Transfer Roth to Vanguard?

[scottie1]

Hi
I currently have about $30k in a roth ira at American funds. I have been paying the 5.75% sales charges and high expenses. 2008 will be the last year I will be eligible to contribute to the roth; due to increase salaries. Do you think it is worth moving it to Vanguard to lessen the expenses? Or should I leave it with American funds, since the sales charges are already paid?

 

[Telly]

A/F is not the place to start for a person with relatively small $ to invest, unless they are in a 401k plan to avoid the up-front sales charge. But now that you are in, and have paid a 5.75% sales charge, I assume you have class A shares, right? As such, A/F class A shares have a much lower than average expense ratio. Scott Burns has recommended them for years.

I'm curious if you indeed have A shares, and what particular fund/funds you are in there. To me, there are some there that it would be foolish to get out of.

 

[mickeyd]

Do you think it is worth moving it to Vanguard to lessen the expenses?

Compare the expense ratio of each fund that you have with each Vanguard fund that you are considering. If the difference makes sense, go for it. As Telly mentioned, you have already been stung by paying the AF commissions and there is no getting that $ back. You would benefit in 2008 by paying no commission at Vanguard.

I rolled over all if my IRA's to Vanguard years ago and have never looked back. And I rolled them over from USAA, a no load company.

 

[scottie1]

They are class a shares of : American growth fund, small cap world fund and new world fund.

 

[d]

these funds are generally well thought of, and the expense ratios, while not at Vanguard levels, are moderate. since the loads are history, i'd stick with them, but would not add new money.

 

[innova]

The upfront fees are a sunk cost and should not factor into your decision.

It is better to make a mistake than to live with a mistake.

If you can't stomach the idea of 'losing' the money you already paid, open your VG account and put all new monies there.

 

[yakers]

I am a big fan of VG and have had several AF funds, still have one small one. I would not necessarily move an established and load paid fund from AF to VG. AF has a few managed funds that I think are decent, particularly that small cap world fund. ( I have the growth fund, and it has done well.) But I would not add any new funds and pay that load. If you find something in your asset allocation that aligns with an AF you like just use that one.

 

[FinanceDude]

The upfront fees are a sunk cost and should not factor into your decision.

It is better to make a mistake than to live with a mistake.

If you can't stomach the idea of 'losing' the money you already paid, open your VG account and put all new monies there.

Why are AF a mistake??

 

[innova]

From the original post:

I have been paying the 5.75% sales charges and high expenses.

OP is asking the question because he feels the original investment was a mistake and is wondering the best course of action going forward.

Nothing wrong with AF except their load structure. Expense ratios aren't excessive but certainly not rock bottom either.

 

[FinanceDude]

Nothing wrong with AF except their load structure. Expense ratios aren't excessive but certainly not rock bottom either.

Given that he paid the load, and their expenses are low, they might be worth keeping...............

 

[innova]

Given that he paid the load, and their expenses are low, they might be worth keeping

Hence my statement about 'sunk cost'. You should not make an economic decision based on sunk costs.. only the costs of each choice going forward. The only evaluation to consider is whether or not VG or AF makes more sense going forward - the load that has already been paid should not factor into the decision.

To add to that, the OP considers AF to have high expenses. I don't know I'd say that. I'd say they are moderate, but certainly not low expense funds.

 

[Darryl]

Moved a Roth my wife had at AF to VG in April and a Roth I had at AF to VG in May so yes I think it is worth it. AF are good funds and I would not call their ER's high, though I do regret the load fee's I paid over the years. I just wanted indexing over managed, lower ER's and the simplicity of fewer brokerage accounts so come on in the water is fine

 

[scottie1]

thanks for all the replies; btw what is an OP?

 

[Darryl]

original poster