Should I transfer taxable account from Fidelity to Vanguard?

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tallkid24
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Should I transfer taxable account from Fidelity to Vanguard?

Post by tallkid24 » Sun Feb 10, 2019 11:20 pm

Hello, I have a Fidelity account that has some funds that have been in there for a while. They were added when I was growing up, and I've never done anything really with managing them. They've grown quite a bit, however, I'm unsure if I should keep the money in these funds since they are basically all stock allocation. This money would probably be earmarked for retirement. The funds I am in are:

FBGRX - Fidelity Blue Chip Growth
FCNTX - Fidelity Contrafund
FMILX - Fidelity New Millenium
FSCHX - Fidelity Select Chemicals (this one at the very least I think I would get out of)
FSCSX - Fidelity Select Software and IT Services

All in all, there is ~$60,000 worth in these. Like I said, they seem to be doing well, but just unsure if I should transfer these over to Vanguard or even if I should just buy some other Fidelity funds with them (like a target date fund, or a 3 fund portfolio). Thanks for the help!

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emlowe
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Re: Should I transfer taxable account from Fidelity to Vanguard?

Post by emlowe » Sun Feb 10, 2019 11:27 pm

You need to determine the capital gain in these to see if you can sell them without substantial tax consequences.

Any of those that have negative (loss) or modest gain I would sell immediately and invest in a 3-fund portfolio

No need to move to Vanguard for access to cheap index ETFs or MFs - Fidelity has a good selection. Although at Vanguard you can hold mutual funds that are more tax efficient.

https://www.bogleheads.org/wiki/Fidelity

Horsefly
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Re: Should I transfer taxable account from Fidelity to Vanguard?

Post by Horsefly » Sun Feb 10, 2019 11:57 pm

I agree with emlowe on the capital gains. If things have been there for a very long time, the important thing is to add these to the list of things to look at the next time you do sell, and think through the tax implications when you do.

Having said that, I have been in your first two for nearly 20 years, and I've had shares of New Millenium at some point in that period. I've been really, really happy with those funds, despite them not fitting the Boglehead mold (I was not aware of Bogleheads until relatively recently). While I did mess with some of the select funds years ago (trying to time them), I don't think I would keep those any longer than you have to. See when you want to rebalance or otherwise have a rational (vs. irrational) time to sell, and sell out of the two select funds. You don't need that.

I can't comment much on your main question of moving from Fidelity to Vanguard. I'm all in on Fidelity, and staying there. I had some Vanguard a while back and didn't like the experience, but I won't judge them by my now years-old experience. My guess is there is no compelling reason to move or not move.

bondsr4me
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Re: Should I transfer taxable account from Fidelity to Vanguard?

Post by bondsr4me » Mon Feb 11, 2019 6:28 am

I see no compeling reason to transfer from Fidelity to Vanguard.

Fidelity, Schwab and Vanguard are all very cost competitive.

Cost, customer service, website, overall technology, and investment research and choices are some good reasons to choose a particular firm.

Of these 3 firms, I give Fidelity the top grade with Schwab a close second.

Choose whoever you want to work with.

JW-Retired
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Re: Should I transfer taxable account from Fidelity to Vanguard?

Post by JW-Retired » Mon Feb 11, 2019 9:38 am

emlowe wrote:
Sun Feb 10, 2019 11:27 pm
You need to determine the capital gain in these to see if you can sell them without substantial tax consequences.

Any of those that have negative (loss) or modest gain I would sell immediately and invest in a 3-fund portfolio

No need to move to Vanguard for access to cheap index ETFs or MFs - Fidelity has a good selection. Although at Vanguard you can hold mutual funds that are more tax efficient.
Agree with this. I've kept a roughly 50/50 split of assets between Vanguard and Fidelity for many years.

One warning tallkid24 .......... I bought Fidelity Contra fund way back in the 1980's, and it's been one of the very few lucky funds that has beat the indexes since then. I guess that is a good thing but it means I'm trapped by a lot of Contra fund unrealized capital gains, which keeps me from selling it due to the tax. Worse yet, Contra also has a habit of lots of trading and realizing significant capital gains in most years. That is very bad for my tax situation. Any tax loss harvesting I do in other equities gets rapidly chewed up by Contra fund realized gains, instead of against my ordinary income (which would give me roughly double the tax savings).
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michaelingp
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Re: Should I transfer taxable account from Fidelity to Vanguard?

Post by michaelingp » Mon Feb 11, 2019 9:50 am

You don't say if you already have funds in Vanguard. If yes, the only advantage I see to moving the Fidelity money to Vanguard is a slight simplification of your finances. Since I have both Fidelity and Vanguard accounts, I obviously don't think it's much of a hassle to have both. If you don't currently have funds in Vanguard, then I agree with the others that there is no compelling reason to switch. You might want to put new money in Vanguard, just to see the difference.

dbr
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Re: Should I transfer taxable account from Fidelity to Vanguard?

Post by dbr » Mon Feb 11, 2019 9:55 am

You need to look up the expense ratios and turnover on those funds. That they are at Fidelity is fine. That they are more expensive and less diversified funds than you might better choose is not so fine. You can invest in low cost diversified funds at Fidelity as well as at Vanguard. Transferring those very funds to Vanguard will not help the problem you have with them.

Others have addressed looking at where the capital gains are. You can use that information to compare your tax cost to change to the ongoing cost of keeping the funds.

retiredjg
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Re: Should I transfer taxable account from Fidelity to Vanguard?

Post by retiredjg » Mon Feb 11, 2019 10:35 am

I think you need to give more thought to what your real question is.
  • Are you trying to decide if you want to keep those funds?

    Or are you trying to decide if you want to be at Fidelity?

    Or are you considering that you don't want to hold 100% stocks?
Those are all different questions that are hinted at in your post.


For any of the questions, it would be difficult to give you a meaningful answer without knowing what else you hold - say in a 401k or IRA for instance. There are other things important to know like your tax bracket (we could help you with that if you want), your age, etc. And just how much of that $60k is unrealized capital gains is important too.

Just off the cuff, I'd say that none of those funds is likely to be tax-efficient. That means the dividends and capital gain they produce increase your taxes each year. None is likely to be a low cost fund (meaning the expense ratios are likely to be high). Are these the things that are bothering you?

Also just off the cuff, even if you don't want those funds, that does not mean you have to leave Fidelity. Fidelity has perfectly fine index funds just like Vanguard.

Also just off the cuff, you probably do not want to buy a target fund for your taxable account - that would also be tax-inefficient.

Tell us more about your situation and what the real question(s) is(are).

retiredjg
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Re: Should I transfer taxable account from Fidelity to Vanguard?

Post by retiredjg » Mon Feb 11, 2019 10:36 am

For the best help, you should post your information in the format shown in the link at the bottom of this message. You will be asked all these questions anyway and it is a good exercise to do. You will learn a lot.

Topic Author
tallkid24
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Joined: Thu Nov 01, 2018 7:11 pm

Re: Should I transfer taxable account from Fidelity to Vanguard?

Post by tallkid24 » Mon Feb 11, 2019 11:17 pm

retiredjg wrote:
Mon Feb 11, 2019 10:35 am
I think you need to give more thought to what your real question is.
  • Are you trying to decide if you want to keep those funds?

    Or are you trying to decide if you want to be at Fidelity?

    Or are you considering that you don't want to hold 100% stocks?
Those are all different questions that are hinted at in your post.


For any of the questions, it would be difficult to give you a meaningful answer without knowing what else you hold - say in a 401k or IRA for instance. There are other things important to know like your tax bracket (we could help you with that if you want), your age, etc. And just how much of that $60k is unrealized capital gains is important too.

Just off the cuff, I'd say that none of those funds is likely to be tax-efficient. That means the dividends and capital gain they produce increase your taxes each year. None is likely to be a low cost fund (meaning the expense ratios are likely to be high). Are these the things that are bothering you?

Also just off the cuff, even if you don't want those funds, that does not mean you have to leave Fidelity. Fidelity has perfectly fine index funds just like Vanguard.

Also just off the cuff, you probably do not want to buy a target fund for your taxable account - that would also be tax-inefficient.

Tell us more about your situation and what the real question(s) is(are).
I am fine with being with Fidelity. The only reason I was thinking of moving it over to Vanguard was just to have everything in one place (since I have my Roth IRA with Vanguard), but it's not that big of a deal to have both accounts.

I am 28 and as for what else I hold, I have a 401k and IRA with target date funds for 2055. There hasn't been any changes to these funds for a long time, so I'm not sure what that means in terms of how much is unrealized capital gains.

I guess my main concern was that I want to set this account up to be a good account for retirement, earlier than 2055. I do agree with others posting saying that the Contrafund, New Millenium and Blue Chip Growth have been good funds, so I'm not necessarily opposed to keeping those (as well as the other ones, they have also performed well). Is one option to keep these funds and then just open up another fund that has a more balanced profile to even things out?

NancyABQ
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Re: Should I transfer taxable account from Fidelity to Vanguard?

Post by NancyABQ » Mon Feb 11, 2019 11:22 pm

While you're deciding, you can turn off automatic dividend reinvesting (assuming you have it turned on -- you probably do). Funnel the dividends into whatever inexpensive index fund you would like to transition to (Total Stock, etc).

This prevents you from investing more money in funds you're not sure you want to keep forever. It has no tax consequences.

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ruralavalon
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Re: Should I transfer taxable account from Fidelity to Vanguard?

Post by ruralavalon » Tue Feb 12, 2019 8:39 am

tallkid24 wrote:
Sun Feb 10, 2019 11:20 pm
Hello, I have a Fidelity account that has some funds that have been in there for a while. They were added when I was growing up, and I've never done anything really with managing them. They've grown quite a bit, however, I'm unsure if I should keep the money in these funds since they are basically all stock allocation. This money would probably be earmarked for retirement. The funds I am in are:

FBGRX - Fidelity Blue Chip Growth
FCNTX - Fidelity Contrafund
FMILX - Fidelity New Millenium
FSCHX - Fidelity Select Chemicals (this one at the very least I think I would get out of)
FSCSX - Fidelity Select Software and IT Services

All in all, there is ~$60,000 worth in these. Like I said, they seem to be doing well, but just unsure if I should transfer these over to Vanguard or even if I should just buy some other Fidelity funds with them (like a target date fund, or a 3 fund portfolio). Thanks for the help!
You could turn off any automatic reinvestment of dividends and gains for those funds, then use that money to buy shares of Fidelity Total Stock Market Index Fund (FSKAX).

Vanguard funds are more tax-efficient, but you probably have large capital gains in those Fidelity funds.

My own personal preference is Vanguard, but don't see a compelling reason to change to Vanguard in your situation.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

retiredjg
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Re: Should I transfer taxable account from Fidelity to Vanguard?

Post by retiredjg » Tue Feb 12, 2019 9:46 am

tallkid24 wrote:
Mon Feb 11, 2019 11:17 pm
There hasn't been any changes to these funds for a long time, so I'm not sure what that means in terms of how much is unrealized capital gains.
Unrealized capital gains are the gains you have not yet paid taxes on.

Each year you pay taxes on all the dividends (if any) from each fund. Each year you pay taxes on some of the capital gains of each fund. The rest of the capital gains (increase in price per share) is left untaxed and will be taxed when you sell the shares.

If you decide to get rid of these funds, you will pay capital gains taxes on that unrealized gain. You would want to know ahead of time how much that is - to help you decide if or how much to sell. This information is available somewhere in your online account. See if you can find it.

I guess my main concern was that I want to set this account up to be a good account for retirement, earlier than 2055. I do agree with others posting saying that the Contrafund, New Millenium and Blue Chip Growth have been good funds, so I'm not necessarily opposed to keeping those (as well as the other ones, they have also performed well). Is one option to keep these funds and then just open up another fund that has a more balanced profile to even things out?
Yes, there is an option to keep these funds. The argument against that is that they are high cost and not tax-efficient. However, this is likely to be a small portion of your portfolio as time goes by so the effect on your overall portfolio will be small.

As for putting another fund in there, that's fine too if you are already filling both your 401k and an IRA (probably Roth IRA). The best funds to use in a taxable account are a broad US stock index fund or a broad international stock index fund. These would be both low cost and very tax-efficient.

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