High fee investments

Investing
#1

Hi PFC!
A couple years ago I got involved with a financial advisor who led me into high fee investments with TransAmerica. I have since cut ties with that financial advisor and have moved the investments over to fidelity. Question is, can I sell off or exchange those investments and then invest in something like vtsax? Worried about any capital gains or front end/back end loads I might have to end up paying.

#2

Depends on the type of accounts for dividends and capital gains. The Fidelity equivalent of VTSAX (the 0 fee fund) is FZROX.

1 Like
#3

Welcome @mayabee to the PFC community and thank you for your first post!! I have three thoughts to share:

  • Assuming that the investments are not held in a retirement account (e.g., IRA, Roth IRA), then you would have to pay capital gains on any gains that you have when you sell the investments.

  • Websites like Morningstar or the fund’s website will help you confirm if there is any form of a back end load when you go to sell the funds. Back end loads are not as common as they once were, so hopefully your fund doesn’t have one or you have held it for long enough where it is no longer applicable.

  • I believe Fidelity charges a commission on most Vanguard ETFs. I just went to try and buy it in my Fidelity account and it had a high commission. So, that leaves you with a few options. You can buy Vanguard’s ETF equivalent of VTSAX on the Fidelity platform - I believe the ticker is VTI. ETFs trade commission free through Fidelity. Or, you can choose one of the many commission free index Mutual Funds that Fidelity offers! All of Fidelity’s own Mutual Funds are commission free and a number of third party managers are commission free as well (Fidelity has a list of "No Transaction Fee (NTF) funds on their website).

I hope this is helpful!!

#4

Hey MayaBee,

Over time as the assets in that fund grow, the fees are going to get higher and higher too. So I would sell and move that into Fidelity’s S&P500 index fund. If it’s a sizeable amount you could spread that over a handful of years so that the tax burden is also spread.

Someone correct me if I’m wrong on this part… This should reset your cost basis too so you wouldn’t pay taxes a second time on this money. Just the growth from today on after you sell again once you retire.