Invest S-corp funds @Fidelity or take distribution and invest @Vanguard?

[drdds]

In order to get the maximum returns for my S-corp business funds (previously sitting in a low-interest bank account), I searched for a corporate investment option and found the only offering available was at Fidelity with a taxable corporate brokerage account (Vanguard does not offer this). I moved 90% of my corporate bank account funds into this account and bought Fidelity mutual funds (FSTVX (total stock), FSGDX (total international), FSITX (total bond) and MUB (ishares municipal bond)) according to 80-10-10 AAP. I also keep moving any new funds available each month in the corporate bank account and buying these funds leaving a little there for expenses and payments.

I am only buying Fidelity funds and not the Vanguard equivalent funds here mainly because Fidelity funds are free. I can't tell if Fidelity charges a fee to purchase Vanguard funds or not (looks like it does not but am not sure). I want to avoid any fees to purchase funds.

1) Is there a difference between equivalent Fidelity and Vanguard funds (for ex. FSTVX and VTSMX) that I am losing out by not buying VTSMX instead?

2) The reason I am buying only Fidelity funds in this Fidelity account is so that the money remains in the corporation and is not distributed. Should I instead take distributions and take the money into my Vanguard individual taxable brokerage account and buy the equivalent Vanguard funds there instead? Or should I do a mix and match of both?

Your advice is much appreciated.

 

[VagabondMD]

The Vanguard and Fidelity index funds are equivalent, for all practical purposes.

As I understand the OP, are you investing corporate funds for operations in Index mutual funds? I am not sure that this is legal or appropriate and have never heard of such. If there are excess funds, you should take them as salary. If you need the funds for running the business, they should be in a checking account or something that is similarly liquid.

[Zaphod]

Vagabond MD wrote:

The Vanguard and Fidelity index funds are equivalent, for all practical purposes.

As I understand the OP, are you investing corporate funds for operations in Index mutual funds? I am not sure that this is legal or appropriate and have never heard of such. If there are excess funds, you should take them as salary. If you need the funds for running the business, they should be in a checking account or something that is similarly liquid.

Click to expand...

Its legal to invest but the structure of an S corporation dont really give a bunch of benefits since you cant really retain earnings without changing taxation status and it passing through anyway. C corps can and its very beneficial as they arent marked as income, etc...until sold, this is kind of what BRK does, but again you lose some other taxation benefits (cap gains rates---->corp rates (which are similar now though)).

[jfoxcpacfp]

You, as a shareholder in the S-corp, have the right to make any reasonable choice you want in regard to use of your excess liquidity. You can even make unreasonable choices if you are the only shareholder and don't have to answer to a BOD.

I am concerned, however, that you are speculating with money that you may need in the short term. In general, I would not recommend investing any funds that will be needed in the next 5 years, as the market is very volatile in the short term. If we go into a bear market and you can afford to ride it out because you have other funds available and/or you are investing for the long term, then that's a different story.