Post #217 by rayvt on the Index Investing board

Investment Strategies / Index Investing

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Aren’t there tax advantages to holding VBIL or similar? Or do you have to hold the Bills directly, as Ray suggests? Seems like a lot of work.

Investments that are in Treasuries are exempt from state income tax. VBIL and FDLXX are these. Things like SPAXX have a lot of Treasury repurchase agreements to get a slightly higher return. But repurchase agreements are not Treasuries, so they are not state tax-free.

Conveniently for me my state recently dropped the top income tax rate from 4.9% to 3.9%, so the benefit is minimal.

Buying & holding T-bills is not a lot of work. All of the major brokers let you put in an order to buy Tbills at the Treasury auction with no commission. Fidelity also lists the expected interest rate. You can also tell Fidelity to automatically roll-over your T-bills.

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