should I sell my old franklin funds and transfer vanguard?

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whitecliff
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should I sell my old franklin funds and transfer vanguard?

Post by whitecliff » Thu Jun 13, 2013 9:20 pm

Ok so still very new to the investing thing. I used an advisor right out of school who sold me some A shares of some franklin templeton funds. I have about 40k worth of these funds. I am currently now purchasing only Vanguard Target retirement fund 2045. I know some people say target retirment funds arent great but its easy for me right now while I am learning. So the funds are:

FISEX Franklin Equity Income Fund expense ratio (0.95)
FKCGX Franklin Flex Cap Growth Fund 0.98
FKGRX Franklin Growth Series 0.98
FRDPX Franklin Rising Dividends Fund 0.98
TPINX Templeton Global Bond Fund 0.91


My question is should I dump all these because of high expense ratios and buy the target retirement funds? Does it matter that I paid more upfront for the A shares, meaning should I wait a few more years before I sell them. I think the upfront cost was 5% (yes I know I got screwed). All suggestions are welcome. Thanks again for all the help.

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damjam
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Re: should I sell my old franklin funds and transfer vanguar

Post by damjam » Thu Jun 13, 2013 9:27 pm

Are these funds in a regular account or in a tax sheltered account (like an IRA)?
If it's a regular taxable account what kind of capital gains do you have?
What is your tax bracket?

The loads you paid to buy the funds are sunk costs. Waiting to change your investments will not get that money back. Consider it tuition.

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Watty
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Re: should I sell my old franklin funds and transfer vanguar

Post by Watty » Thu Jun 13, 2013 9:41 pm

damjam wrote:Are these funds in a regular account or in a tax sheltered account (like an IRA)?
If it's a regular taxable account what kind of capital gains do you have?
What is your tax bracket?

The loads you paid to buy the funds are sunk costs. Waiting to change your investments will not get that money back. Consider it tuition.
+1 ,

sometimes in a taxable account the tax costs of sticking with a less than ideal investment the best choice.

One thing that you can do is to make sure that the dividends and capital gains distribution are not automatically being reinvested the Franklin funds.

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joe8d
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Re: should I sell my old franklin funds and transfer vanguar

Post by joe8d » Thu Jun 13, 2013 9:45 pm

Witty wrote:
damjam wrote:Are these funds in a regular account or in a tax sheltered account (like an IRA)?
If it's a regular taxable account what kind of capital gains do you have?
What is your tax bracket?

The loads you paid to buy the funds are sunk costs. Waiting to change your investments will not get that money back. Consider it tuition.
+1 ,

sometimes in a taxable account the tax costs of sticking with a less than ideal investment the best choice.

One thing that you can do is to make sure that the dividends and capital gains distribution are not automatically being reinvested the Franklin funds.
Excellent Advice from both.
All the Best, | Joe

whitecliff
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Re: should I sell my old franklin funds and transfer vanguar

Post by whitecliff » Thu Jun 13, 2013 10:00 pm

damjam wrote:Are these funds in a regular account or in a tax sheltered account (like an IRA)?
If it's a regular taxable account what kind of capital gains do you have?
What is your tax bracket?

they are in a SEP-IRA. To be terribly honest I don't know what tax bracket I am in but we are married and filling jointly.
Our federal adjusted gross income for 2012 was 221k and our Federal taxable income was about 200k. I think we are in the 28% percent brack but could be wrong. keep the advice coming. thanks

whitecliff
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Re: should I sell my old franklin funds and transfer vanguar

Post by whitecliff » Thu Jun 13, 2013 10:05 pm

So if I can sell these off and transfer to the vanguard target retirement fund without triggering a taxable event and keep within my SEP, would this be the best option?

gerrym51
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Re: should I sell my old franklin funds and transfer vanguar

Post by gerrym51 » Thu Jun 13, 2013 10:07 pm

there is nothing wrong with owning a target date fund :mrgreen: :mrgreen:

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ogd
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Re: should I sell my old franklin funds and transfer vanguar

Post by ogd » Thu Jun 13, 2013 10:09 pm

whitecliff wrote:Does it matter that I paid more upfront for the A shares, meaning should I wait a few more years before I sell them. I think the upfront cost was 5% (yes I know I got screwed).
That money is gone unfortunately. Sorry. Keeping the funds any longer would only make the matters worse due to the high fees. If you sell them now in a taxable account, you'll incur a tax bill, but that's not getting any better with time either -- I'm guesing that the gains are long term by now. The only implausible reason it would be worth waiting is if you know you'll be in the 15% bracket in a year or two, and you aren't now.

But even then, I'd sell them on principle. These guys should not get another penny of your money.

Please make sure you tell everyone you know, and Yelp, Facebook etc, how the result of your encounter with this advisor (as compared to a good one) was losing 6-7% of your money and a tax bill. I'd probably not use the term "stolen" for fear of a lawsuit, but it's a very close moral equivalent.

Yes, this makes me mad.

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damjam
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Re: should I sell my old franklin funds and transfer vanguar

Post by damjam » Thu Jun 13, 2013 10:12 pm

whitecliff wrote:
damjam wrote:Are these funds in a regular account or in a tax sheltered account (like an IRA)?
If it's a regular taxable account what kind of capital gains do you have?
What is your tax bracket?

they are in a SEP-IRA. To be terribly honest I don't know what tax bracket I am in but we are married and filling jointly.
Our federal adjusted gross income for 2012 was 221k and our Federal taxable income was about 200k. I think we are in the 28% percent brack but could be wrong. keep the advice coming. thanks
OK since the funds are in a tax deferred account you can make any change you want without tax consequences.
You could rollover your SEP-IRA to a low cost provider like Vanguard. Since you are already investing in a Vanguard fund why not continue?

BTW, Target Retirement funds are perfectly reasonable investments. Just make sure the one you choose is based on the underlying investments not just the date in the name. Target Retirement 2045 is currently 90% stock and 10% bond. Is that the level of risk your comfortable with? This asset allocation is going to be rather volatile.

I don't know your age but a common rule of thumb is age-in-bonds or age-10 in bonds. I'm more of an age-10 type myself, with the absolute minimum of 20% bonds. YMMV.

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ogd
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Re: should I sell my old franklin funds and transfer vanguar

Post by ogd » Thu Jun 13, 2013 10:17 pm

whitecliff wrote:So if I can sell these off and transfer to the vanguard target retirement fund without triggering a taxable event and keep within my SEP, would this be the best option?
Sorry, missed your update. Yes, there will be no tax consequences. You can get a sell date of tomorrow if you sell before 4pm EST. For me, it wouldn't be soon enough.

whitecliff
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Re: should I sell my old franklin funds and transfer vanguar

Post by whitecliff » Thu Jun 13, 2013 10:33 pm

I have already rolled them into my SEP with vanguard under a brokerage account. So selling them and buying vanguard funds will be easy.

I just turned 30. I just chose that fund due to the date coinciding with when I want to retire/ slow down. I don't necessarily have a risk tolerance right now because I know I am not withdrawing anything for another 30 or so years. Should I be looking at another fund with less risk due to my age?

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Clever_Username
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Re: should I sell my old franklin funds and transfer vanguar

Post by Clever_Username » Thu Jun 13, 2013 11:45 pm

whitecliff wrote:I have already rolled them into my SEP with vanguard under a brokerage account. So selling them and buying vanguard funds will be easy.

I just turned 30. I just chose that fund due to the date coinciding with when I want to retire/ slow down. I don't necessarily have a risk tolerance right now because I know I am not withdrawing anything for another 30 or so years. Should I be looking at another fund with less risk due to my age?
Do you know what your risk tolerance is? If not, the target date fund is fine, especially if you don't plan to watch it closely day-in and day-out.

If you know your risk tolerance, pick a fund that reflects that, or form a portfolio that reflects that. If you know your risk tolerance, make a portfolio post and folks can help you from there.
"What was true then is true now. Have a plan. Stick to it." -- XXXX, _Layer Cake_

whitecliff
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Re: should I sell my old franklin funds and transfer vanguar

Post by whitecliff » Fri Jun 14, 2013 9:17 am

as I said before not sure about my risk tolerance but looking through the retirement funds it doesnt appear that the risks are that different for each fund.

target 2045 fund 90/10 (stock/bond)
target 2040 fund 90/10
target 2035 fund 86/14
target 2030 fund 78/22

Is it just me or does it seem that all these target funds are pretty risky/aggressive?

dbr
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Re: should I sell my old franklin funds and transfer vanguar

Post by dbr » Fri Jun 14, 2013 9:21 am

whitecliff wrote:as I said before not sure about my risk tolerance but looking through the retirement funds it doesnt appear that the risks are that different for each fund.

target 2045 fund 90/10 (stock/bond)
target 2040 fund 90/10
target 2035 fund 86/14
target 2030 fund 78/22

Is it just me or does it seem that all these target funds are pretty risky/aggressive?
It is conventional these days for TR funds to be aggressive until a pretty late date. The advice here is to decide on an asset allocation and, if a TR fund is desired, pick the asset allocation that matches rather than choose the nominal time frame. I wouldn't use the marketing decisions of the fund companies as personal investment advice regarding asset allocation.

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BL
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Re: should I sell my old franklin funds and transfer vanguar

Post by BL » Fri Jun 14, 2013 9:28 am

Another option would be to buy the Life Strategy Aggressive (80/20 stock/bond) or Life Strategy Moderate (60/40). It is pretty similar to TR funds but does not change as you near retirement. Any of these choices are reasonable and good.

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grabiner
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Re: should I sell my old franklin funds and transfer vanguar

Post by grabiner » Fri Jun 14, 2013 6:58 pm

whitecliff wrote: Does it matter that I paid more upfront for the A shares, meaning should I wait a few more years before I sell them. I think the upfront cost was 5% (yes I know I got screwed)
It doesn't matter what you paid for the shares, because your goal is not to gain X% over the initial purchase price, but to get the best future returns. And since $10,000 of A shares and $10,000 of cash can be invested in the same new funds to get the same returns, you should sell the A shares if they are not appropriate for your investment.

(If they were B shares, you couldn't sell them for the full value, and while B shares are very expensive, it cost less to wait a few months if that makes the redemption fee decline by 1%.)
Wiki David Grabiner

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joe8d
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Re: should I sell my old franklin funds and transfer vanguar

Post by joe8d » Fri Jun 14, 2013 7:29 pm

BL wrote:Another option would be to buy the Life Strategy Aggressive (80/20 stock/bond) or Life Strategy Moderate (60/40). It is pretty similar to TR funds but does not change as you near retirement. Any of these choices are reasonable and good.
That would be my recommendation also.At age 30,LS Growth (80/20) would be my choice.
All the Best, | Joe

whitecliff
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Re: should I sell my old franklin funds and transfer vanguar

Post by whitecliff » Fri Jun 14, 2013 8:20 pm

[/quote]That would be my recommendation also.At age 30,LS Growth (80/20) would be my choice.[/quote]


Is the only reason this is preferred is less stock exposure?

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joe8d
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Re: should I sell my old franklin funds and transfer vanguar

Post by joe8d » Fri Jun 14, 2013 9:12 pm

That would be my recommendation also.At age 30,LS Growth (80/20) would be my choice
Is the only reason this is preferred is less stock exposure
I think that you could hold that ratio through the bulk of your accumulation years, adding " Bond " exposure around 5 years prior to retirement.BTW,I'm going on 71 and my Roth is 100% LS Growth.
All the Best, | Joe

pascalwager
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Re: should I sell my old franklin funds and transfer vanguar

Post by pascalwager » Sun Jun 16, 2013 3:36 am

BTW,I'm going on 71 and my Roth is 100% LS Growth.
+1 (same age and investment)
Preferred AA: Total US and foreign stock markets and short-term Treasury fixed income

Dandy
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Re: should I sell my old franklin funds and transfer vanguar

Post by Dandy » Sun Jun 16, 2013 1:01 pm

I would get out as soon as possible if in a tax advantaged account. If not, I would pay some cap gains to get out. If the cap gains are great then at least have the divs and cap gains distributions from those funds in cash rather than reinvest. You are young so the tax losses by selling will be made up by having your investments having almost 1% less expenses per year every year from now on.

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Re: should I sell my old franklin funds and transfer vanguar

Post by pascalwager » Sun Jun 16, 2013 2:57 pm

I had $50k in the Franklin CA HY tax free bond fund class C shares, sold and bought a VG bond fund instead. The Franklin high costs were absurd.

The 5% you've already paid are sunk costs. VG Target or LS are both excellent choices.
Preferred AA: Total US and foreign stock markets and short-term Treasury fixed income

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