Should i pull my money out??? And invest elsewhere...

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Should i pull my money out??? And invest elsewhere...

Postby rat108m » Sat Dec 29, 2012 7:36 am

Im 28 years old and I have a fidelity roth ira worth around $33,000. I have all my money in a fidelity target fund and im not that happy with it, but i dont know where to move my money to? I need help. I've heard good things about index funds or fidelity spartan index funds? Does this sound like a good move for me or should i invest in more traditional mutual funds? Pls advise...
I picked a target date fund because I was new to investing and it sounded easy and I liked that the target fund would rebalance over the years. I was thinking of moving my money because I feel that it could be working better somewhere else, just dont know where?
btw I'm in target date FFFFX 2040 Fidelity
Last edited by rat108m on Sun Dec 30, 2012 1:35 am, edited 1 time in total.
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Re: Should i pull my money out??? And invest elsewhere...

Postby hoppy08520 » Sat Dec 29, 2012 10:53 am

rat108m wrote:Im 28 years old and I have a fidelity roth ira worth around $33,000. I have all my money in a fidelity target fund and im not that happy with it, but i dont know where to move my money to? I need help. I've heard good things about index funds or fidelity spartan index funds? Does this sound like a good move for me or should i invest in more traditional mutual funds? Pls advise...

Rat, your question is like going to a vegetarian site and asking, "I'm not happy with my meat-based diet, and I'm thinking about becoming a vegetarian. Does this sound good or should I keep eating meat?" :happy

So, most of us here are proponents of index funds. But don't expect miracles. A 3-Fund portfolio built around Spartan Index Funds won't suddenly trounce the returns of a Fidelity target fund, if both portfolios are of a similar asset allocation. The superiority of index funds is more subtle, as you'll generally see an extra 0.5% - 1% a year, averaged over many years, by having lower expenses with index funds over actively managed funds. That seemingly small difference, however, when compounded year over year, can amount to much bigger returns over a lifetime. Just don't expect fireworks in the first year or two, or even five.

Why are you unhappy with your target date fund? What were you expecting, and what are your goals?

I recommend reading the Getting Started page on this site's wiki to learn more.
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Re: Should i pull my money out??? And invest elsewhere...

Postby JW Nearly Retired » Sat Dec 29, 2012 11:11 am

If you like the single fund approach there is a combo of Fidelity Spartan funds called Fidelity Four-in-One Index Fund(FFNOX). ER is a pretty low 0.23%. It consists of 4 Spartan funds: SP500/extended Mkt/ total International stocks/ and bonds in 48/12/25/15 proportions.
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added.... this has one concrete advantage over the target retirement fund. It has a 0.5% lower ER. I think that is worth the mouse click it would take you to exchange your fund for this one.
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Re: Should i pull my money out??? And invest elsewhere...

Postby STC » Sat Dec 29, 2012 11:13 am

Why aren't you happy with it? What is the turn-off?
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Re: Should i pull my money out??? And invest elsewhere...

Postby livesoft » Sat Dec 29, 2012 12:06 pm

Fidelity Freedom funds have done quite well this year, so if you are unhappy with it, I think you are going to be unhappy with every investment including index funds. So like hoppy wrote, why are you unhappy?
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Should i pull my money out??? And invest elsewhere...

Postby cherijoh » Sat Dec 29, 2012 12:11 pm

What is the target date of your fund? Is it possible that you are being too conservative?

C
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Re: Should i pull my money out??? And invest elsewhere...

Postby nisiprius » Sat Dec 29, 2012 12:27 pm

rat108m wrote:Im 28 years old and I have a fidelity roth ira worth around $33,000. I have all my money in a fidelity target fund and im not that happy with it, but i dont know where to move my money to? I need help. I've heard good things about index funds or fidelity spartan index funds? Does this sound like a good move for me or should i invest in more traditional mutual funds? Pls advise...
Stick with the Fidelity target fund until you can give some really good, specific reason to change. Boring, I know, but there it is. Please be more specific about why you're "not that happy with it." I am assuming you are talking about one of the Fidelity Freedom funds, possibly Freedom 2045?

There's no magic, no miracles, and no reason to make any big change in a big hurry. Vanguard doesn't have any magic shields against the Uncomfortably Steep Fiscal Hill; whatever happens, a Vanguard year-2045 target fund will react about the same way as a Fidelity year-2045 target fund. Index funds are great but they're not all that great, they're just a way to save some money on costs and free yourself from superstitious nonsense about actively managed funds.

The most important question is not "what brand name" or "what fund flavor," it's your asset allocation: % stocks, % everything else. Which Freedom Fund is it, and do you know what percentage you have in stocks? If it's Freedom 2045, be aware that, basically, your retirement money is in "stocks," 85% stocks, and whatever "stocks" do, your fund is going to mirror that.

Stocks are stocks. Any portfolio with, let's say, 85% stocks in it is going to have its ups and downs, and they will be large. You can either grit your teeth and ride out the fluctuations, which is sooner said than done by the way, or you can ease down on your percentage of stocks slowly and gradually. As J. P. Morgan supposedly replied when someone said he was losing sleep over his stock investments, "sell down to your sleeping point."

According to the standard thinking here, which I agree with, yes, you can save a bit on costs and take control of your portfolio and get rid of a lot of silly nonsense in the Freedom funds by replacing it with a three-fund portfolio consisting of Fidelity Spartan Total Market Index Fund (FSTMX), Fidelity Spartan Global Ex-US (FSGUX), and FIdelity Spartan U. S. Bond Index (FBIDX). If you mix these three to get the same proportions of domestic stock, international stock, and bonds as your current Freedom Fund, then, in my opinion, you will have made a small, incremental improvement without changing your strategy.

Since I'm a Vanguard fan, sure, in my personal opinion you could make another improvement--a very small improvement but still an improvement--by moving to Vanguard and using the corresponding trio of Vanguard funds, because with $33,000 total you should be able to get lower-priced Admiral shares for some of those funds. But none of that is very important.

In your situation, I might consider changing my holdings at Fidelity, but I would not leave Fidelity as a brokerage unless you were unhappy with something else about Fidelity besides their Freedom Fund. The big brokers and mutual fund houses, e.g. Vanguard, Fidelity, Schwab are all pretty much the same, just like big supermarkets. Someone may swear by Albertson's or shop only at Kroger's but you can assemble a meal in either place, and if you can afford to shop at one you can afford to shop at the other.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
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Re: Should i pull my money out??? And invest elsewhere...

Postby Padlin » Sat Dec 29, 2012 4:20 pm

I've never cared for the Freedom Funds due to the extra baggage they are packed with. I use a Spartan funds similiar to what JW Nearly Retired suggests.
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Re: Should i pull my money out??? And invest elsewhere...

Postby Majormajor78 » Sat Dec 29, 2012 7:13 pm

From somebody who used to have most of their savings in the Freedom 2040 I can understand why anybody would not be happy with it. Vanguard's target date fund is a basic three fund portfolio... look what's under the hood of the Freedom 2040:

Asset Allocation (%)2 as of 10/31/2012
Domestic Equity Funds 59.98
Equity Funds 50.95
– Fidelity Series All-Sector Equity Fund 11.74
– Fidelity Series Large Cap Value Fund 10.10
– Fidelity Growth Company Fund 7.93
– Fidelity Series 100 Index Fund 7.12
– Fidelity Disciplined Equity Fund 5.39
– Fidelity Blue Chip Growth Fund 3.73
– Fidelity Series Small Cap Opportunities Fund 1.97
– Fidelity Small Cap Value Fund 1.15
– Fidelity Small Cap Growth Fund 1.11
– Fidelity Series Real Estate Equity Fund 0.71
Commodity Funds 9.03
– Fidelity Series Commodity Strategy Fund 9.03
International Equity Funds 22.45
– Fidelity Series International Value Fund 7.99
– Fidelity Series International Growth Fund 7.89
– Fidelity Series Emerging Markets Fund 4.98
– Fidelity Series International Small Cap Fund 1.60
Bond Funds 17.52
Investment Grade Bond Funds 8.50
– Fidelity Series Investment Grade Bond Fund 8.50
Inflation-Protected Bond Funds 0.00
High Yield Bond Funds 7.29
– Fidelity Series High Income Fund 7.29
Floating Rate Funds 0.50
– Fidelity Series Floating Rate High Income Fund 0.50
Emerging Markets Debt Funds 0.94
– Fidelity Series Emerging Markets Debt Fund 0.94
Real Estate Debt Funds 0.27
– Fidelity Series Real Estate Income Fund 0.27
Short-Term Funds & Net Other Assets 0.05
– NET OTHER ASSETS 0.05
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Re: Should i pull my money out??? And invest elsewhere...

Postby livesoft » Sat Dec 29, 2012 8:01 pm

I was down on Freedom Funds, too, but they hold their own performance-wise against Vanguard Target Retirement funds. They do so even with higher fees because they have a bit higher risk. So if the OP has a performance-issue problem, they will have the same problem with a Vanguard Target Retirement fund.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Should i pull my money out??? And invest elsewhere...

Postby steve r » Sat Dec 29, 2012 8:12 pm

I am going to give you very different advice.

Take half your Roth, roll it over to Vanguard and pick a Target Date fund (say 2040). Never touch it!
With the other half, invest, speculate, buy stocks, ETFs and mutual funds ... and .... most importantly learn from experience. The value of such an experience will far exceed the cost of any mistakes you will make. You may even come out ahead.

In a few years you can readjust.
Maximize Diversification - Minimize Costs
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