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Mutual Funds-Do they need attention?
Old 05-03-2019, 05:34 PM   #1
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Mutual Funds-Do they need attention?

I have three mutual funds worth about $90,000, should I move these assets into an Index fund or something else? My financial advisor at Fidelity wants to move them into a professionally managed account to offset the capital gains taxes. I don't think I will do that because of the fees. Is there any reason I shouldn't leave these funds alone? She also wants to move my Roth IRA into a managed account. As i have mentioned in another thread I think she is getting commission on opening professionally managed accounts. I already have Fidelity managing my ROLLOVER IRA. Here are the three mutual funds:

BEGRX
FRANKLIN MUTUAL BEACON CLASS Z

MDISX
FRANKLIN MUTUAL GLOBL DISCOVERY Z

KAUFX
FEDERATED KAUFMANN CLASS R
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Old 05-03-2019, 06:31 PM   #2
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Originally Posted by murphearlyretirement View Post
I have three mutual funds worth about $90,000, should I move these assets into an Index fund or something else? My financial advisor at Fidelity wants to move them into a professionally managed account to offset the capital gains taxes. I don't think I will do that because of the fees. Is there any reason I shouldn't leave these funds alone? She also wants to move my Roth IRA into a managed account. As i have mentioned in another thread I think she is getting commission on opening professionally managed accounts. I already have Fidelity managing my ROLLOVER IRA. Here are the three mutual funds:

BEGRX
FRANKLIN MUTUAL BEACON CLASS Z

MDISX
FRANKLIN MUTUAL GLOBL DISCOVERY Z

KAUFX
FEDERATED KAUFMANN CLASS R
BEGRX
FRANKLIN MUTUAL BEACON CLASS Z 0.76% ER

MDISX
FRANKLIN MUTUAL GLOBL DISCOVERY Z 0.96% ER

KAUFX
FEDERATED KAUFMANN CLASS R 1.98% ER

The expense ratios are too high. Get rid of these dogs and buy index funds in accordance with your asset allocation (AA).
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Old 05-03-2019, 07:14 PM   #3
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You can find cheaper mutual funds
you can find more expensive mutual funds

what is your goal with the money?
how did the money get there in the first place?
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Old 05-03-2019, 08:30 PM   #4
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I contributed to those funds from 1994-1999. I am hoping to retire at 55 and use this money along with my 401k to live on until I start collecting social security at 67. I also have an IRA to draw on.
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Old 05-03-2019, 09:10 PM   #5
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Are these in a taxable account or a IRA?

If the former, be careful... moving them could create a significant tax bill. If in an IRA, then no worries... dump them and buy index funds with the proceeds.
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Old 05-03-2019, 09:29 PM   #6
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Taxable. How will fidelity move them and not generate a tax bill if I allow them moved into their managed account.?
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Old 05-03-2019, 09:46 PM   #7
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The shares can be moved "in-kind" to another account in Fidelity or even to aanother brokerage... so moving them isn't the issue. Do you know how much the unrealized gains or losses are (what your capital gain or loss would be if you sold)? It should be available on the website.

If the unrealized gains are not to much then just bite the bullet. Most likely the tax will be 0% to 15% of the gain.... plus any state income tax on the gain.
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Old 05-03-2019, 09:58 PM   #8
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Originally Posted by murphearlyretirement View Post
My financial advisor at Fidelity wants to move them into a professionally managed account to offset the capital gains taxes.
I wonder what they mean by that? I suppose maybe into an index find to avoid CG distributions? But as pb4 says, you may face large CGs on the sale of your existing funds. Might be worth it though, or best if you are looking at ER soon and might have some room to take CGs at 0% tax rate.
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Old 05-03-2019, 11:46 PM   #9
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Don't mutual funds often declare capital gains (which tax has to be paid upon) quite frequently, so OP may not have much of a CG by selling them as the gains have already been taxed over the years.

OP - There are mutual funds that are well respected, index funds that have fees far below 0.20%
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Old 05-04-2019, 12:09 AM   #10
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Actually, if the OP has held them 7 years as he says, there are probably pretty significant gains.

The other thing is that the second two have outperformed VTSAX, so they might be worth keeping.
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Old 05-04-2019, 08:02 AM   #11
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Originally Posted by murphearlyretirement View Post
Taxable. How will fidelity move them and not generate a tax bill if I allow them moved into their managed account.?
So the OP is (paraphrased)
$90k in a taxable account in 3 (expensive) mutual funds.
retire at 55, then draw down assets prior to collecting SS at age 67

What we don't know
1) what amount is in 401k
2) how is the 401k invested
3) hold old are you now
4) what are your monthly expenses now
5) what do you expect monthly expenses to be in retirement at age 55?
6) what is the AGI on your 2018 and 2019 filed returns?

Random commentary
a) I would NOT let a mild short term tax impact defy any of the logic from 1-5
b) if the tax hit is significant, there may be a bridge strategy to 1-5 above example, convert one fund this year, another next year, third year after to spread a large tax hit out. on 90k I doubt this strategy will be needed
c) I don't see a retirement plan, I see a person wanting advice on a single decision without a stable retirement plan in place.
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Old 05-04-2019, 09:20 AM   #12
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...The other thing is that the second two have outperformed VTSAX, so they might be worth keeping.
Sorry; no.

S&P manager persistence studies show no persistence. For example here is what happened to the top quintile managers in the second 5 years after their outperformance:

This data is not cherry picked. All of the manager persistence reports show basically the same thing..This is so counterintuitive that many people just can't believe it.
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Old 05-04-2019, 09:50 AM   #13
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^^^^ Note that I said "might" be worth keeping... not "were" worth keeping... I was suggesting that the OP look at how they have done vs alternatives.
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Old 05-04-2019, 11:50 AM   #14
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I am 54 and I do have a finacial advisor with fidelity that has a strategy in place me. My question about my three mutual funds is because my advisor wants to move them into a managed fund and I am suspecting she is doing this to get a bonus for opening another managed account in my Portfolio. She also want's to move my Roth IRA into a manged account. Maybe I am just being paranoid becuase of all the negative information in the press about high fees. If I alow this move into managed accounts she said my entire portfolio fee rate would be just below 1%, I don't remember the exact number.
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Old 05-04-2019, 01:20 PM   #15
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^^^^ Note that I said "might" be worth keeping... not "were" worth keeping... I was suggesting that the OP look at how they have done vs alternatives.
Sorry again, but the data say that fund history has zero predictive value, whether relative or absolute. A good lab rat for this is the Morningstar star system, which is a strictly relative ranking. WSJ analysis last fall yet again showed that the stars have zero predictive value.


We want to believe that successful investing is due to skill. After all a cello player has skill, a nuclear physicist has skill, and a champion tennis player has skill. But do we expect to find someone who has the skill to predict the ripples and whorles in a flowing trout stream? Of course not, even though the mathematics is well known. The trout stream is too complex -- chaotic IOW. Effectively it is random even though the mathematics is there. If you believe it is random then you have to also believe that short term results are due to luck and long term results are due to the general trend.
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Old 05-04-2019, 01:44 PM   #16
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You are not being paranoid. This Fidelity advisor is not giving you the best advice.

What is the best advice? I cannot tell without more details, but it isn't what your Fido salesrep is telling you.
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Old 05-04-2019, 02:07 PM   #17
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You are not being paranoid. This Fidelity advisor is not giving you the best advice.

What is the best advice? I cannot tell without more details, but it isn't what your Fido salesrep is telling you.
This x2
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Old 05-04-2019, 03:29 PM   #18
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Comparing the Kaufx to VTSAX is not apples to apples. KAUFX compares to VMGRX which is Vanguards active growth fund. We all know growth has been stomping value for the last 10 years or so. 15 year results of the two funds show the Vanguard fund slightly ahead and trailing after 10 years. Kaufx is not magic, but it has earned a good return. I am willing to bet when growth goes out of favor, that ER of 1.98 will increase pain. VMGRX has an ER of .36.

I would move to VTSAX to own the market instead, but only after considering the Cap Gains and tax pain.
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Old 05-06-2019, 09:01 AM   #19
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As others have said, consider the pain (CG taxes) that may result if you sell and move to other (lower cost) funds........but be sure to balance that against pain that will happen (CG distributions) if you don't do anything. I know your pain.......I have (or used to have) all 3 of those critters......belatedly got rid of the one in the TIRA for no pain as others have suggested .

Even if you end up doing nothing right now, perhaps in a slump (when gains have diminished) ,you may be more mentally prepared to make the change then.
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