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Switch investment companies?

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SirGeist
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Switch investment companies?  Reply with quote  

Hello, all. Just found these forums and have a question I've been considering for a while...

I'm looking at the possibility of changing my investment companies, from USAA to Vanguard. The biggest reason for the switch is to take advantage of Vanguard's super-low expense ratio's on their Admiral mutual funds. For the funds I'm looking at, the difference in expenses is between 60%-75% less at Vanguard. I'm very happy with what I've got right now, just not sure if it's worth making the move over to vanguard to save .2%-.4% of my values in expenses.

my questions...
1) Do you think switching to Vanguard is a good idea for me?
2) Are there any restrictions or implications for moving from MF's at one company to very similar MF's at a different company?
3) Should I totally close my USAA investment accounts, or leave them open with a few hundred dollars?

If it matters, I currently have about $8k in unrealized gains in my non-retirement MF's, total of about $60k (plus $32k in a Roth) that I'm looking at moving. I'm 25 y/o, in the 15% tax bracket, about $30k taxable income.

Thanks!
Post Sun Jul 31, 2011 1:13 am
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coaster
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First of all, you're looking at the trees and missing the forest. Expense ratios are just about the least important criterion in deciding where to put your funds*. You should first be looking at whether your assets are in the right asset class, and then look for the best NET returns on that asset class; next in line, IMO, is customer service and safety. Expense ratios are down there somewhere on the bottom and frankly, when all my non-retirement assets were in mutual funds, something I usually didn't even take into account. If you have two similar funds at two different investment companies that are suitable for your priority criteria, and fund #1 has higher expenses but has consistently outperformed fund #2 with lower expenses, which one would you want your money to be in?

USAA is one of the highest-regarded investment companies. If you're happy there, why change?

But if you do change, find out if the receiving institution carries the USAA funds in the fund catalog they offer their clients. If they do, just transfer the funds over there. Without a sale, there's no tax consequence. Why would one ever want to do that? Well, there's often some advantage to having different funds consolidated at one investment company.....they offer perks to large accounts.

If you do sell the USAA funds, sell all shares and close the accounts. There's no advantage to doing what you ask about. Naturally, selling shares generates tax consequences.

*One exception is INDEX FUNDS and INDEX ETFs: with indexed securities, the expense ratio is the whole ball game, because it's the only ball you have to play with. Everything else a fund manager usually does to add management value to a portfolio doesn't exist in an index fund.
Post Sun Jul 31, 2011 3:26 am
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SirGeist
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I do use only index funds, and through them I maintain my asset allocation (which I've used for years and I'm comfortable with). The greater selection in index funds offered by Vanguard is another reason I was considering the change. Because my investments all index funds, performance/returns are fairly similar in the comparison. I agree that USAA is stellar for customer service (one reason I'm so happy with them), though in my case, it doesn't really matter much for this--in 5 years, I've never called them regarding my investments.

So would making the change basically be a wash for me then? If that's the case, I suppose it wouldn't be worth the trouble. Just not sure how meaningful the lower expenses would be to justify the switch.
Post Sun Jul 31, 2011 10:46 am
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coaster
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Well, since it's index funds you're using, I think it's appropriate to consider expense ratios. Only you can decide whether it's worth it now to pay capital gains tax. But here's another idea: if you're in it for the long term, you might consider opening an IRA. You can make the transfers in amounts less than or equal to your maximum yearly contribution. Then the transfer would be an iRA deposit and I'm pretty sure the gains not taxable (though before you actually do so please confirm that). If you use a traditional IRA the entire amount would be tax deductible.
Post Sun Jul 31, 2011 5:43 pm
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Donald D
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Various investment companies providing the best advantages to the customers who invest their money for health reason. As such I don’t have idea about investment company as I can’t help your in this. I’ll share the best assignment company forum with others as well to discuss the question.
Post Tue Dec 26, 2017 10:49 am
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