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Tuesday, December 07, 2004

Email of the Day: Escaping from Destiny 
Q. My wife and I suckered ourselves by buying into the First Command propaganda and are fully invested in both Fidelity Destiny and Destiny II. Can we still roll our investments into a USAA or other non-FC Roth IRA? Although the $3000 from the 50% first year sales charge is a bitter pill to swallow, we're willing to jump ship. What would you recommend? Thanks!

A. Well, my first recommendation is not to take financial advice from some idiot with a Website.

But onto the more specific question at hand: you should be able to execute a rollover, or trustee-to-trustee transfer to another financial institution, no problem. It's better to have them send the money directly to another fund company. Otherwise, the fund company will withhold 20% of the balance to pay taxes.

But you can even stay with Fidelity - there's nothing wrong with them at all.

I also like TIAA-CREF, Vanguard, T. Rowe Price, and DFA Funds. USAA is fine, too, although their fund managers are relatively new on the job. They had a bloodletting a couple of years ago and replaced a bunch of their managers. Their index funds are fine. I'd check manager tenure before buying their actively managed funds.

If the Destiny account isn't already in a Roth, you'll have to meet certain income requirements. Check with a financial professional before making any moves. You have to consider what Destiny and Destiny II were doing in your portfolio. Do they represent your large cap exposure and you have other investments in bonds, internationals, small caps, etc? Then look for another large cap. But if you aren't diversified in these other sorts of holdings, then you may want to look for a broader fund, such as one tracking the Wilshire 5000 index or Lehman U.S. Bond Aggregate index.

It really depends entirely on your portfolio and your own needs and risk tolerances, which are questions I can't answer from here.

I'm a big fan of fee only planning for a question like yours. Check out the National Association of Personal Financial Advisors website (www.napfa.org, I think, though I can't hyperlink to it from this infernal Mac for some reason), and they'll refer you to a fee-only planner (no commissions; you pay for their time, usually by the hour, or a percentage of assets under management.)

If you prefer to use a commissioned advisor, then one load fund family I really like is American Funds. Has a large cap bias, though.

What I want you to carry away from this post isn't specific fund families, though, but the idea that no recommendation can carry any weight unless it first takes into account your total portfolio, risk tolerance, time horizon, and personal financial goals. It's more important to find a good advisor than a good fund recommendation.

Jason

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