American Clas

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Frequently Asked Questions...

Should I change my Roth from American Funds to Vanguard?

Currently my total retirement portfolio consists of abt 13K in American Balanced Fund Clas B shares (BALBX). I want to transfer it to Vanguard Total Stock Market Index (VTSMX) because I'm just realizing I don't want to be paying a 5% load. Are there any drawbacks to that move? Is it a smart move?
Is it a good idea to get the index fund (VTSMX) and then add a balanced fund to that or add a target fund to it as well as other funds to diversify my portfolio?


It doesn't really matter. You've already paid the load on the money you have in American Funds and you won't get that money back, so if you moved the money to Vanguard, it wouldn't be any different than if you just left the money there and make all of your future contributions to Vanguard. The only real reasons to move your existing money from American to Vanguard are if you find the funds from Vanguard more to your liking and because it's easier to track all of your funds together in 1 fund family and if they were in 2 fund families.

As to Vanguard's Total Stock Market Index, you do realize that you're moving from a balanced fund (i.e. a fund that has several asset classes, such as stocks and bonds) to one that is purely in equities (stocks only), right? If you want something equivalent to the balanced fund you currently hold, you might want to check out Vanguard's STAR fund, which is a balanced fund. Or you may want to look at Vanguard's Target Retirement Funds; select the one which fits your age, planned retirement date, and risk tolerance.

If you're going to go the target retirement fund route, I'd stick with it and not mess with a lot of other funds. When you get a target retirement fund, you're basically picking a fund that automatically adjusts your asset allocation to your risk profile as you get older. Why would you want to mess up that allocation by adding other funds to the mix? If, on the other hand, you want to determine and control your own asset allocation, then you should just do that with individual funds and stay away from the target retirement funds. If you want to have control yourself, why would you want to give up a portion of that control to a target retirement fund?

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