Author Topic: Exchange mutual funds for index funds  (Read 2381 times)

hexdexorex

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Exchange mutual funds for index funds
« on: June 18, 2014, 07:26:56 PM »
I manage the money of a good friend of mine. He recently got a inheritance and I am wondering how to easily transition these funds away from mutual and into index funds. The expense ratio is .6...not insane...but much higher than the .05 I personally pay for index funds.

His gains are about 20K on the mutual funds since the death of the family member...and CA tax with federal would be around 5K....and the fees run around 500 dollars a year on the whole thing. Should I cash em out for index and have him take the 5k hit? Or continue to pay the 500 till another market crash when its easier to exchange without any gains?

phred

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Re: Exchange mutual funds for index funds
« Reply #1 on: June 18, 2014, 07:40:36 PM »
does the fund which offers the mutual fund also offer index funds?  They may have an inexpensive conversion process.

beltim

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Re: Exchange mutual funds for index funds
« Reply #2 on: June 18, 2014, 08:00:53 PM »
Unless your friend is going to change tax brackets or states sometime soon, there's no reason to delay moving into a cheaper fund if that's the strategy your friend wants.

Also, mutual/index is not a valid dichotomy.  There are plenty of mutual funds that are index funds.

myDogIsFI

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Re: Exchange mutual funds for index funds
« Reply #3 on: June 18, 2014, 11:09:06 PM »
An index fund is a type of mutual fund.  I think you meant to say that you are thinking about transitioning from an actively managed mutual fund to a passively managed index mutual fund.

Typically you should go ahead with the switch.  See "I have the wrong fund in my taxable account" at the the bogleheads wiki for a spreadsheet to help out.  http://www.bogleheads.org/wiki/Investing_FAQ_for_the_Bogleheads%C2%AE_forum

hexdexorex

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Re: Exchange mutual funds for index funds
« Reply #4 on: June 20, 2014, 10:17:37 AM »
Thanks everyone for the input!