Author Topic: Changing Funds  (Read 1413 times)

accolay

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Changing Funds
« on: August 04, 2015, 05:13:39 PM »
I'm going to put my money from a non-IRA mutual fund into Vanguard from American Funds. The American Funds account is under my name and the Vanguard account will be in both me and my wife's name. I called Vanguard and they told me I would have to sell my American Fund shares, then transfer to Vanguard since they account names will be different.

I'm wondering if there is a better way. If I have to sell the shares what kind of tax hit do I take?

Thanks!

milesdividendmd

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Re: Changing Funds
« Reply #1 on: August 05, 2015, 06:45:49 PM »
You should be able to transfer the mutual funds in kind to another broker. But if you want to invest them in s vanguard fund then you will have to sell your American funds mutual funds anyway and take a capital gains hit on your profits to date.

The hit will be the amount of appreciation to date in your mutual fund X your capital gains rate (which depends on your marginal tax bracket.)

forummm

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Re: Changing Funds
« Reply #2 on: August 05, 2015, 07:36:25 PM »
You probably don't want to transfer the American Funds mutual funds into Vanguard. The point of getting out of the American Funds mutual funds is to get rid of their outrageous fees. If you just own those funds at Vanguard you are still paying the outrageous fees. The point of moving you money to Vanguard is to invest in their low-fee funds.

So yes you will take a tax hit (assuming they are worth more than when you bought them). But each year you don't sell those high-fee funds you are paying a sizable chunk of your money to them, even if the funds lose value.

milesdividendmd

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Re: Changing Funds
« Reply #3 on: August 05, 2015, 09:23:00 PM »
Right,  and since the stock market tends to go up over time, it will quite possibly  never be cheaper than now.

accolay

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Re: Changing Funds
« Reply #4 on: August 05, 2015, 09:24:33 PM »
Thanks for the replies.

Yeah. The fees. I never had much money in them, but I have had them for about 15 years. I was steered towards American Funds, a Roth IRA and some whole life insurance by a financial adviser when back in my youth. I knew nothing about investing (still don't know much) so I thought doing something would be better than doing nothing.

Fast forward to last year. I started putting some money into the IRA and noticed the fees seemed excessive. I did the math over lifetime investing and the fees were quite high. And then I came across MMM and jlcollinsnh. The adviser I had took a page straight from his Part IX of the Stock Series.

Thanks again for the replies and many happy returns.