I've been a lurker on the MMM website for a while but I'm just now venturing into the forums for some advice. I was unsure of whether this belongs here or in the Investor Alley section, apologies if so!
I'm turning 23 in 2 months. Zero debt (no student loan debt and I completely own my car). I have a budget figured out and am working towards accumulating my 'stache, so I didn't think a detailed case study posting was warranted for this question, although I may make one later.
The Issue:
This year I wanted to start a Roth IRA so in February my dad set me up with his financial advisors (who've also advised my family for the last 20+ years). Of course they recommended an American Funds Roth IRA.
Prior to meeting with them I had actually read enough of the MMM website to know that Vanguard's index funds had low expense ratios and did well in the long term but not enough to go into detail and actually hold a proper conversation with a financial advisor. When I recited what I knew about Vanguard they just fed me a bunch of graphs and big words and I crumbled and went with American Funds. I contributed $5500 for 2014 and have auto withdrawals set up to hit the max again for 2015. Currently I have a little under $10,000 in my portfolio. From my online account summary:
American Funds Growth Portfolio (GWPAX)
Underlying Funds:
Growth 70%
AMCAP Fund 30%
EuroPacific Growth Fund 25%
SMALLCAP World Fund 15%
Growth & Income 30%
Fundamental Investors 30%
Asset Mix:
U.S. Equities 57.7%, Non-US. Equities 33.9%
U.S. Bonds .2%, Non-U.S. Bonds 0%
Cash & Equivalents 8.2%
Fees:
Annual Management Fees .10%, Other Expenses .13%, Service 12b-1 .19%
5.75% Class A front load
Gross Expense Ratio: .85%
Question:
Would it be better to transfer this to some type of Vanguard fund (I'm thinking either Target Retirement 2055 or 2060 Funds?), or should I just keep the actively managed American Funds and start putting additional future savings into a new VTSMX fund? I have the ability to put save a bit more on top of maxing out my IRA each year, so I'd also like to start some type of additional index fund soon, regardless.
From what I've read American Funds isn't the worst I could have done, but now that I better understand how low cost index funds are in the long term I'm kind of horrified by how much I'd lose to fees with an actively managed fund....
I'm definitely planning on reading a few of the recommended books and educating myself further but I just want to seize the opportunity to fix this (if it needs fixing) while it's just starting out. Any clarity is appreciated ~ thank you!