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I need a little advice

March 18th, 2011 at 10:52 am

I haven't posted anything in a couple of months. Nothing much new going on. I'm progressing pretty well with my goals for the year. I will make a separate post about my goals.

Anyways I have a little mutual fund problem that I would appreciate advice on. I have two mutual funds that I originally purchased from an investment broker
in the 1990's. I was happy with them for a long time and the paperwork involved was pretty simple.

Then with various stock market crashes and the recession and so on my mutual funds depreciated a lot and also somehow became more complicated. They snuck in a maintenence fee. Due to my slacker ways I barely noticed. I did call them to find out what was going on but they just insisted that i always had paid the fees. Now I just found out that the fees only started in 2009. They also passed my funds through to several different investment companies. I called the guy that I thought was my broker and it turns out that he didn't want to handle my account anymore so he had turned it over to their Customer Service Team. I spoke with them finally the other day because i had a tax question and actually it
the first time that the brokers seemed to give me any straight answers to my questions. So I think the fact that my old broker didn't weant my account was a good thing.
But the problem still is that the company charges me a maintenace fee of $60 a year and this year its going up to $85. My Mutual Funds are just starting to recover from all the bad things that have happened over the years but are basically pretty close to what
the original base was. I'm thinking of closing it all up completely. That would elimate the fees the brokerage firm that hasn't done much of anything for me. I am thinking of putting the money into Vanguard because that seems to be the most highly praised Mutual Fund company from people on Savings Advice.

So does that seem like a good idea or what should I do? And what Vanguard fund (or any other fund) would you recommend? Its not an IRA. I had Growth and Income Mutual Funds.

Thanks in advance. And I'm sorry if this post was pretty boring to read. I really could use the advice. Especially for the best Vanguard fund to look into.

11 Responses to “I need a little advice”

  1. MonkeyMama Says:

    I suppose it depends what you want.

    $85/fee is really not bad if that is ALL you are paying. The benefit of some of the borkerages like ScottTrade/Schwab type places is that you can buy/sell any mutual funds rather cheaply.

    Vanguard would be cheaper, yes. (Currently no fees if you take electronic statements). But, then you are limited to only Vanguard funds. I believe they sell other funds - don't know what the fee structure is for the outsiders.

    VG has many great funds, and I am fine to be limited to their funds for no maintenance or managements fees, personally. What you invest in just depends. You can choose your own asset allocations (they have funds in about any category imaginable), or you could always settle for a balanced fund or a Target Date type fund. (A fund of funds).

  2. Toyguy1963 Says:

    Thanks MonkeyMama. I mostly want something very simple to deal with. And of course a reliable fund that I don't have to worry about it over a long period of time.

    The fees itself don't bother me much. Its just that they never told me. It just showed up and they lied and said it was always there.

    I also never used any of the brokers services except for initially buying the funds.

    Thanks again for your input

  3. creditcardfree Says:

    We have Vanguard S&P 500, as well as, Vanguard Winsdsor II. I haven't really checked on these funds compared to others in awhile, but we like them considering where the market is.

    I would avoid using a brokerage firm, unless you want a very wide diversity of funds, need the brokers advice, or are trading stocks on a regular basis.

  4. Ima saver Says:

    I too have Vanguard Index 500 and have for over 20 years. I am very happy with the fund. I also have Vanguard Star fund.

  5. baselle Says:

    Another Vanguardian here. I don't know how much is in your mutual fund, so I don't know whether $85 would represent a xx% fee. I tend to think in those terms.

    Unfortunately you probably are paying more than $85 in fees - most mutual funds are very efficient in hiding their fee structure. Especially if a fund is rising its so easy to sneak 'em in there - it just means that you'll be making a bit less than you should. They probably don't disclose because if you knew you'd be at their office with a pitchfork and a torch.

    Vanguard is the leader in index funds, don't hide their fee structure and their website is a wealth of info. They were especially a leader in the 2002 - 2004 when there was that series of scandals in the mutual fund industry. Not a hint of taint at Vanguard. There isn't much hand holding, but that's why you aren't paying a fee. There is also a Vanguard forum also.

    You haven't told us the funds you have. I'd definitely look up the ticker symbol for them (mutual funds have tickers just like stocks do), then look them up in Morningstar and see what you have, how its really been doing, and if there is a roughly comparable Vanguard fund and how its been doing.

  6. Jerry Says:

    I think that it is lame that they introduced fees without telling you, too... unless they told you in a letter and it was overlooked, or something, it just would lead to some trust issues for me. There might be some insurance of better options out there, and there might not be, but maybe a head-to-head comparison is in order! Good luck...

  7. davera Says:

    Yes, Vanguard is a good way to save on fees. They do allow you to hold non-vanguard funds in your brokerage account with them.

    You might give them a call and ask them if you open an account with them, whether you could simply transfer in-kind your existing mutual funds to your Vanguard account.

    Also, as point of comparison, you can ask them what the Vanguard funds are that are similar to your current funds, and check the expense ratios compared to your funds.

    Finally, check with your current brokerage firm to see if there is a fee to close your account. A lot of times there will be a fee for about $100 and you don't want a nasty surprise.

    The forms to open a Vanguard account and to transfer funds in-kind or cash are available for downnload on their website.

  8. Toyguy1963 Says:

    Thanks everyone for responding. You are all very helpful.
    I do think the Vanguard Index 500 is what I was thinking of. I'll look into it over the next couple of weeks. And I'll check to find out if there are any fees or anything that I need to deal with if I close my current Mutual Funds.

    And for Baselle - The 2 funds that I currently have are Putnam Fund for Growth and Income.
    And Investment Company of America Growth and Income Fund.

    Overall they are good funds I believe and I've been told that the second one I named is particularly good. But they still have not done very well for me in years. And its the Brokerage firm that I seem to be having issues with. Ohh and I don't have a huge amount of money invested. But its quite a lot for me. Roughly
    about $6000.

    Thanks again everyone. I will post to let you know how it turns out.

  9. baselle Says:

    Growth and Income are opposite poles in stock investing, so what you have strikes me as two "balanced" funds. Index 500 is pretty much going to be large cap.

    $85 out of $6,000 is 1.4%. It could be worse, but it fails the rule of thumb that I like - when adding $ to accounts/ maintaining accounts keep the fees under 1%. Sometimes you can't but 1% is an easy cutoff to remember. Fidelity or Vanguard will go far under that.

  10. Toyguy1963 Says:

    Thanks again baselle. That was very helpful info.
    So in simple terms over a long period of time which would be considered better. Groth and Income or Index 500. I know what Growth and Income's purpose is but what would the INdex 500 do? Sorry if that sounds like a dumb question.

  11. baselle Says:

    Not a dumb question at all. Index 500 comprises the 500 largest capitalized companies in the US. Some are growth, like Google, most are what would be called big name blue chip companies ... many would pay a dividend, so the index would tilt more strongly to the income side. It should go along lockstep with the S&P 500 - so if it goes up, the fund goes up; if it goes down, the fund does too. This fund is not too risky if you are comparing to other equity funds, moderate risk if you are comparing to something like a CD.

    Usually this index is more attractive to a conservative investor looking for a little bit of diversification against a lot of bond funds. They are also relatively tax efficient, something useful if you are investing money not in an IRA or a Roth. Its also a reasonable "core" holding - where you put most of your money (say, 70%) in that and then if you wanted to make little side investments (say, 5%) in international, emerging market, small/med cap funds, etc the Index 500 fund would smooth out big drops in the side investments or if the side investments did well, they'd juice up the returns on your index 500.

    If you are talking 10 years long period of time, or you want to put it somewhere while you are thinking about its final place, probably is a good place. If you talking 20-30 years, I'd go a bit broader like a Total stock market index.

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