Author Topic: Sell high cost mutual funds, take cap gains hit & buy Vanguard funds or not?  (Read 2263 times)

rolliefingers

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This is likely an elementary question but I will ask anyway.  I have a portfolio with many low cost funds but several 1.0-1.2% expense ratio funds still remain.  Most of these have had great gains over the years.  My question is should I sell these off in favor of sinking the money into low cost Vanguard funds of the same ilk, or do I simply ride these out for the next 15-20 years?  If anyone cares to comment or has a tool for this kind of dilemma then I would appreciate any input.

matchewed

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Just run it through a compound calculator. Run your current balance using a return rate that is normal for those funds at a 15 year timeline. And then do the same but minus the capital gains taxes and for the returns suitable for the Vanguard funds at a 15 year timeline.

grantmeaname

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Here's a spreadsheet that'll show you when you break even from the move. If your funds are going to be invested for longer than 13 years, you should take the tax hit and make your move. Play with the numbers in the spreadsheet if you'd like!

rolliefingers

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Thanks to you both for the quick advice & helpful spreadsheet

Here's a spreadsheet that'll show you when you break even from the move. If your funds are going to be invested for longer than 13 years, you should take the tax hit and make your move. Play with the numbers in the spreadsheet if you'd like!

GreenGuava

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I'm assuming by the question that these are not held in a tax-advantaged account

One other thing to throw in:  even if you decide to not sell quite yet for those funds (such as if there are significant short-term gains, or if there's a back load that will expire in a year or so), re-direct dividends out of the account - such as to your bank account.  Use those to buy an equivalent amount of your preferred Vanguard funds.