Leaving EJ for Fidelity- what to know?

[corn18]

stygz, you can buy American Funds from Fidelity with no load because they're not a full service firm. Like I mentioned earlier, compare what you're considering buying with what you've got already. IF you find you have good funds already, it's likely easy to transfer them. Dumping a fund company because just because you heard "all active funds are bad" is ill-advised. Do your due diligence and do whatever you think is best. If "beating the S&P500 index" is all you're interested in (and I hope it's not) their oldest fund has beat the index since inception, for over 80 years. People can twist numbers around, but that's an impossibility according to many.

From the American Funds prospectus dated 1 Mar 2022, page 6:

12.18% Class A shares total return since 1/1/1934
12.72% S&P 500 total return since 1/1/1934

https://www.capitalgroup.com/individual/pdf/shareholder/MFGEPRX-004-555421.pdf

And they didn't do any better over 1, 5 or 10 years. And this is from American Funds own prospectus. Data don't lie.

 

[MRG]

From the American Funds AIVSX prospectus dated 3 Mar 2022, page 6:

12.18% AIVSX total return since 1/1/1934
12.72% S&P 500 total return since 1/1/1934

Data don't lie.

https://www.capitalgroup.com/individual/pdf/shareholder/MFGEPRX-004-555421.pdf

Does that include the FE load, fees, or the 12B-1 fees? [emoji4]

 

[Dtail]

Thank you for the responses. I will have to ask about Fidelity bonuses and transfer reimbursement.

Yes my American funds are cl A. The load expense is water under the bridge. They perform well but the expense ratio is high. Likely I would let them grow and stay in my portfolio and reinvest in cheaper funds going forward.

Good to know my cost basis should move with Fido. I have already started to ask Fido some questions.

I mentioned to my EJ advisor about the high expenses with American Funds. I asked about doing some ETF's. Basically I pay a 4% load on American Funds to buy and no cost to sell. With the ETF, I pay 2% to buy and 2% to sell....basically the same but I get a better number up front for slightly better growth.

Paying an upfront 4% load usually not a good idea. Upfront loaded funds or front and back 4% total is not an arrangement almost anyone here would feel comfortable with.

 

[Graybeard]

Good lord, a 5% load? You are being robbed. Funds with loads have to overcome the load to make money and even if that fund does well that's 5% lost forever and that will never compound. Personally, I would not own any fund that charges a load, front, back or ongoing, heck I wouldn't own a fund that charges an ER of 25 or 30 bp!

 

[arcyallen]

From the American Funds prospectus dated 1 Mar 2022, page 6:

12.18% Class A shares total return since 1/1/1934
12.72% S&P 500 total return since 1/1/1934

https://www.capitalgroup.com/individual/pdf/shareholder/MFGEPRX-004-555421.pdf

And they didn't do any better over 1, 5 or 10 years. And this is from American Funds own prospectus. Data don't lie.

First off, good for you for actually doing the research. Most people would just recite something they heard about active funds and walk away. But the prospectus can be hard to read, and you misread it.

You're referring to the S&P 500 total return from class f2 inception. Since 8/1/2008 the return since 1/1/1934 was 11.22%. To correct/summarize:
12.18% Class A shared total return since 1/1/1934
11.22% S&P 500 total return since A share inception is 1/1/1934

Keep in mind this is a conservative growth and income mutual fund. Their more aggressive funds have done even better. And yes, their performance not just in this fund but for most have lagged a bit during this 14yr bull market. They are a value firm - generally when things are great they lag and when the crap hits the fan (say, 2000-2002) they shine. They've expressed this for decades.

Does that include the FE load, fees, or the 12B-1 fees? [emoji4]

Yes, that includes a full 5.75% up front load (the average charge fyi is 3.5%, and if you don't want full service you can get these for no load from Fidelity, etc)) AND the 12b1 fee. Every firm or fund company will include those 12b1 fees when reporting performance. It's not some secret.

With this clarification, people can either think "Wow, better than I thought" or, keep digging for holes. If you're going to do the second, be intellectually honest enough to do the first. And if you want more info on American Funds, I know them VERY well. They're not for everyone, and I'm not suggesting everyone own them, but I would like everyone to base their decisions on facts and not hearsay or dogma. There's a lot of garbage repeated over and over out there.

 

[arcyallen]

I did some more examining of my fees with EJ. Under my current plan and investment strategy, I am paying about $1,200 a year. This includes a the 5% load on my American Funds, 2% in our taxable account (ETFs), and account maintenance fees on a $225k account that invests $2500 a month.

If I were to drop the American funds and divert the money to a few ETFs, my yearly fees across all my accounts would drop to about $720.

I will say this particular year our fees were higher as we put about $14k into google on a one time purchase. This is not a recurring thing. Yes, I could have done that buy on Fidelity for $0.

Considering many are paying 1%+ for a managed account, my numbers seem much less.

Am I missing something?

(quick note: IF your household has over $100k total in American Funds it should be a 3.5% load)

You might be overthinking this a bit. If you want the advice and service of EDJ or some other full service firm, you'll end up paying fees similar to what you're paying. If you want to buy similar (and in many cases the same) investments without that advice and service, use a self service firm. As for the specific mutual fund ongoing expenses, just ask yourself "What did I get for my x% a year?" If YOU think the performance (return, volatility, etc) warranted that expense, great. If not, make a change. Apparently I'm one of the few people here who think you can make a wise decision either way.

Whatever you do, just try to keep the big picture (10+ years if possible) in mind. Buying or selling because of shorter term performance is historically a bad decision. And try to ignore "all or nothing" thinking. Someone telling you you can't do it on your own, or that there's no value in professional advice are both wrong.

 

[Powderjunkie]

Interesting but ……

First off, good for you for actually doing the research. Most people would just recite something they heard about active funds and walk away. But the prospectus can be hard to read, and you misread it.

You're referring to the S&P 500 total return from class f2 inception. Since 8/1/2008 the return since 1/1/1934 was 11.22%. To correct/summarize:
12.18% Class A shared total return since 1/1/1934
11.22% S&P 500 total return since A share inception is 1/1/1934

Keep in mind this is a conservative growth and income mutual fund. Their more aggressive funds have done even better. And yes, their performance not just in this fund but for most have lagged a bit during this 14yr bull market. They are a value firm - generally when things are great they lag and when the crap hits the fan (say, 2000-2002) they shine. They've expressed this for decades.



Yes, that includes a full 5.75% up front load (the average charge fyi is 3.5%, and if you don't want full service you can get these for no load from Fidelity, etc)) AND the 12b1 fee. Every firm or fund company will include those 12b1 fees when reporting performance. It's not some secret.

With this clarification, people can either think "Wow, better than I thought" or, keep digging for holes. If you're going to do the second, be intellectually honest enough to do the first. And if you want more info on American Funds, I know them VERY well. They're not for everyone, and I'm not suggesting everyone own them, but I would like everyone to base their decisions on facts and not hearsay or dogma. There's a lot of garbage repeated over and over out there.

Thanks for sharing this but I have a few questions. I am assuming you pulled all this information from the prospectus. How were you able to pull a return number for the S&P 500 from 1934 when the index did not come into creation until 1957? I don’t think Standard and Poors as a corporation actually came into creation until 1941. Has the fund had the same investment objective since 1934? Capital Group seems like a good firm and relative to other active managers has competitive fees but I don’t think highlighting point-in-time figures (1,3,5,7,10,14yr a/o of a static date) gives one a good idea of whether the manager can add value on a consistent basis. Why not talk about the rolling 3yr returns numbers over the last 5,7,10, 15, 20 years assuming the investment objective and benchmark have been the same. Going back to 1934 does not tell me too much on what I can expect as investor going forward especially considering the size of the fund today. Wouldn’t you agree?

 

[arcyallen]

Thanks for sharing this but I have a few questions. I am assuming you pulled all this information from the prospectus. How were you able to pull a return number for the S&P 500 from 1934 when the index did not come into creation until 1957? I don’t think Standard and Poors as a corporation actually came into creation until 1941. Has the fund had the same investment objective since 1934? Capital Group seems like a good firm and relative to other active managers has competitive fees but I don’t think highlighting point-in-time figures (1,3,5,7,10,14yr a/o of a static date) gives one a good idea of whether the manager can add value on a consistent basis. Why not talk about the rolling 3yr returns numbers over the last 5,7,10, 15, 20 years assuming the investment objective and benchmark have been the same. Going back to 1934 does not tell me too much on what I can expect as investor going forward especially considering the size of the fund today. Wouldn’t you agree?

Awesome, lots of great points and questions!

I thought I attached my source, sorry. See attached. I've seen several sources (like https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html) cite an S&P500 metric going back before 1957. I don't know where they all get their info, but I assume they literally just looked at the market caps from before an official metric was announced and did the math. If you ever find out an official answer, I'd be curious to know it.

As far back as I can find, every American Fund (including AIVSX) has kept their objectives pretty steady. They've acted consistently even when it's unpopular like during the tech boom.

I agree that single timeframe measurements aren't useful on their own, but taken in consideration all together and with rolling time frames they are. If you look at marketing material American uses rolling time frames often. The one I'm enclosing actually mentions one. If a mature fund has performed well since inception, I think it's a great starting point.

I think what the fund did 80 years has minimal bearing on today, except that it, taken with the big picture, demonstrates they've been consistent in their performance and philosophy: own quality investments for long periods of time so they can focus on the long term while avoiding fads...even if it makes them look bad in the short term.

I'll be away from my laptop for a few a bit so I'll respond to anything else when I get to back to it in a few days - I hate typing much on a phone!

 

[RetMD21]

I did some more examining of my fees with EJ. Under my current plan and investment strategy, I am paying about $1,200 a year. This includes a the 5% load on my American Funds, 2% in our taxable account (ETFs), and account maintenance fees on a $225k account that invests $2500 a month.

If I were to drop the American funds and divert the money to a few ETFs, my yearly fees across all my accounts would drop to about $720.

I will say this particular year our fees were higher as we put about $14k into google on a one time purchase. This is not a recurring thing. Yes, I could have done that buy on Fidelity for $0.

Considering many are paying 1%+ for a managed account, my numbers seem much less.

Am I missing something?

You are paying a lot less than many and only a portion of the expense ratio of your American funds is kicked back to EJ. The 1% AUM that folks pay doesn't include fund expense ratios.

 

[corn18]

Awesome, lots of great points and questions!

I thought I attached my source, sorry. See attached. I've seen several sources (like https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html) cite an S&P500 metric going back before 1957. I don't know where they all get their info, but I assume they literally just looked at the market caps from before an official metric was announced and did the math. If you ever find out an official answer, I'd be curious to know it.

As far back as I can find, every American Fund (including AIVSX) has kept their objectives pretty steady. They've acted consistently even when it's unpopular like during the tech boom.

I agree that single timeframe measurements aren't useful on their own, but taken in consideration all together and with rolling time frames they are. If you look at marketing material American uses rolling time frames often. The one I'm enclosing actually mentions one. If a mature fund has performed well since inception, I think it's a great starting point.

I think what the fund did 80 years has minimal bearing on today, except that it, taken with the big picture, demonstrates they've been consistent in their performance and philosophy: own quality investments for long periods of time so they can focus on the long term while avoiding fads...even if it makes them look bad in the short term.

I'll be away from my laptop for a few a bit so I'll respond to anything else when I get to back to it in a few days - I hate typing much on a phone!

So what is the explanation for the under performance for the 1 year, 5 year and 10 year vs. the S&P 500?

 

[braumeister]

Going back to 1934 seems kind of pointless to me, so I just looked at what Morningstar says of the last ten years.

AIVSX total return 11.53%
Category 12.33% (Large Blend)
Index 13.59% (Morningstar US LM TR USD)

Doesn't appear to be world-beating performance to me.

 

[stygz]

You are paying a lot less than many and only a portion of the expense ratio of your American funds is kicked back to EJ. The 1% AUM that folks pay doesn't include fund expense ratios.

From what I can tell I don’t have a AUM fee. I have a select account. I basically pay as I buy/sell.

 

[Qs Laptop]

Going back to 1934 seems kind of pointless to me, so I just looked at what Morningstar says of the last ten years.

AIVSX total return 11.53%
Category 12.33% (Large Blend)
Index 13.59% (Morningstar US LM TR USD)

Doesn't appear to be world-beating performance to me.

No, it isn't. Now do AGTHX. That's the only American Fund I've found that consistently beats the S&P500. AMCAP has also beat the index over many time spans.

 

[corn18]

Again, per their prospectus, none of the American Funds have beat the S&P 500.

 

[RetMD21]

From what I can tell I don’t have a AUM fee. I have a select account. I basically pay as I buy/sell.

That's their traditional arrangement but they do have AUM options from what I understand. If you pay attention and don't trade too much you can hold down costs.

 

[stygz]

That's their traditional arrangement but they do have AUM options from what I understand. If you pay attention and don't trade too much you can hold down costs.

Ok. I saw in their website they offer my type of account (called select) and managed accounts that do have AUM fees. With that said, I can easily see how fees under the AUM structure get out of control. I guess that was my confusion.

However, I still need/want my money to operate more efficiently.. I need to drop the American funds.

 

[Qs Laptop]

View attachment 43261

Again, per their prospectus, none of the American Funds have beat the S&P 500.

Those are average annual returns per each class of mutual funds. For example, the entire basket of class A mutual funds are lumped into one line item called "Share Class A" in your chart.

American Funds Growth Fund of America started in December 1973. Here is a chart of the overall returns vs. the S&P500 Index since January 1, 1974.




And since 1984:




Since 1994:



The trend of AGTHX beating the S&P 500 continues all the way up until the last 7 months of 2022. In other words, until you pick an end date of January 31, 2022 (or later) as your endpoint, just about any beginning point you choose at least 2 years prior to 1/31/22, AGTHX beats the index.

 

[corn18]

View attachment 43261

Those are average annual returns per each class of mutual funds. For example, the entire basket of class A mutual funds are lumped into one line item called "Share Class A" in your chart.

American Funds Growth Fund of America started in December 1973. Here is a chart of the overall returns vs. the S&P500 Index since January 1, 1974.

View attachment 43259


And since 1984:

View attachment 43260


Since 1994:

View attachment 43262

The trend of AGTHX beating the S&P 500 continues all the way up until the last 7 months of 2022. In other words, until you pick an end date of January 31, 2022 (or later) as your endpoint, just about any beginning point you choose at least 2 years prior to 1/31/22, AGTHX beats the index.

I would think they would put your charts in the prospectus.

 

[Qs Laptop]

I would think they would put your charts in the prospectus.

Charts were taken from Morningstar. I'm sure they have this data in the prospectus for the individual fund, "Growth Fund of America". You are posting a chart showing all American Funds A share mutual funds as a group and claiming they never beat the index. Yes, the combined total of all American Funds A share mutual funds do not beat the index, but this individual fund, AGTHX, does beat the index, and consistently. Another good one from American Funds for beating the index is AMCAP, though not as consistently as AGTHX.

 

[RetMD21]

Ok. I saw in their website they offer my type of account (called select) and managed accounts that do have AUM fees. With that said, I can easily see how fees under the AUM structure get out of control. I guess that was my confusion.

However, I still need/want my money to operate more efficiently.. I need to drop the American funds.

Yeah you wouldn't want to be paying the big commissions and the AUM both! The other conversation in this thread is about is about some American Funds beating the market, If they have, there is no assurance going forward. Still if they can have an ER of .6 and even match the market that suggests good stock picking. I forget if you have your funds in a taxable account. The high turnover from the active funds is best in a tax free or tax deferred account.

 

[zaqxsw]

I haven't read the multiple pages of posts on this thread.

I had Fidelity move my mother's estate over to my account a decade ago. It was very complicated coming from Wells Fargo (OMG, a whole other story) and I still can't believe the great job they did for free! Wells Fargo had to sit back and just watch it!

I've been with Fidelity for several decades and couldn't be happier!

 

[tulak]

Again, per their prospectus, none of the American Funds have beat the S&P 500.

Yep, and I’d be surprised if you get a response with a ticker and data. But way to do your research!

OP, you are being robbed by EJ.

It’s your money, so do what you want, but personally I’d stop talking with EJ to figure out their fees and call Fido to start transferring the accounts. You already know the fees are ridiculous.

And the load you pay for American Funds is not a one time hit. That’s money that is not growing for you every year. For a 1k load, you lose the 1k plus all future gains on that 1k. That adds up to be a lot of money. Plenty of studies have been done to show the effect of fees on performance.

If you want a managed portfolio, best to go with Vanguard who charges 0.30% using inexpensive funds. You’ll come out way ahead.

Good luck with whatever you decide.

 

[stygz]

Yep, and I’d be surprised if you get a response with a ticker and data. But way to do your research!

OP, you are being robbed by EJ.

It’s your money, so do what you want, but personally I’d stop talking with EJ to figure out their fees and call Fido to start transferring the accounts. You already know the fees are ridiculous.

And the load you pay for American Funds is not a one time hit. That’s money that is not growing for you every year. For a 1k load, you lose the 1k plus all future gains on that 1k. That adds up to be a lot of money. Plenty of studies have been done to show the effect of fees on performance.

If you want a managed portfolio, best to go with Vanguard who charges 0.30% using inexpensive funds. You’ll come out way ahead.

Good luck with whatever you decide.

Yes, the compounding growth was my concern.

Total fees I pay right now comes out to about $1200 a year. I don’t have a AUM fee with EJ. I have started a move to Fidelity. I am going to migrate there I think by the end of the year.

 

[tulak]

Good plan. I hope it all goes smoothly for you.

 

[RetMD21]

And the load you pay for American Funds is not a one time hit. That’s money that is not growing for you every year. For a 1k load, you lose the 1k plus all future gains on that 1k. That adds up to be a lot of money. Plenty of studies have been done to show the effect of fees on performance.

Please explain how transferring to Fidelity reduces the impact of the load that has been paid. I can't think of any better example of a one time cost than a paid initial load.