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Follower ○○○

Transfer from actively managed funds to index funds - timing question

Hello!

After 17 years of holding actively managed funds in my retirement accounts (401K. IRAs and HSA), I have decided to move my money to Vanguard and / or Fidelity index funds. I am 10-15 years away from retirement. I do not intend to start an active versus passive portfolios discussion - my question is “what do I need to consider before moving the money from the actively managed funds to index funds”. Does doing it in a recession or when the market is so volatile make sense? My portfolios are down YTD; not sure if I wait for them to get in the black before transferring the money.

 

I also have actively managed funds in my non-retirement accounts but I need to weigh the tax implications before making the move. But the same questions above apply.

 

Thanks in advance for your advice. Let me know if you have any questions.

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9 Replies
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Explorer ○○○

Re: Transfer from actively managed funds to index funds - timing question

Aren't you paying capital gains taxes each year anyway??  If you want to make this change, no time like the present.  

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Participant ○○○

Re: Transfer from actively managed funds to index funds - timing question

If you are just changing from an active fund to an index fund, but essentially keeping the same type of investment in an IRA/401k - do it anytime. eg. a large cap active fund to a 500 index fund.

If you are changing the type of investment - e.g from a small cap active to a large cap index - there is no way to say which is the best time to switch.

As you pointed out, for non-retirement accounts you also need to consider the tax implications.

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Participant ○○○

Re: Transfer from actively managed funds to index funds - timing question

It's a lateral move. Same type of fund sans the manager and his fee.

Regarding your taxible active bond funds you should weigh the cost of paying the taxes NOW vs the long term cost between.the active fund's ER minus the passive fund's ER.

The math is pretty easy.

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Frequent Contributor

Re: Transfer from actively managed funds to index funds - timing question

Exactly what SJ60 said.

This is the fourth time/forum you’ve posted this. You would get better responses and continuity by posting only once.

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Frequent Contributor

Re: Transfer from actively managed funds to index funds - timing question


@chang wrote:

Exactly what SJ60 said.

This is the fourth time/forum you’ve posted this. You would get better responses and continuity by posting only once.


Usually a newbie problem.  I know when I first started, I thought the forums had different viewers, so it made sense to post the same question multiple times.  We probably need a set of tips for new members to avoid these little pitfalls recurring.

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Follower ○○○

Re: Transfer from actively managed funds to index funds - timing question

chang , racqueteer:

my bad! i posted in different forums to get most eyeballs since i thought there wouldn't be common viewers. will remember it next time.

 

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Frequent Contributor

Re: Transfer from actively managed funds to index funds - timing question


@jschoomer wrote:

Hello!

After 17 years of holding actively managed funds in my retirement accounts (401K. IRAs and HSA), I have decided to move my money to Vanguard and / or Fidelity index funds. I am 10-15 years away from retirement. I do not intend to start an active versus passive portfolios discussion - my question is “what do I need to consider before moving the money from the actively managed funds to index funds”. Does doing it in a recession or when the market is so volatile make sense? My portfolios are down YTD; not sure if I wait for them to get in the black before transferring the money.

 

I also have actively managed funds in my non-retirement accounts but I need to weigh the tax implications before making the move. But the same questions above apply.

 

Thanks in advance for your advice. Let me know if you have any questions.


 

 It makes perfect sense. The sooner you switch the better. Index funds, on average, outperform actively managed funds come rain or shine. Best of luck, let us know. BTW, my custodian is Fidelity with the bulk of my portfolio in Vanguard funds, not a single Fidelity fund. I have been happy with Fidelity and have seen many posts on poor Vanguard service.

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Frequent Contributor

Re: Transfer from actively managed funds to index funds - timing question


@Bentley wrote:

@jschoomer wrote:

Hello!

After 17 years of holding actively managed funds in my retirement accounts (401K. IRAs and HSA), I have decided to move my money to Vanguard and / or Fidelity index funds. I am 10-15 years away from retirement. I do not intend to start an active versus passive portfolios discussion - my question is “what do I need to consider before moving the money from the actively managed funds to index funds”. Does doing it in a recession or when the market is so volatile make sense? My portfolios are down YTD; not sure if I wait for them to get in the black before transferring the money.

 

I also have actively managed funds in my non-retirement accounts but I need to weigh the tax implications before making the move. But the same questions above apply.

 

Thanks in advance for your advice. Let me know if you have any questions.


 

 It makes perfect sense. The sooner you switch the better. Index funds, on average, outperform actively managed funds come rain or shine. Best of luck, let us know. BTW, my custodian is Fidelity with the bulk of my portfolio in Vanguard funds, not a single Fidelity fund. I have been happy with Fidelity and have seen many posts on poor Vanguard service.


The less active you are with changing your portfolio,  the better Vanguard looks. They have some of the best low expense funds. 

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Follower ○○○

Re: Transfer from actively managed funds to index funds - timing question

Your funds are in a retirement account.  There are no tax consequences.  Stop trying to "time the market." You can't and it's nonsense.  Simply transfer the funds within your retirement account and be done with it.

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