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American Funds Dilemma
Old 01-12-2018, 08:59 AM   #1
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American Funds Dilemma

Have a large portion of one of my IRA's from 401k rollovers in American Fund mutual funds. These front loaded funds were purchased nearly 30 years ago and have done okay.

The dilemma I speak of has to do with not being able to trade within the American Funds as easy as it would be in say Fildelity, Vanguard or a Schwabb account since they "recommend" an adviser and they do not have in house advisers. The accounts are now held in my Merrill Lynch account and my adviser there has been very reluctant to help when it comes to discussions regarding trading within American Funds. They have offered me a "deal" at reduced fees in which I would have to liquidate my American Funds mutual funds accounts and transfer them into their own Portfolio Model in which I would need to turn over control and allow them to trade.

Ideally I would like to keep the American Funds mutual funds as an Investor Account and be able to re balance AA as needed going forward.

Has anyone or is anyone currently doing something like this within the American Fund Family.

The other option I have from standing pat - not preferred is to transfer all assets to Vanguard or Fidelity/Schwabb.
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Old 01-12-2018, 09:04 AM   #2
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Since these are in an IRA, there are no cap gains tax. So just sell them and buy low-cost broad based index funds at Vanguard or Fidelity/Schwabb.

Then you can re-balance as you wish. Why hold these American Funds?

-ERD50
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Old 01-12-2018, 09:08 AM   #3
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Since these are in an IRA, there are no cap gains tax. So just sell them and buy low-cost broad based index funds at Vanguard or Fidelity/Schwabb.

Then you can re-balance as you wish. Why hold these American Funds?

-ERD50
I have considered this as well. More of a comfort thing since I have had them since the beginning and having to pay the 6% up front.

This perspective definitely helps with a decision like that.

Thanks
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Old 01-12-2018, 09:12 AM   #4
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What ERD50 said. No reason to try to find a way to escape the jail cell you are in when the door isn't even locked!
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Old 01-12-2018, 09:22 AM   #5
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I have considered this as well. More of a comfort thing since I have had them since the beginning and having to pay the 6% up front.

This perspective definitely helps with a decision like that.

Thanks
Sure you paid 6% thirty years ago do what. While their fees aren't as high as many managed funds they're still 10X more than Vanguard or Fidelity.
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Old 01-12-2018, 09:26 AM   #6
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What ERD50 said. No reason to try to find a way to escape the jail cell you are in when the door isn't even locked!
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Sure you paid 6% thirty years ago do what. While their fees aren't as high as many managed funds they're still 10X more than Vanguard or Fidelity.
Just what I need to hear. No doubt the reason I have joined this forum.
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Old 01-12-2018, 09:35 AM   #7
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Sure you paid 6% thirty years ago do what. While their fees aren't as high as many managed funds they're still 10X more than Vanguard or Fidelity.

In addition, the 6% you paid was on the initial investment. I'm sure that was a relatively small sum at this point.

I do understand you wanting to get your money's worth. I think you will fit in nicely here
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Old 01-12-2018, 09:35 AM   #8
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Sure you paid 6% thirty years ago do what. While their fees aren't as high as many managed funds they're still 10X more than Vanguard or Fidelity.
+1

The 6% upfront fee is a "sunk cost". It is done and gone, it has absolutely no bearing on any future decisions. It is only a misguided emotional connection - you can look up "behavioral economics" if you are curious, but either way, just forget about the 6%. What is done is done.

Look forward, the lowest fees for a broad based index are probably the best indication that the investment will track the markets going forward (and the best indication that the indexes will beat the managed funds).

-ERD50
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Old 01-12-2018, 09:40 AM   #9
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... No reason to try to find a way to escape the jail cell you are in when the door isn't even locked!
Or as The Eagles said and sung so well:

So often times it happens that we live our lives in chains
And we never even know we have the key
But me, I'm already gone


But for some odd reason, my 2nd favorite line in that song just cracks me up - like "and take that!":

And then you'll have to eat your lunch all by yourself




-ERD50
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Old 01-12-2018, 09:42 AM   #10
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For reference here is the offer Merrill made me:
Attached Images
File Type: jpg 2017_2018 deal.jpg (272.4 KB, 48 views)
File Type: jpg 10001.jpg (487.7 KB, 52 views)
File Type: jpg 10002.jpg (442.4 KB, 44 views)
File Type: jpg 10003.jpg (509.4 KB, 35 views)
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Old 01-12-2018, 09:43 AM   #11
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In addition, the 6% you paid was on the initial investment. I'm sure that was a relatively small sum at this point....
But if that 6% were invested, and growing with that investment, wouldn't it still be 6% of the current value? Or did I mis-calculate it?

-ERD50
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Old 01-12-2018, 09:52 AM   #12
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You don't have to stay with Merrill Lynch. .... u know that right? And if afraid to invest on your own, both Fidelity & Schwab have CFPs that can guide you for significantly less
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Old 01-12-2018, 10:06 AM   #13
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You don't have to stay with Merrill Lynch. .... u know that right? And if afraid to invest on your own, both Fidelity & Schwab have CFPs that can guide you for significantly less
Understood. Been with Merrill forever just a comfort thing as mentioned earlier. Funds are not currently "under management" so they have done what they have done.

Been contemplating a big change in my daily routine and am wanting to make sure I can act on my own behalf to limit any major corrections going forward.

Good about managing my daily finances and am not afraid to delve in to managing my own wealth especially with the help of a wonderful forum such as this.
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Old 01-12-2018, 01:01 PM   #14
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I'd call up Vanguard and have them set up the transfer from your current investments into a much lower cost fund offered by Vanguard, than by ML. As long as they transfer the funds directly (no check to you), the tax-protected status will remain. If you don't want to be involved in any fund decisions, just choose a 'target retirement date' fund and be done with it. They automatically rebalance as you get closer to the date, and you won't have to do a thing! There are certainly better, and more advanced methods of managing your investments, but they require an advisor (at a cost), or have higher fees. Just my 2 cents!
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Old 01-12-2018, 02:15 PM   #15
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Used to be able to direct your ML rep to "exchange" from one American Fund to another with no charge.

Why can't you now? Does ML prohibit its brokers from doing retirement business not within one of their preapproved models? If so, I'd go somewhere else. American Funds used to be able to act as their own custodian on IRAs, for like $10. ML also has an online division ( ML Direct?). They should be able to hold the funds and facilitate self directed no cost exchanges.

You're really hanging on because of the sunk cost of the front end load 30 years ago? God bless you.
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Old 01-12-2018, 02:29 PM   #16
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Hope I don't highjack the OP's thread but I am in a similar situation and have a question or two.

From the answers the OP has gotten, I take it I can hold an American Funds fund at Vanguard, correct?

How can I determine what the expense ratio would be and as far as the front end loader, would that be applied again when the fund was moved?
Thanks
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Old 01-12-2018, 03:43 PM   #17
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You can hold them anywhere, I just didn't like the letter from Merrill Lynch
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Old 01-12-2018, 03:52 PM   #18
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This sounds like a bigger advisor issue vs. an AF issue to me. And I've got nothing against using advisors.
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Old 01-12-2018, 03:55 PM   #19
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I have an advisor @ Schwab .... everyone there does and either we can primarily self direct our investments with his input or we can utilize him greater regarding which Investments to get. I get an annual review. I don't need more than that. I'm assuming the Fidelity is the same. And for some weird reason I still prefer brick-and-mortar to online only access
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Old 01-12-2018, 03:59 PM   #20
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Always curious how we measure to arrive at the "... and did okay" evaluation. What was the original investment balance 30 years ago before any load costs?

A straight S&P fund from 1987 to 2017 would have grown as follows:

Initial Invest. Total in 2017
10,000 => 163,280.96
50,000 => 816,404.80

These are with NO additional investment. Did the American Funds perform okay against this metric?
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