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Take it or leave it?

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  • Take it or leave it?

    My parents started a custodial account for me a long time ago and forgot about it until a few years ago and finally transferred it over to me. It now holds almost 300k. I never really paid attention to the funds in the account until recently when the investment company switched over the funds from class C to class A, which supposedly meant better returns (on avg 9-11%). Unfortunately the fees are high (1.0-1.5%) and I didn't realize they charge an additional load fee of 5.5% for each fund.

    My question is, would it make any difference at this point to sell everything, take the hit in capital gains taxes (I'm on attending salary) , and invest somewhere else with lower fees? Or just leave them in there since they've been there for so long and take the hit in fees?

    Thanks in advance for any feedback!

  • #2
    I am happy when I find a fiver in my pants pocket.  You found 300K!!!

    As to what to do with it a lot depends on the basis.  Any losers you can sell?  How much gain?

    Stop reinvesting the dividends.

    Thank your parents.


    • #3
      The load was paid only on purchases. You should not have paid a load on the share-class change.

      The ER on theA-shares is less than the C-shares.

      Selling would depend upon the basis. From the sound of things, you might have some significant capital gains.


      • #4
        It would depend on the tax cost. Which depends on the amount of gains and your specific marginal tax rate on the realized gains. Which may not be as simple as the LTCG tax rate. Also depends on your specific situation. Debt, etc.

        If you regularly donate to charity, and the funds have sizable gains, you should investigate donation of appreciated shares.


        • #5
          Agree with donating most appreciated shares to charity. If you do any tax loss harvesting during the year somewhere else you can sell equivalent gains from this account.


          • #6
            I would:

            1) turn off reinvestments immediately

            2) use this for charitable donations (only IF you already donate)

            3) wait for a bear market to swap for a similar VG fund

            4) or wait til low income year (sabbatical?) to liquidate

            Yeah, that fee stinks, but at this point, it is better than a 23.6% hit on gains, unless you need the cash....

            I am happy when I find a fiver in my pants pocket.  You found 300K!!!
            Click to expand...

            I had to laugh at this.  last night, I found a dime in that spot where the car's seat attaches to the floor (I was going after an errant cheetoh) and even that put a smile on my face!  300k is in the category of manna from heaven.  your folks have set the bar high with regards to you and your kids....


            • #7
              What’s your basis? I would look towards donating some appreciated shares to charity if you already donate to charity. The rest would depend on how much capital gain taxes you’re looking at along with the rest of your financial situation.