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This is a follow-up to my previous question:
My investment account is increasingly and significantly underperforming vs. the S&P 500. What should I do?

Much of the advice I received pertained to switching my money to a Vanguard fund. This may seem obvious, but I am new to investing and I don't know how to pull my money out and re-invest it into a separate fund.

I'm assuming I will need a broker, and since I do not plan to micro-manage the new fund, would it be sufficient to pay one of the cheaper online brokerages instead of finding a personal account manager?

Also, what fees should I look out for if I pull my money from the current fund and re-invest in another?

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You need to contact the institution that is holding your current account, have them sell your fund investment, and then close your account and send you a check for the balance.

Then you can open an account directly with Vanguard (or call 800-319-4254).

You don't need an account with an online broker unless you want to be able to invest in funds outside the Vanguard family.

Fees will depend on the institution that you are currently using and the fund. With some funds you have to pay a "load" (percentage of your assets, in the neighborhood of a couple of percent) when you redeem shares. Your institution may charge you a fee for redeeming the fund (anywhere from $0/free to maybe $40 or higher). Some institutions will charge a fee for closing the account. (I've seen anything from $0/free to $40, but I haven't looked around in a while.)

As MrChrister points out in a comment below, this is not the best method for an IRA. In that case, you'd want to make a transfer, and I'd recommend calling both your current institution and Vanguard (or wherever you end up transferring funds to) for forms and instructions on how best to do it.

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    +1 - but remember to watch for tax issues depending on the kind of accounts you have. This is not the best method for IRAs (but the question isn't about an IRA) – MrChrister Feb 9 '11 at 22:23
  • Very helpful - thank you. But yes, to address the tax issue - do I need to worry about realizing capital gains when I sell? We're just talking about a few $100's here I think. That might be a topic for a whole new question actually... – NoCatharsis Feb 9 '11 at 23:15
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    Yes. You will realize capital gains when you sell. Hard to change investments otherwise. The good news is that you'll be resetting your cost basis a little higher, so your future taxes will be lower. This is particularly good if long-term capital gains tax rates rise in the future. – user296 Feb 10 '11 at 6:33
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Usually the new broker will take care of this for you. It can take a couple of weeks.

If you are planning to go with Vanguard, you probably want to actually get an account at Vanguard, as Vanguard funds usually aren't "No Transaction Fee" funds with many brokers. If you are planning to invest in ETFs, you'll get more flexibility with a broker.

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  • Just to clarify: Do you mean I should get an account with Vanguard, in which case one of their brokers will work with me? Or do you mean get a 3rd party broker to open the account and manage it for me? – NoCatharsis Feb 11 '11 at 13:53
  • If you are interested in mutual funds, an account with Vanguard is the way to go. If you're interested in ETFs, I would use a discount broker like Schwab, Ameritrade, ETrade, etc. – duffbeer703 Feb 12 '11 at 1:44

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