Author Topic: Sell T Rowe vs Buy VTSAX  (Read 1044 times)

happylife17

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Sell T Rowe vs Buy VTSAX
« on: March 14, 2017, 10:59:03 AM »
Hello,

I was wondering anyone could please give me advice or tell me if I am on the right track.  I am pretty new to the whole investing thing and obviously did not know what I was doing when I set up my IRA.  In case you are wondering I am 32 - don't know if this will make a difference. 

I currently have a Roth IRA with T Rowe Price and I have it invested in (3) separate funds.  The IRA is worth about $12,400 and the expense ratios are (.87%, .82% and .67%).  I transferred my account over to Vanguard in hopes of selling these funds and just investing the total amount in VTSAX.  There is a $35 fee for selling each fund.

Would it make sense for me to sell even though I am being charged $105 to sell these funds?  I feel like in the long run I would benefit more from the lower expense ratio in VTSAX.

Any suggestions?

Thank you!!

El Marinero

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Re: Sell T Rowe vs Buy VTSAX
« Reply #1 on: March 14, 2017, 11:03:28 AM »
I can't see any upside in staying longer in those high expense funds.

I'd consider the $105 as cheap tuition for a valuable lesson
Yo soy marinero, no soy capitán

TheAnonOne

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Re: Sell T Rowe vs Buy VTSAX
« Reply #2 on: March 14, 2017, 12:42:44 PM »
I can't see any upside in staying longer in those high expense funds.

I'd consider the $105 as cheap tuition for a valuable lesson
Agreed.

$105 is just barely over a years worth of fees. So after 1 year you are a head. Easy choice.

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MrGville

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Re: Sell T Rowe vs Buy VTSAX
« Reply #3 on: March 14, 2017, 12:45:41 PM »
Go ahead and sell.  As mentioned above, your fees for the year are likely close to $100, so its smart to sell now and get into some cheaper funds.

TheAnonOne

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Re: Sell T Rowe vs Buy VTSAX
« Reply #4 on: March 14, 2017, 12:56:54 PM »
Well.

$12,400 * .0087 = $107.88

Which is assuming all of the money is in the highest fee fund. So the real expense is a bit lower...
Get. Out. Now.

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happylife17

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Re: Sell T Rowe vs Buy VTSAX
« Reply #5 on: March 14, 2017, 02:01:09 PM »
I just sold them all, lesson learned.

Thank you all for replying!!!


ltt

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Re: Sell T Rowe vs Buy VTSAX
« Reply #6 on: March 15, 2017, 12:00:03 PM »
Am curious, what TRP funds were they in?

happylife17

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Re: Sell T Rowe vs Buy VTSAX
« Reply #7 on: March 15, 2017, 02:18:23 PM »
PRDMX (Diversified Mid Cap Growth), PRDSX (QM US Small Cap Growth Equity) & PRGFX (Growth Stock).


AZryan

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Re: Sell T Rowe vs Buy VTSAX
« Reply #8 on: March 16, 2017, 03:36:31 PM »
PRDMX (Diversified Mid Cap Growth), PRDSX (QM US Small Cap Growth Equity) & PRGFX (Growth Stock).

I know you already took advice and sold, but for the future... remember that people told you what to do and didn't even know what you were invested in. Yes, high fees are usually bad, but those three funds are different from the Total Stock Market. It should be a fact that you're not going to simply get the same return as you would've, plus a new lower fee bonus. It could be that you'll have lower returns now.

I think you made a good enough switch, and got good enough advice, but it was really uninformed on both sides of the question. But if you don't know what to be in, being in the Total Market is a solid choice.

If you like MidCaps and SmallCaps, Vanguard's Indexes for those are also very low fee. I don't recommend you ever choose growth over value like you had, though. Usually value wins, but it's still a total guess. Stick with a 'blend' Index.

The fee of the MidCap Index fund (VIMAX) in particular is like .08% vs. .05% for the Total Market/500 Index (higher, but still dead low), and has done far better over the decades long term, and either no worse or much better in the two most recent BIG crashes. It follows the overall flow of the Total Market, so it isn't likely to do something radically different (just slightly more volatile -bigger swings), but it historically has done a lot better (because far more swings go up than down).

You might consider that fund instead of, or in addition to, the Total Market (and rebalance between them in that case). I'm 100% stocks and the MidCap Index has been my main fund for the past 20+ years. I've done much better than the Total Market just by making that one choice. I like SmallCaps, too and you see a similar historical benefit, but I prefer Mids because it's a Goldilocks being in the middle. It doesn't get any of the SmallCap nobodies. It's all big billion dollar names we all know, and basically a Large and MidCap fund. The Total Market/500 Indexes are mainly GiantCap funds. Those companies at the top have less space to grow and are getting too concentrated with too much of the money IMO. It's far worse now than it was 20 years ago.

I do also have what started as a very small percent of TRowePrice /Fidelity tech funds (PRMTX, PRGTX, FBSOX). Those are all high fees like you had. But those tech sector funds have killed the Total Market Index and more than made up for those fees. Now, I'm not telling you to pick those (though I still trust them). I just point it out to illustrate that high fees doesn't automatically mean horrifically evil, stupid, or even a guaranteed failure to beat the market.


happylife17

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Re: Sell T Rowe vs Buy VTSAX
« Reply #9 on: March 17, 2017, 08:44:12 AM »
I should have provided more detail in my initial question.  I am very new to the investing world and have so much to learn.

I initially chose those funds because a Dave Ramsey ELP suggested I use any T Rowe Price fund.  I looked at fees (these were on the lower end for T Rowe) and average annual returns for prior years, this was the extent of my research. 

This year I started using personal capital and the 401k Analyzer said 19% of my earnings would be lost to fees which seems a bit high to me.  I wound up doing more research and found that most finance bloggers use these Vanguard index funds, specifically the Total Stock Market fund, that's how I ended up here.

My 401k is invested in the Small Cap (VSMAX) as this is the only vanguard index choice in my retirement plan but I would like to add the VIMAX to my IRA portfolio as well.  I'm going to look into this some more.

I just learned a lot from reading your post.  This is a weird a question but is there a book that you recommend I read so that I can get up to speed on
investing?   

Thank you very much for your advice. 

TheAnonOne

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Re: Sell T Rowe vs Buy VTSAX
« Reply #10 on: March 17, 2017, 08:52:07 AM »
I should have provided more detail in my initial question.  I am very new to the investing world and have so much to learn.

I initially chose those funds because a Dave Ramsey ELP suggested I use any T Rowe Price fund.  I looked at fees (these were on the lower end for T Rowe) and average annual returns for prior years, this was the extent of my research. 

This year I started using personal capital and the 401k Analyzer said 19% of my earnings would be lost to fees which seems a bit high to me.  I wound up doing more research and found that most finance bloggers use these Vanguard index funds, specifically the Total Stock Market fund, that's how I ended up here.

My 401k is invested in the Small Cap (VSMAX) as this is the only vanguard index choice in my retirement plan but I would like to add the VIMAX to my IRA portfolio as well.  I'm going to look into this some more.

I just learned a lot from reading your post.  This is a weird a question but is there a book that you recommend I read so that I can get up to speed on
investing?   

Thank you very much for your advice.
Jim Collins has a book, it's pretty much the game plan for this forum but 99% of the information is in his "stock series" on his blog.

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TheAnonOne

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Re: Sell T Rowe vs Buy VTSAX
« Reply #11 on: March 17, 2017, 08:55:56 AM »
Found it for ya...
http://jlcollinsnh.com/stock-series/

If you haven't figured it out by now, Dave Ramsey is running a business. His advice generates profits somehow, usually off of you.

He sometimes disses the "index funds" as plain average on air which is so disingenuous it makes me want to puke. Index funds are, in the long term, going to beat 90% of all other active funds. That is remarkably ABOVE average.

The only reason he calls it average is because he mistakenly believes that the sp500 is some sort of average return. Which it isn't.


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happylife17

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Re: Sell T Rowe vs Buy VTSAX
« Reply #12 on: March 17, 2017, 09:08:10 AM »
I'm going to head over to that site to read the stock series. 

Yeah, after finding out about Index Funds I pretty much stopped following Dave's advice on anything that is investing related.

Thank you!

TheAnonOne

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Re: Sell T Rowe vs Buy VTSAX
« Reply #13 on: March 17, 2017, 09:11:45 AM »
I'm going to head over to that site to read the stock series. 

Yeah, after finding out about Index Funds I pretty much stopped following Dave's advice on anything that is investing related.

Thank you!
Yea, his one big plus is obviously getting people motivated to pay off debt.

Though, he focuses on the people who need "feel good" advice, thus the snowball instead of high interest first.

I listen to his show occasionally, because I enjoy hearing the different f'ed up situations people got themselves into. It's defenetly a personal mood booster!

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