Dividend Ten

Freelance & personal finance journal

Recent Buy

Recent Buy

I purchased 1,250 shares of FSAZX (Fidelity Arizona Municipal Income) at $12/ share for a total purchase price of $15,000.

Since this is a state I reside in, the income generated is both tax free federally and at the state level as well.

While it sports a 1.98% yield, in actuality tax free this equates to an actual after tax 3.10% yield assuming a 33% tax bracket.

This purchase is my first bond purchase, a conservative (defensive) buy and one that adds some needed risk reduction to a rather risky portfolio. Should unforseen events occur that would cause a market correction, this capital could then be deployed into the market again. Until that time, it will be generating a better return than holding in cash.

While my return since launch of this blog has generated alpha over a simple index fund, this is to be expected as we are in a rising market and my large holdings are some of the more aggressive growth names. When a correction comes, I would anticipate my current portfolio to take a harder hit than a simple index fund. So while my return has been great so far – and everyone is a Buffett in a rising market – I believe my risk adjusted return to be somewhat poor. I therefore will seek to add to some more defensive & fixed income instruments as the stock market continues to inflate and then wait patiently (for who knows how long?) for a decent correction of some sort.

With a 0.55% net expense ratio, this will reduce the gross return received $5.50 per $1000 invested, or $82.50/ year (the cost of diversification). Meanwhile, at around a $0.026 monthly payout, this should add about $32.50/ mo in tax free income, or $390/ year. Not a massive sum, but better than nothing, and certainly helpful as part of a strategy to slowly and steadily (we hope) build a large income snowball over time.

 

 

14 Comments

  1. A unique buy among our peers. You don’t read many, if any, bonds or bond funds being bought. That tax free equivalent yield is pretty nice though. Putting money to work is the name of the game. Well done.
    DivHut recently posted…Recent Stock Purchase April 2017My Profile

  2. Jay

    Can you sale this bond at anytime with no fees?

  3. Thanks for the update, I would own more of these tax free funds myself
    (I own PZA) if only the distributions grew instead of shrinking over time. I really find myself drawn to the safety of these funds as well as the tax benefits and the monthly payments.

  4. Jay

    Thanks for sharing this latest investment Greg. The tax free yield is a great benefit. Pretty good in today’s rate environment!
    Jay recently posted…How to Track Your Stock Trades with Google Spreadsheets (Free Template)My Profile

  5. Interesting buy! Certainly, the tax-free yield is good. I don’t like the 0.55% expense ratio, though — that seems pretty high.

    • 10

      Yes, it’s a bit high, but it’s not impacting the yields quoted. Thanks for commenting!

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