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What's the best way to go about changing investment companies? I see a couple ways of doing it:
1) Sell everything from Company A, transfer cash to Company B, buy new investments with all currently-held investment monies.
2) Stop buying shares from Company A (but leave them in place), and start buying shares from Company B. Later on (say, 1 year later, to gain "long term gains" status), sell what's still at Company A, and transfer to Company B, and add to then-currently held investments.
Option 1 is (obviously) the easiest. It's basically out of one, into the other. Downside: It ignores tax implications on gains, some of which could be taxed at the higher short-term gains rate.
Option 2 is basically the opposite, but takes a while to follow through with. Is this a consideration worth messing with, or is the net result essentially the same? Does this answer change if you're in the 15% tax bracket vs. 25% or higher?
Is there anything I'm missing?
To get into specifics, I'm considering moving my (taxable) investments from USAA (where they've been for ~4 years) to Charles Schwab. I would move the money from a couple USAA index funds into some of Schwab's no-commission ETF's. I'm trying to figure out if using their ETF's would be a suitable/smart replacement for standard mutual funds, as far as being able to make regular (twice-monthly) contributions, and otherwise manage it similarly... The main reasons I'm considering the switch is for lower cost ratios and better investment selection -- I'm wishing USAA had more index funds, such as for international and small cap equities. I am, however, planning on keeping my Roth and GNMA bonds MF there at USAA for now. ETA: If it matters, I'm talking about moving ~$11k currently, and contributing ~$500/mo into the foreseeable future.
Last question: Jim, could you post a link for the Morningstar X-Ray tool that you so frequently mention? I'd like to do some looking with that before I make any decisions. Is it a free tool, or do you need an account and/or membership to use it?
1) Sell everything from Company A, transfer cash to Company B, buy new investments with all currently-held investment monies.
2) Stop buying shares from Company A (but leave them in place), and start buying shares from Company B. Later on (say, 1 year later, to gain "long term gains" status), sell what's still at Company A, and transfer to Company B, and add to then-currently held investments.
Option 1 is (obviously) the easiest. It's basically out of one, into the other. Downside: It ignores tax implications on gains, some of which could be taxed at the higher short-term gains rate.
Option 2 is basically the opposite, but takes a while to follow through with. Is this a consideration worth messing with, or is the net result essentially the same? Does this answer change if you're in the 15% tax bracket vs. 25% or higher?
Is there anything I'm missing?
To get into specifics, I'm considering moving my (taxable) investments from USAA (where they've been for ~4 years) to Charles Schwab. I would move the money from a couple USAA index funds into some of Schwab's no-commission ETF's. I'm trying to figure out if using their ETF's would be a suitable/smart replacement for standard mutual funds, as far as being able to make regular (twice-monthly) contributions, and otherwise manage it similarly... The main reasons I'm considering the switch is for lower cost ratios and better investment selection -- I'm wishing USAA had more index funds, such as for international and small cap equities. I am, however, planning on keeping my Roth and GNMA bonds MF there at USAA for now. ETA: If it matters, I'm talking about moving ~$11k currently, and contributing ~$500/mo into the foreseeable future.
Last question: Jim, could you post a link for the Morningstar X-Ray tool that you so frequently mention? I'd like to do some looking with that before I make any decisions. Is it a free tool, or do you need an account and/or membership to use it?
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