Moving balances in a mutual fund
October 24, 2014 1:55 PM   Subscribe

When transferring balances from one mutual fund to another in my 401k, what the is the most advantageous format to use for the transfer (percent, shares, or dollars) and why?

I'm in the U.S. My 401k is managed by a big company who's name you would recognize. I am making this exchange via that company's website. I am going to transfer the balance from one mutual fund to another within my 401k. I've done all my research and have made this decision. I'm not withdrawing money from the 401k or transferring anything to another person -- this is all within my own, personal 401k.

I am stumped about the best format to make the transfer in -- dollars, percent or shares. Which will result in the most money for me (by which I mostly mean, which will result in me paying the lowest fees). Can you point me to some resources about the pros and cons of each so that I can make an informed decision about which to choose?
posted by OrangeDisk to Work & Money (4 answers total) 1 user marked this as a favorite
 
Best answer: It doesn't matter at all, in any way. Insofar as there are any redemption or subscription or transfer fees, they will be calculated as a percentage of the dollar amount transferred. It doesn't matter how you specify the transfer.

For example, say you had 100 shares of a fund with a $20 per share value, so total account value of $2000. And you wanted to transfer half of it. You could specify 50 shares, or $1000, or 50%. Regardless, the amount transferred will be 10 shares = 50% = $1000, and you will be charged the same fee.
posted by Perplexity at 2:01 PM on October 24, 2014


Best answer: There is no difference. They just give you the choices to make it easier to carry out your rebalancing plan. Some people would rather look at it as percentages, others as dollars, and a few as shares. Say you have 100 shares of fund X and the price is $100 per share, so you have $10,000 in that fund. If you decide you want to move $1,000 to another fund, you can move $1,000, or move 10%, or move 10 shares. It's all the same thing, but you might find one way of looking at it easier than another.
posted by jkent at 2:11 PM on October 24, 2014


Response by poster: It never occurred to me that it was for my convenience. I assumed it must mean something. It really sucks that I wasted a question on this! Thank you very much for the quick answers though.
posted by OrangeDisk at 2:14 PM on October 24, 2014 [2 favorites]


Best answer: It is really just your choice. It could make a very small difference.

If you want to transfer all of your money from one fund to another, use percentage, 100%. Transfers occur at the end of the day after price changes have occurred, so you wouldn't know when you place the order what the total dollar amount is going to be at the end of the day. If you place your order in the middle of the day, your order typically doesn't process until prices are final at the end of the same day. If you place your order at night, it doesn't process until the end of the next day. So you never know the exact price or total before placing your order. With percentages, it doesn't matter 100% is 100% regardless what price changes occur before processing.

Likewise, if you are trying to rebalance between two funds, say to a target percentage, you wouldn't know exactly how many dollars that would be since the total could change at the end of the day before the transfer. So percentage will give you a slightly closer result to your desired target.

Fractional fund shares are totaled down to three decimal places, typically worth a few pennies, so you get the same results whether you specify dollar amount or percentage. You don't need a round numbers of shares to get a result accurate to a penny.

So generally, percentages are more useful, but dollars are okay too. Number of shares is kind of irrelevant since you are generally interested in the percentage amount or dollar amount.
posted by JackFlash at 5:23 PM on October 24, 2014 [1 favorite]


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