American Funds Dilemma

[augam]

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.

 

[ERD50]

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

 

[augam]

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

 

[REWahoo]

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!

 

[MRG]

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.

 

[augam]

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!

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.

 

[Helen]

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

 

[ERD50]

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

 

[ERD50]

... 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

 

[augam]

For reference here is the offer Merrill made me:

 

[ERD50]

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

 

[gayl]

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

 

[augam]

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.

 

[HI Bill]

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!

 

[gcgang]

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.

 

[Murf2]

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
Murf

 

[gayl]

You can hold them anywhere, I just didn't like the letter from Merrill Lynch

 

[gerntz]

This sounds like a bigger advisor issue vs. an AF issue to me. And I've got nothing against using advisors.

 

[gayl]

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

 

[bw5972]

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?

 

[harley]

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
Murf

Correct. You can hold an American Funds fund at Vanguard.

The expense ratio for a fund is the expense ratio for that fund. It would be the same for an American Funds fund at Vanguard as it is at Merrill. The expense ratio is listed for all funds on their prospectus.

If you have Vanguard (or whoever) transfer the fund from Merrill, there wouldn't be any cost for that, no re-applied load. Now, if you sold them at Merrill, then transferred the money to Vanguard, then bought them again (why would you, though?), then the front load would be re-applied. I think.

The advice here is to have Vanguard pull the funds over from Merrill. Then you can sell them if you want, and buy relatively similar but much lower expense funds from VG. If the funds are in a tax advantaged account, I would consider that a no brainer. If they are in taxable, I probably wouldn't incur the tax penalty to save the difference in expenses.

 

[Murf2]

Thanks harley!

 

[augam]

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?

definitely

 

[gcgang]

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?

AMCPX 1/12/88-1/11/18 $10k grew to over $242k. S&P grew to $212k. AGTHX, another growth fund, grew to $323k.

American Funds used to claim their funds beat their benchmarks over 90% of the time over 10 year periods.

They're one of the few active managers I use.

 

[imokurok]

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

+1