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Take it or leave it?

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  • Avatar Aycmd 
    Participant
    Status: Physician
    Posts: 1
    Joined: 06/01/2019

    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!

    #230674 Reply
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 1823
    Joined: 02/11/2019

    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.

    “Never let your sense of morals prevent you from doing what is right.”

    #230689 Reply
    Liked by Anne
    Faithful Steward Faithful Steward 
    Participant
    Status: Financial Advisor, Small Business Owner
    Posts: 511
    Joined: 06/12/2017

    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.

    Michael Peterson, CFP® | Faithful Steward Wealth Advisors
    https://ProsperousPhysician.com | (717) 496-0900

    #230736 Reply
    Liked by ENT Doc, Peds
    Avatar jacoavlu 
    Moderator
    Status: Physician, Small Business Owner
    Posts: 2374
    Joined: 03/01/2018

    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.

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #230747 Reply
    Liked by CordMcNally
    Avatar GPGP 
    Participant
    Status: Physician
    Posts: 186
    Joined: 05/02/2017

    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.

    #230750 Reply
    Avatar G 
    Participant
    Status: Physician, Small Business Owner
    Posts: 1799
    Joined: 01/08/2016

    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….

    #230752 Reply
    Liked by Lordosis
    CordMcNally CordMcNally 
    Participant
    Status: Physician
    Posts: 2817
    Joined: 01/03/2017

    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.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #230753 Reply

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