Is this a sensible three-step transition toward 3-fund?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
jco
Posts: 212
Joined: Sat Jan 25, 2020 8:53 am

Is this a sensible three-step transition toward 3-fund?

Post by jco »

I have about 75% of my TIAA-CREF 401a in (mostly actively-managed) mutual funds with a transaction fee for buying/selling.

I learned recently that I can sell them on a recurring basis over three months to avoid the transaction fee.

I have a two-step plan for moving into a Boglehead friendly portfolio.

1. Sell out of the transaction fee funds on a recurring schedule over three months to avoid the transaction fees.
2. At the same time as 1, put in recurring purchase orders for a no transaction fee (NTF) T Rowe Price S&P 500 Index Fund (PREIX, ER 0.21%).
3. After all the transaction fee mutual funds have been converted into PREIX and the six-month holding period expires so that I can sell PREIX without a short-term redemption fee, I can then place a simultaneous order to sell all the PREIX and reinvest in VTI, VXUS, BND, etc. since TIAA allows no fee ETF transactions.

While this may seem unnecessarily complicated, I can't think of a simpler approach that avoids transaction fees and avoids unnecessary time out of the market. It has the added benefit of getting me closer to a Boglehead-ish portfolio sooner rather than later via PREIX, although the ER for PREIX is pretty high for an index fund.

Note: PREIX is the lowest expense ratio NTF mutual fund offered through TIAA-CREF that's comparable to a total market fund.

Thoughts? Alternatives?
dandinsac
Posts: 209
Joined: Sat Jul 30, 2016 8:34 am

Re: Is this a sensible three-step transition toward 3-fund?

Post by dandinsac »

Besides buying PREIX, can you buy a low cost money-market fund for the portion of your account that will eventually be in bonds? That way, you are getting your target allocation up front and then updating later to a bond ETF.
Topic Author
jco
Posts: 212
Joined: Sat Jan 25, 2020 8:53 am

Re: Is this a sensible three-step transition toward 3-fund?

Post by jco »

When I sell anything from a mutual fund, it automatically goes into MMTTOH, FEDERATED TRUST FOR TREAS OBLIG CASH II, which appears to be some sort of cash fund.

There is a TIAA money market fund (TCIXX), but I don't appear to have access to it, or at least not without a transaction fee.
Post Reply