Long before we stumbled onto Vanguard and low-cost index funds, we invested in the set of 5 mutual funds listed below (probably guided by Money Magazine or similar lists). This was our early, admittedly crude attempt at diversification, between 1980-1986. We haven't added to them since, but dividends and cap gains have been reinvested. In total, they are now worth around $220k. They carry expense ratios much higher than our more recent (and much larger) investments:
* Nicholas Fund (NICSX)(0.72% ER) = 1% of portfolio
* Nicholas II Fund (NCTWX)(0.6% ER) = 1% of portfolio
* Fidelity Europe Fund (FIEUX)(0.96% ER) = 1% of portfolio
* Wells Fargo (formerly Evergreen) Opportunity Fund (WOFDX)(1.0% ER) = 1% of portfolio
* Wells Fargo (formerly Evergreen) Classic Value Fund (EIVDX)(0.95% ER) = 2% of portfolio
Aided by reading here, I see (at least) two options for managing these high-cost funds.
- Sell them off and exchange into lower cost index funds (3-fund portfolio stands ready to receive). DOWNSIDE: This would generate considerable tax liability on 30+ years of gains, just as I am relishing some low tax space to convert tax-deferred 401k (TSP) into Roth IRA. Plus the nightmare of calculating cost basis over that stretch.
- Let them sit until we are gone, at which time our kids can inherit them with stepped-up basis, wiping out those decades of taxable gains. We shouldn't need to tap them in retirement, so they could sit undisturbed. I already plan to turn off dividend reinvesment, as suggested by Bogleheads. DOWNSIDE: Continuing to pay higher than necessary expenses, "as long as we both shall live."