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Few years ago I invested $7500 in some taxable American Century mutual funds, which I have recently realized have 1.0% expense ratios, which is a bit high for my liking. I want to switch over to Vanguard, which has expense ratios more in the 0.1 to 0.25% range (I'm undecided on specific funds as of now).
The problem is the capital gains tax - the funds have appreciated to $8800. I'm only 24 and don't plan on needing this money anytime soon, I'm basically using it as a Rainy Day fund/Supplement to my 401k and IRA.
A 15% capital gains tax on $1300 (8800 - 7500) is about $200. I came up with a quick spreadsheet to compare the 2 and it seems like the break even point is about 3.5 years. After 30 years, the Vanguard fund has about $17,000 higher value (assuming 8% return on both accounts, 15% capital gains, 0.25% expense ratio for vanguard).
So it seems like I should go ahead and sell off the American Century and move things over to Vanguard (added bonus in that my IRA and planned future holdings are also with Vanguard), but wanted to get a second opinion before I go ahead and did it. Any thoughts?
Thanks
The problem is the capital gains tax - the funds have appreciated to $8800. I'm only 24 and don't plan on needing this money anytime soon, I'm basically using it as a Rainy Day fund/Supplement to my 401k and IRA.
A 15% capital gains tax on $1300 (8800 - 7500) is about $200. I came up with a quick spreadsheet to compare the 2 and it seems like the break even point is about 3.5 years. After 30 years, the Vanguard fund has about $17,000 higher value (assuming 8% return on both accounts, 15% capital gains, 0.25% expense ratio for vanguard).
So it seems like I should go ahead and sell off the American Century and move things over to Vanguard (added bonus in that my IRA and planned future holdings are also with Vanguard), but wanted to get a second opinion before I go ahead and did it. Any thoughts?
Thanks
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