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Moving out of actively managed funds into 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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Re: Moving out of actively managed funds into index funds - timing question

As long as you are moving “like for like”, i.e., keeping your AA the same, I don’t see how any external conditions could matter.

Unless perhaps you held a fund that suffered a sharp, horrifying loss that you thought was poised to bounce back. But I guess you know that guesses like this are notoriously hard to make.

In a taxable account—yes, obviously you need to consider gains and losses, and the tax consequences.

Edit: I see you’ve posted this on three separate forums. Don’t do that. It will inhibit the discussion and just annoy people. 

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Re: Moving out of actively managed funds into 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”.


Obviously, a lot depends on personal characteristics/tendencies.  Taking your question at face value, an index is going to be invested in good and bad, favored and disfavored investments, and, if cap-weighted, be a little momentum-tilted, but over a longer time period than we normally consider relevant.  It's 100% invested; for good or ill.  Quite different (perhaps) than you're used to.  Is this to be a "set it and forget it" kind of thing?  I'd watch the relative volatility here; since you don't want a big loss shortly before retiring.  You should probably start to think about mitigating risk sometime soon; maybe alter your allocation levels.

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Frequent Contributor

Re: Moving out of actively managed funds into 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.


          Market timing and forever tinkering is a crap shoot. Taxes probably can’t ever be any lower. You can slowly convert to indexes if the tail wags your dog though but with values being down like everyone else’s taxes may be less at the present time..

           You do need a plan to stick with through thick and thin no matter what that meets your needs. Indexes do beat active management long term but active management get’s paid to maneuver during the short term blips in markets. We made the most money long term maneuvering ourselves during bad conditions like these since 70% of the time markets are up. Answering your questions I’d do it now but you probably have 9-12 months until a vaccine is developed, all this foolishness recedes and the vacuum is replaced by something else.

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