Mutual Fund Companies - Any Reason You Need More Than One?

scfr · #1 (**permalink**) 10-16-2006, 11:03 PM

We have accounts (retirement and non-retirement) at both T.Rowe Price and Vanguard. While we have been very happy with both companies, we are smitten with the low expenses at Vanguard and are thinking of transferring the funds at T.Rowe over to Vanguard.

Is there any reason why we should keep our money diversified between the 2 fund families? Are there any risks involved in having all of our mutual fund money with Vanguard? I haven't been able to come up with a single logical reason why we shouldn't go ahead and move the money, but there is still this nagging voice in the back of my head that says there must be some risk that I'm not aware of.

What do you all think?

scfr · #2 (**permalink**) 10-16-2006, 11:23 PM

I need to add one important clarification: At Vanguard we have both retirement and non-retirement accounts. At T.Rowe we have only retirement accounts. So, there would be no tax consequences if we moved the funds from T.Rowe to Vanguard.

trainedmonkey · #3 (**permalink**) 10-17-2006, 05:22 AM

My suggestion would be an account at Fidelity or Schwab. There you could buy funds from multiple funds families in a single account. In their brokerage style accounts you can hold a subaccount for a Rollover IRA, Roth IRA and Individual account.

Each of these accounts can hold stocks, bonds, money market mutual funds and regular mutual funds. You would want to review the cost of holding this type account and weigh it against the convienence. You would also want to review the mutual funds available through their fund networks to determine if you can hold your favorites without transaction fees.

I would think you can transfer into these types of accounts without leaving the market (in kind transfer) and as a result not incur any tax liability but you would want to consult with your financial adviser, tax adviser or the brokerage companies themselves.

I think Fidelity waves most of their fees if you wave getting paper, which I love and most accounts, I think, wave fees for accounts over a combined total of 100,000.

Of course, as always, its a good idea if you're dealing with large sums of money to consult a professional upon making any major financial decisions.
You should review all aspects of a decision based on your comfort level and knowledge of how the decision will impact your personal situation.

sweeps · #4 (**permalink**) 10-17-2006, 06:28 AM

Vanguard is fine, Fidelity is fine, but Schwab? Why?

OP, I personally prefer having all my brokerage accounts at one place. It's easier to maintain/monitor that way, and you usually get more personalized service and lower fees the larger balance you have. I have little experience with T. Rowe Price, but I am with Vanguard -- the service is good, the expenses are rock bottom, and I like their philosophies. If it were my accounts, I would consolidate them at Vanguard for that reason.

As far as Vanguard vs. Fidelity, it's like Coke vs. Pepsi, thin crust vs. deep dish, PC vs. Mac. My personal opinion is that there is very little difference between them. You would do well with either one.

Ima saver · #5 (**permalink**) 10-17-2006, 08:19 AM

I agree with sweeps! Why pay Schwab, when you can do it yourself.
I have accounts at several mutual funds. I started them quite a while back. If I had it to do over, I would probably stick to just one mutual fund family. I like Vanguard a lot!

disneysteve · #6 (**permalink**) 10-17-2006, 09:35 AM

The reason to go to different fund families is to get the best funds. No one company, not Vanguard, not Fidelity, not American Century, not anyone, has all of the best funds in every category. Vanguard might have the best healthcare fund, Fidelity might have a better international growth fund, Heartland has one of the best value funds, Cohen and Steers has one of the best real estate funds, Oppenheimer has an excellent gold and precious metals fund, etc. It doesn't make sense to put all your money in one fund family if you are sacrificing performance in the process.

pyotr · #7 (**permalink**) 10-17-2006, 02:49 PM

I like to look up the main portfolio directors and find out what makes him/her tick. Basically hoping to find a Peter Lynch or Warren Buffet rather than some sleaze-ball. If I can't figure out who/what the directors are, I'd always go for the index funds and in general this is the best bet. The lower the expense ratio the better (comparably within fund families) with these index funds. I think everybody should have the Vanguard Total Stock Market Index fund or iff you can afford to buy $10,000 at a time, the Fidelity Spartan versions, or the TRowePrice versions are just as good. Alternatively one of those automated retirement funds set for your age like the VTHRX or the FFFEX for me or whatever your retirement time will be.

I like the VBMFX (Vanguard total bond market index fund) because it allows me to have some percentage of my money in the bond market. Its expense ratio is 0.2% versus 0.3% for the VMPXX (treasury money market fund). I was for a time tempted with one of those new fangled ETFs like the IEF, SHF or the LQD with its lower published expense ratios, but I'd like to see some more performance history from these funds. What do you guys know about these?

Ima saver · #8 (**permalink**) 10-17-2006, 03:32 PM

I went with magellan when Peter Lynch ran it, but that was a long time ago. I still have Fidelity Magellan.

scfr · #9 (**permalink**) 10-19-2006, 10:01 AM

Quote:

Originally Posted by Sweepsplayer

OP, I personally prefer having all my brokerage accounts at one place. It's easier to maintain/monitor that way, and you usually get more personalized service and lower fees the larger balance you have. I have little experience with T. Rowe Price, but I am with Vanguard -- the service is good, the expenses are rock bottom, and I like their philosophies. If it were my accounts, I would consolidate them at Vanguard for that reason.

We will be sticking with Vanguard or with Vanguard & TRowe Price, because we have been happy with their service and performance. [I know others are very happy with Fidelity and I am very glad for them, but I just have not been able to get over the fact that years ago Fidelity kept insisting we get a deceased relative's signature on documents when settling an estate!]

I understand the benefits of consolidating our funds at Vanguard: great service, super low costs, wide selection of funds, and they seem to just support us and our philosophy of investing rather than pushing their own agenda.

But ... Are there risks in putting all of our mutual fund money in just one company? What if they were rocked by a scandal? Or some other calamity that we haven't heard of yet? I don't keep all of my cash in one bank, just in case one bank goes bankrupt. [I know with FDIC insurance I'd get my money back eventually, but what would I do while waiting for my claim to be settled?] Is it the same with mutual fund companies, better to spread the money around a bit?

Right now I'm leaning towards keeping both mutual fund families, but putting a greater percentage in Vanguard to take advantage of the lower costs, and (drawing on disneysteve's advice) keeping money in just one or two T.Rowe funds where have performed better than Vanguard.

sweeps · #10 (**permalink**) 10-19-2006, 10:58 AM

The SIPC (Securities Investor Protection Corporation) protects your assets in a brokerage account in case your broker goes bankrupt. Note that it does not cover investment losses (for example if the stock market goes down), but it does protect you in case of a broker's bankruptcy.

Not to say that if your brokerage goes bankrupt, it wouldn't take a while to get your money. Just like if your bank with FDIC insurance goes belly up, it may take a while to get your money back. So for this reason, I can see the desire to split your savings between multiple banks. However, your brokerage assets should be your longer-term savings anyway, so I don't see a real need to have more than one brokerage.

disneysteve · #11 (**permalink**) 10-19-2006, 12:03 PM

Quote:

Originally Posted by scfr

Are there risks in putting all of our mutual fund money in just one company? What if they were rocked by a scandal? Or some other calamity that we haven't heard of yet?...Is it the same with mutual fund companies, better to spread the money around a bit?.

There was a trading scandal that rocked several big mutual fund companies a few years ago and it did have a big impact on the funds involved. I think that is unlikely at Vanguard or Fidelity but anything is possible. Honestly, I wouldn't make my investment decisions based on the fear that something like that might possibly happen sometime in the future.

I would just restate what I said earlier. The reason I invest with multiple fund companies is to get the best funds. I have a lot of money with Vanguard, but I also have a lot of money with other companies that offer better performing funds in particular categories.

WellManicuredMan · #12 (**permalink**) 10-19-2006, 12:27 PM

Quote:

Originally Posted by Sweepsplayer

The SIPC (Securities Investor Protection Corporation) protects your assets in a brokerage account in case your broker goes bankrupt.

How much does SIPC cover you for? Sorry I could probably Google this and find the answer right away but thought I'd ask here first

sweeps · #13 (**permalink**) 10-19-2006, 01:01 PM

Quote:

Originally Posted by disneysteve

There was a trading scandal that rocked several big mutual fund companies a few years ago and it did have a big impact on the funds involved. I think that is unlikely at Vanguard or Fidelity but anything is possible. Honestly, I wouldn't make my investment decisions based on the fear that something like that might possibly happen sometime in the future.

Note that this is a slightly different issue. Due to the fund scandal, investors pulled serious money out of the funds in question. If you're in that fund, you don't necessarily lose any money when that happens. BUT, the fund is forced to sell much of its assets before it's ready to. That can mean selling at a low point, for example, and it generates a lot of transaction costs.

This situation I don't believe is covered by SIPC because technically your assets are still there. It's just that your fund's performance will suffer.

Quote:

Originally Posted by WellManicuredMan

How much does SIPC cover you for? Sorry I could probably Google this and find the answer right away but thought I'd ask here first

I don't have an authoritative source, but many web sites are saying it covers you for $100,000 in cash and $500,000 in securities you have on deposit.

HalMd · #14 (**permalink**) 10-26-2006, 10:10 AM

My wife and I recently bought some mutual funds. We started with a fund screener (TDAmeritrade) which did not limit our search to one fund family. In other words, if you stay with Vanguard, then you are limiting yourself to only Vanguard funds.

I'm not saying this is good or bad--Vanguard has a great reputation, low fees, etc. It's just a limiting factor when you shop for funds if you try to stay in one fund family.