Would you trade Fidelity funds to buy Vanguard?

[freetodream]

I am looking at the possibility of trading funds and need some advice:
A portion of our retirement income is invested in Fidelity funds. We presently have about 100M Roth accounts invested in FBIDX, FUSEX, FBALX, FBNDX, & FFNOX with about an 50/50 mix of equities/bonds allocation.

I have been investing for about 30 years using dollar cost averaging & buy & hold principals. I prefer index funds & low fund expenses. I am 2-3 years away from ER, a conservative investor, & not too interested in international stock funds.
I prefer Vanguard funds & recently found out I could sell all the fidelity funds & purchase 2 Vanguard funds at $75 per trade per fund = $150 total trade costs. (All funds I presently own have had no trade costs.)
I am considering to purchase 50M V Welllington and 50M V Wellelsey which would result in about a 50/50 equity/bond mix like I currently own. By trading I would miss out on $cost averaging due to immediate purchase. I would gain some solid vanguard funds, & simplify my holdings.

Does this sound like a reasonable idea? Does owning just 2 accounts provide enough allocation & risk protection for this account?

 

[golfnut]

I am far from an expert but 50/50 Wellington / Wellesley seems to be very popular. Great funds with low expenses and good long track records. This combo will also provide some int'l in the mix.

Why do you have to pay trading costs? Vanguard will be more than happy to get these monies out of Fidelity without charging you.

Full disclosure - I have some of my dough in these 2 funds and also some in Fidelity Balanced.

 

[Tyro]

By trading I would miss out on $cost averaging due to immediate purchase.

I wouldn't look at it that way; you're essentially just making a lateral move for the reasons you stated. I agree with the good walk spoiler rolleyes that there shouldn't be any trading costs, but if there are, they'll likely be more than made up for by the lower ERs @ Vanguard.

Wellington / Wellesley does seem to be popular around here (and I'm considering it myself). I'd just note that they're not index funds, which you mentioned you prefer.

Tyro
---
"Golf is a good walk spoiled." ~ Mark Twain (alleged, but refuted)

 

[bondi688]

There are good funds and mediocre funds in both Fidelity and Vanguard. My impression was that Vanguard funds generally perform better. This year my Fidelity fund portfolio did better than Vanguard so far, which is a surprise to me. I guess it depends on the fund picked. Wellington and Wellesley have long reputation as good funds, but then at some point in history, Fidelity Magellan was also regarded as an "No Lose" fund.

 

[donheff]

What are those "M"s you are talking about. If it is $59 million each I doubt the $75 will matter.

 

[RunningBum]

I wouldn't look at it that way; you're essentially just making a lateral move for the reasons you stated. I agree with the good walk spoiler rolleyes that there shouldn't be any trading costs, but if there are, they'll likely be more than made up for by the lower ERs @ Vanguard.

Wellington / Wellesley does seem to be popular around here (and I'm considering it myself). I'd just note that they're not index funds, which you mentioned you prefer.

Tyro
---
"Golf is a good walk spoiled." ~ Mark Twain (alleged, but refuted)

Yeah, I don't get the obsession with dollar cost averaging. The money is already invested. Pulling a lump sum out to DCA back in makes no sense at all, even if it's going somewhere else, unless you are timing the market and think this is a good time to get out.

I would open an account directly with Vanguard and invest directly with them with no fees. With 50K or more you can get lower fee Admiral class funds. If you are really talking about 50M than maybe you have money in an account with other advantages.

Wellington and Wellesley are fine funds, but you do realize they are not index funds, right?

 

[Texas Proud]

What are those "M"s you are talking about. If it is $59 million each I doubt the $75 will matter.

M stands for thousands.... Roman number...

 

[Texas Proud]

To the OP...


Why are you paying a trading fee IOW, it sounds like you have money at some bank/broker and you could buy Fidelity for 'free'.... but they charge you to buy Vanguard...

If so, can you move the money If so, then why not move it to Vanguard and invest the money for free

 

[RunningBum]

M stands for thousands.... Roman number...

OK, that would be an explanation.

To the OP, if that is true, don't confuse things. Just about everyone else uses K for thousands and M for millions.

 

[samclem]

Just so we cover all the bases: I assume we're talking about funds in an IRA or 401K so cap gains isn't an issue, right? The taxes caused by trading a bunch of long-held MFs would swamp any small trading costs.

If you like Fidelity otherwise, their Spartan funds have fairly low ERs (competitive with Vanguard), but they have high minimums

Regardless of the trading costs (see previous comments, you should be able to avoid them), I'd find it convenient to have everything with Vanguard and that's what I'll do when I close out the Solo 401K I have with Fidelity.

 

[Animorph]

If you want to stay at Fidelity, and don't plan on buying small additional amounts of the two funds, the one-time $150 fee is a drop in the bucket. Fidelity doesn't charge a fee for selling (after 180 days), so you are cost free for piecemeal withdrawals in retirement.

Or you could move to Vanguard.

DCA is for transitioning. You could indeed use it to transition slowly between your current portfolio and your new funds. If you expected the old and new funds to be varying wildly in the next year it would be be a good strategy to DCA. However, it sounds like there is not a lot of difference between your origin and destination funds. DCA'ing would make very little difference in this case.

 

[pb4uski]

....A portion of our retirement income is invested in Fidelity funds. We presently have about 100M Roth accounts invested in FBIDX, FUSEX, FBALX, FBNDX, & FFNOX with about an 50/50 mix of equities/bonds allocation.

I have been investing for about 30 years using dollar cost averaging & buy & hold principals. I prefer index funds & low fund expenses. I am 2-3 years away from ER, a conservative investor, & not too interested in international stock funds.
I prefer Vanguard funds & recently found out I could sell all the fidelity funds & purchase 2 Vanguard funds at $75 per trade per fund = $150 total trade costs. (All funds I presently own have had no trade costs.)
I am considering to purchase 50M V Welllington and 50M V Wellelsey which would result in about a 50/50 equity/bond mix like I currently own. By trading I would miss out on $cost averaging due to immediate purchase. I would gain some solid vanguard funds, & simplify my holdings.

Does this sound like a reasonable idea? Does owning just 2 accounts provide enough allocation & risk protection for this account?

Sounds like a reasonable plan and AA. While you could probably avoid the $150 trading cost by moving the Roths to Vanguard and buying the funds, IMO given the relatively small cost it becomes a matter of personal preference. DCA doesn't really apply here since you are going from 50/50 to 50/50.

 

[azphx1972]

From what I've seen, the fees/expense ratios at Vanguard are generally lower than anywhere else, so I wouldn't think twice about dropping $150 to make the jump if that is the case for you.

 

[Lsbcal]

M stands for thousands.... Roman number...

Of course, why didn't I think of Roman numerals?

P.S. Don't mean to dis the OP but this tickled the old funny bone.

 

[audreyh1]

Fidelity has a $75 transaction fee on Vanguard funds and some other fund families, other fund families are NTF (no transaction fee). It all depends on the agreement between Fidelity and the fund family. Transaction fees are usually required by the target fund company to protect their direct shareholders, and you can avoid them by investing directly with the fund company instead of through Fidelity's convenient "supermarket".

I own some transaction fee funds (transaction fee only apply when buying, not selling), and I usually wait until I have a large enough sum to invest to lower the impact of the transaction fee. Like say $10,000 min. If you are investing small amounts, you might want to consider transferring the assets directly to the MF company.

Agree with the others that doing things all at once to minimize costs is what makes sense here. And if you are only going to own Vanguard funds, then in the long run it will be cheaper to invest directly with Vanguard.

You usually only DCA from cash (from a bonus, an inheritance, selling your company stock/options, a lump-sum pension payout, cash you "saved up" but waited to invest, or using the proceeds from when you "got out of the market because it was going to crash")

 

[LOL!]

If you want Wellington and Wellesley Admiral share class funds, you will have to get them at Vanguard or at WellsFargo for no commission.

If you want index mutual funds, the Fidelity Spartan index funds are perfectly fine, but if you want the Vanguard ones you should use Vanguard or WellsFargo instead of Fidelity.

If you want to buy Vanguard index ETFs, then Fidelity would still be an option, but some folks prefer mutual funds shares to ETF shares.

If you want to be able to walk into a local office, you should stick with Fidelity.

Since you are not getting any younger, you should make a decision soon.

 

[Lsbcal]

I like VG but a few weaknesses for me in retirement accounts are:
1) Purchase of CD's are skimpy last I did this back in 2008. Nowadays the rates are so unattractive that this weakness is not currently an issue for me.

2) Recently moved some money from an ETF to a VG fund. It takes 3 days for settlement + another day for the money to get into the Prime MM fund before one can make the VG fund purchase. Some of this may be due to regulations. ETF to ETF sells/buys are no issue. Why you cannot get a Vanguard ETF over to a Vanguard fund in under 4 days is a mystery to me.

 

[Animorph]

Vanguard makes you hold mutual funds in a separate account from stocks/ETF's. That was one reason we ended up at Fidelity. With the separate accounts it will take 3 days to settle an ETF trade (industry standard, not Vanguard's fault), and then a day to transfer that cash to your MF account I guess. With Fidelity, they sort of float you a loan during the settlement period, which allows you to sell an ETF and buy a different ETF or mutual fund the same day with the sales proceeds. Standard brokerage procedure, but since Vanguard doesn't hold your MF's in a brokerage account it doesn't work with them.

 

[Lsbcal]

Just to clarify, within a VG brokerage account you can do ETF -> mutual fund on the same day but it just cannot be a VG mutual fund. For retirement funds I'm not sure you can get any broker margin (a loan) to do things more quickly, even outside of VG.

One workaround I've done for the ETF -> VG fund is to (1) sell some bond fund, (2) wait for that to be available in a VG money market fund, (3) buy the VG fund and the same day late in the trading session, sell the ETF. This keeps you in the market with your intended equity AA. Later you can buy back the bond fund. This is really a PITA though.

 

[freetodream]

Thanks for all of your advice!

golfnut, I have to pay trading costs to buy VG funds at Fidelity (F). I need to stay with F at this time due to some inherited funds at F

Tyro, thanks am clear VG funds were not index altho have low Exp.

donheff, M = 1000 for my purposes a & as noted below; also no lottery winner here- hard to win without a ticket...

RunningBurn, Ok with not doing DCA, just seeking advice about; am/have considered to open a VG account to get free trades but that is not helping simply my investing-

Texas Proud, F requires a trading fee for some funds including VG

sanclem, funds are in a Roth IRA so no tax concerns yet-

azphx1972, answered above, $150 trade fee at F to buy VG funds

awdreyhl, good advice thanks-

LOL, I'm don't feel savi enuff about ETF's to invest in them, could be an option at F?, not sure I want to dive into that type- I'm still thinking simply investments to less funds.... and so on-

 

[pb4uski]

Vanguard makes you hold mutual funds in a separate account from stocks/ETF's. That was one reason we ended up at Fidelity. With the separate accounts it will take 3 days to settle an ETF trade (industry standard, not Vanguard's fault), and then a day to transfer that cash to your MF account I guess. With Fidelity, they sort of float you a loan during the settlement period, which allows you to sell an ETF and buy a different ETF or mutual fund the same day with the sales proceeds. Standard brokerage procedure, but since Vanguard doesn't hold your MF's in a brokerage account it doesn't work with them.

A Vanguard rep recently told me that they plan to merge MF and brokerage accounts in 2013. My IRA currently has an MF account and a brokerage account but once they change it'll be just one account.

 

[MapleShade]

Fidelity has a $75 transaction fee on Vanguard funds and some other fund families, other fund families are NTF (no transaction fee). It all depends on the agreement between Fidelity and the fund family. Transaction fees are usually required by the target fund company to protect their direct shareholders, and you can avoid them by investing directly with the fund company instead of through Fidelity's convenient "supermarket".

I own some transaction fee funds (transaction fee only apply when buying, not selling), and I usually wait until I have a large enough sum to invest to lower the impact of the transaction fee. Like say $10,000 min. If you are investing small amounts, you might want to consider transferring the assets directly to the MF company.

I have been at Fidelity for 20 years and own both Wellington and Wellesley. I paid the $75 transaction fee on my initial purchase of each. JFYI, for additional purchases, you can set up Automatic Investments to purchase additional amounts for only a $5 fee. It is a very flexible method to save on newer purchases. I have set it up for as little as two transactions,i.e, $5000 to invest, $2500 on Jan 5 and $2500 0n Feb 5. Total fee cost $10, saving $140. Then you don't have to wait for a larger amount to invest. You can even change the additional amounts after the first to whatever you need it to be, i.e., $2500 1/5 and $1000 2/5. You may want to look into it. Of course you could use equivalent ETF's for other Vanguard funds but Wellington and Wellesley don't have any.

Hope that helps

 

[freetodream]

I have been at Fidelity for 20 years and own both Wellington and Wellesley. I paid the $75 transaction fee on my initial purchase of each. JFYI, for additional purchases, you can set up Automatic Investments to purchase additional amounts for only a $5 fee.

Hope that helps

It does help; so there are investors buying Vanguard funds at Fidelity. And being able to purchase additional amounts with automatic investments makes me want to look into a change (purchase) next year.