Do a Mutual Fund Switch for Free

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1. Figure out what mutual funds and fund companies you own. Seems elementary, and it is.

2. Drill down to the mutual funds you don’t like. Why don’t you like them? Is it performance? That’s usually why we fall out of love with a fund. If so check other funds at other companies that invest in similar ways. If it’s a large cap fund look at other large cap funds. Is their performance similar to the performance of your fund? If so it’s probably not the fund that is the issue, it’s the sector generally that has done poorly.

3. Figure out how much you are paying to own the funds you don’t like. Most people pay about 1% annually on top of any loads paid to the broker who sold you the fund.  It always makes sense to know this number. Most investors don’t. If you’re making the effort to revisit your funds, go the extra step and find out how much you are paying from year to year.  This number is called the Expense Ratio. It should be fairly easy to find in your prospectus.

4. If you are sure that you need to get out of a fund. If you are absolutely positive, then don’t compound your mistake by looking outside of your current fund company without looking at your current company’s alternatives. If you leave American Funds for instance, and go to Oppenheimer Funds you are going to pay yet another load and put yourself deeper in the hole. Don’t do that.

5. A better alternative is to look within your current fund family for a fund that you will be more comfortable with. If you don’t like the volatility of your current fund which happens to invest in overseas markets why not look at a good domestic bond fund instead. Most fund companies have many choices to choose from. Research any prospective fund on Morningstar.com.

6. If you can find a fund within your current company you can usually move all the money in your current fund into the new fund at absolutely no cost. This is called a SWITCH. Your broker can help you with this, or you can even call the company yourself and initiate the switch. One can do switches in almost all fund companies.

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