Reply To: Loss on Vanguard High-Yield Tax-Exempt Fund held 6 months or less

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#1984
Hootz
Participant

Kaye, thank you.

Kaneohe, I am going to take a crack at answering your question. One needs to look in the fund’s prospectus to see whether a fund is exempt from the 6-month rule. You are looking for the statement, “dividends are declared daily and paid monthly”. If it says “dividends are declared monthly” (or quarterly), the 6-month rule applies. I do not know how the likes of Fidelity (“name brand”) handle their tax-exempt bond funds.

To my understanding, ETFs and the Tax-Exempt Bond Index Fund (which is the mutual fund class of an ETF) are subject to the 6-month rule, because they declare dividends monthly, not daily.

And we are back to the prospectus.

Hootz