Actively Managed Mutual Funds

[Cowspot28]

Hello,

I am new to investing and have been reading advice here and working my way through J Collins's Stock Series.

I have money invested in mutual funds through USAA in IRA and regular accounts. I understand that I should transfer this money to index funds through Vanguard to avoid the higher expense ratios associated with actively managed funds. Is there a good time to do this from a tax perspective, or is it best to do it ASAP due to the higher fees? I have had some for less than a year and some greater than a year if that matters.

Thanks!

[forummm]

There is no tax consideration for an IRA--just transfer it whenever.

For taxable accounts, you'll have to pay capital gains taxes on any appreciation in share price once you sell them. If you've had the funds for a year, it doesn't matter when you sell them. If less than a year, and they have gains, the tax rate is higher. If there are no gains on the ones less than a year, it also doesn't matter.

[forummm]

<tip of the top hat>

[MustacheAndaHalf]

You need to get an idea of how much you're talking about.  In those taxable accounts, look for your "cost basis", or how much you've spent on purchasing those shares (and reinvested dividends).  What you put in, versus what it's worth now, is your gain (could be a loss).

When you're figuring out what to sell, a typical preference is:
* sell losses first, since they help your taxes
* sell long-term assets (over 1 year) since they have a better tax rate (15% for the 25% bracket)

You have to decide if the gain is worth it to sell and pay taxes on, but looking up your cost basis is a good start.