1-800-345-4048.

It's hard to join a fund that has no history, but sometimes the history of
the management company makes it worth the chance.

Michael