need help on picking SEP-IRA funds (fidelity)

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Bones_Jones
Posts: 60
Joined: Thu Aug 11, 2016 2:27 pm

need help on picking SEP-IRA funds (fidelity)

Post by Bones_Jones » Fri Nov 09, 2018 4:26 am

hi guys,

I decided on SEP IRA after waging my option. we are going to max out 55k a year for next 15 years. :D we already have a fidelity account, so we are sticking with them. one annoying thing about SEP IRA is that they won't let me auto invest. so i have to put the $ in monthly. :x


ok, so i just randomly selected 3...


FXAIX (60%)
FIDELITY 500 INDEX FUND
https://www.morningstar.com/funds/xnas/fxaix/quote.html
Expenses
0.02%


FIGFX (20%)
FIDELITY INT'L GROWTH FUND
https://www.morningstar.com/funds/xnas/figfx/quote.html
Expenses
1.03%


FNMIX (20%)
FIDELITY NEW MARKETS INCOME
https://www.morningstar.com/funds/xnas/fnmix/quote.html

Expenses
0.82%


i have a zero clue if these funds are good or not... am i doing this wrong?

and there are so many funds out there. for ex.
https://fundresearch.fidelity.com/mutua ... /316390475
https://fundresearch.fidelity.com/mutua ... /316390665

why shouldn't i pick these with super high returns? :confused


and i know most people here do the lazy 3 index fund portfolio. should i do that too? (i did that with 401k with my previous employer... gave me good returns 2 years ago, but virtually nothing last year)

well any kind of advise is appreciated!


thx in advance.
Last edited by Bones_Jones on Fri Nov 09, 2018 4:57 am, edited 2 times in total.

Chip
Posts: 2281
Joined: Wed Feb 21, 2007 4:57 am

Re: need help on picking SEP-IRA funds (fidelity)

Post by Chip » Fri Nov 09, 2018 4:49 am

It's important to buy funds with low expenses that are broadly diversified. While the high expense funds you picked performed well in the past, there's only a 50/50 chance they'll outperform in the future, before costs. After costs, in time, it's likely they'll underperform. So your smart bet is to pick low cost funds. See the wiki entry on the Effect of High Costs.

Picking funds is one of the very last things to do in developing an investment plan. Have you read the Getting Started entry in the wiki? Highly recommended.

terran
Posts: 768
Joined: Sat Jan 10, 2015 10:50 pm

Re: need help on picking SEP-IRA funds (fidelity)

Post by terran » Fri Nov 09, 2018 7:49 am

Here's my suggestion

FSKAX
Fidelity Total Market Index Fund
https://fundresearch.fidelity.com/mutua ... /315911693
0.015% expense ratio

FTIHX
Fidelity Total International Index Fund
https://fundresearch.fidelity.com/mutua ... /31635V638
0.06% expense ratio

FXNAX
Fidelity U.S. Bond Index Fund
https://fundresearch.fidelity.com/mutua ... /316146356
0.025% expense ratio

More good options here: https://www.bogleheads.org/wiki/Fidelity

Bones_Jones
Posts: 60
Joined: Thu Aug 11, 2016 2:27 pm

Re: need help on picking SEP-IRA funds (fidelity)

Post by Bones_Jones » Fri Nov 09, 2018 1:52 pm

so just go all out index funds?

60% domestic
20% international
20% bonds

like that?
but i don't know how to find them on their website..

but honestly what's the point of having these managed funds? :confused

so i'm more of a short term(15-18years)... not long term... does that change anything?


in fidelity they even have zero expense fund
https://fundresearch.fidelity.com/mutua ... /315911628

but i was bit hesitant because i have no clue how that works and there's not much info. it seems like it's their recent stuff.

and oh wait, i just found they also have all the vanguard stuff
https://search.fidelity.com/search/getF ... umResults=

but they don't have
VBTIX
VINIX
VTSNX

and for those available i have to pay $75 transaction fee which i don't want to...


so i'm back to trying to find a right fund for fidelity... help?
Last edited by Bones_Jones on Fri Nov 09, 2018 2:10 pm, edited 1 time in total.

Chip
Posts: 2281
Joined: Wed Feb 21, 2007 4:57 am

Re: need help on picking SEP-IRA funds (fidelity)

Post by Chip » Fri Nov 09, 2018 2:04 pm

Bones_Jones wrote:
Fri Nov 09, 2018 1:52 pm
so just go all out index funds?

60% domestic
20% international
20% bonds

like that?
Umm, yeah. https://www.bogleheads.org/wiki/Boglehe ... n_possible
but honestly what's the point of having these managed funds? :confused
They make money for the companies that sell them.
so i'm more of a short term(15-20years)... not long term... does that change anything?
No. And your time horizon is not "until you retire". It's through your retirement.
in fidelity they even have zero expense fund
https://fundresearch.fidelity.com/mutua ... /315911628

but i was bit hesitant and i don't even know how such fund can exist...
Lengthy discussion here.

You might get a lot out of a deep dive into the wiki.

niceguy7376
Posts: 2147
Joined: Wed Jul 10, 2013 2:59 pm
Location: Metro ATL

Re: need help on picking SEP-IRA funds (fidelity)

Post by niceguy7376 » Fri Nov 09, 2018 2:04 pm

Why dont you go Solo 401k instead of SEP? That way you can even do backdoor Roth if you currently dont have trad IRAs or SEP /SIMPLE IRA accounts

Bones_Jones
Posts: 60
Joined: Thu Aug 11, 2016 2:27 pm

Re: need help on picking SEP-IRA funds (fidelity)

Post by Bones_Jones » Fri Nov 09, 2018 2:19 pm

Chip wrote:
Fri Nov 09, 2018 2:04 pm
Bones_Jones wrote:
Fri Nov 09, 2018 1:52 pm
so just go all out index funds?

60% domestic
20% international
20% bonds

like that?
Umm, yeah. https://www.bogleheads.org/wiki/Boglehe ... n_possible
but honestly what's the point of having these managed funds? :confused
They make money for the companies that sell them.
so i'm more of a short term(15-20years)... not long term... does that change anything?
No. And your time horizon is not "until you retire". It's through your retirement.
in fidelity they even have zero expense fund
https://fundresearch.fidelity.com/mutua ... /315911628

but i was bit hesitant and i don't even know how such fund can exist...
Lengthy discussion here.

You might get a lot out of a deep dive into the wiki.


gotcha. so i should try to find fidelity equivalent of

VBTIX
VINIX
VTSNX

? i'll do that now. or maybe i should open a vanguard account? :confused


i read those wiki few years ago. i'll read it again. :sharebeer

Chip
Posts: 2281
Joined: Wed Feb 21, 2007 4:57 am

Re: need help on picking SEP-IRA funds (fidelity)

Post by Chip » Fri Nov 09, 2018 2:43 pm

Bones_Jones wrote:
Fri Nov 09, 2018 2:19 pm
gotcha. so i should try to find fidelity equivalent of

VBTIX
VINIX
VTSNX

? i'll do that now. or maybe i should open a vanguard account? :confused
https://www.bogleheads.org/wiki/Three-f ... head-style

You can buy the Fidelity funds shown or any of the ETFs. $4.95 commission on ETFs except for iShares

Bones_Jones
Posts: 60
Joined: Thu Aug 11, 2016 2:27 pm

Re: need help on picking SEP-IRA funds (fidelity)

Post by Bones_Jones » Fri Nov 09, 2018 3:09 pm

Chip wrote:
Fri Nov 09, 2018 2:43 pm
Bones_Jones wrote:
Fri Nov 09, 2018 2:19 pm
gotcha. so i should try to find fidelity equivalent of

VBTIX
VINIX
VTSNX

? i'll do that now. or maybe i should open a vanguard account? :confused
https://www.bogleheads.org/wiki/Three-f ... head-style

You can buy the Fidelity funds shown or any of the ETFs. $4.95 commission on ETFs except for iShares

ah snap. it's all right there! thx!! i'll change right now :sharebeer


one question though - what's your opinion on doing 3 fund portfolio and then maybe just 1 of high performing managed funds? i like the idea of getting big returns short term...

and i see that on fidelity i have to choose between
Fidelity ZERO Total Market Index Fund (FZROX)
https://fundresearch.fidelity.com/mutua ... /31635T708

Fidelity Total Market Index Fund (FSKAX)
https://fundresearch.fidelity.com/mutua ... /315911693



so which one should i choose? isn't the one with zero expense ratio a no brainer? why would anybody choose anything else since expense ratio seems like #1 priority? :confused

Chip
Posts: 2281
Joined: Wed Feb 21, 2007 4:57 am

Re: need help on picking SEP-IRA funds (fidelity)

Post by Chip » Fri Nov 09, 2018 4:42 pm

Bones_Jones wrote:
Fri Nov 09, 2018 3:09 pm
one question though - what's your opinion on doing 3 fund portfolio and then maybe just 1 of high performing managed funds? i like the idea of getting big returns short term...
Who doesn't like big returns short term? If it were as easy as looking at past performance why wouldn't everyone do it?

Here's the answer: You can't buy that past performance (unless you've invented a time machine). Past performance does NOT predict future results. Repeat that last sentence to yourself 10 times. Mutual funds are required by law to put a similar sentence in their sales materials.

What has been proven is that over time, costs matter. Keeping costs low is just about a guaranteed way to achieve superior returns over a lifetime of investing. See https://www.bogleheads.org/wiki/Boglehe ... _costs_low.
and i see that on fidelity i have to choose between
Fidelity ZERO Total Market Index Fund (FZROX)
https://fundresearch.fidelity.com/mutua ... /31635T708

Fidelity Total Market Index Fund (FSKAX)
https://fundresearch.fidelity.com/mutua ... /315911693

so which one should i choose? isn't the one with zero expense ratio a no brainer? why would anybody choose anything else since expense ratio seems like #1 priority? :confused
It's not a no-brainer, though it's certainly a better choice than an expensive fund. Read the 700+ post thread I gave you a link to earlier if you want to explore the reasons for and against using it. It is probably a suboptimal choice in a taxable account due to likely capital gains distributions.

terran
Posts: 768
Joined: Sat Jan 10, 2015 10:50 pm

Re: need help on picking SEP-IRA funds (fidelity)

Post by terran » Fri Nov 09, 2018 4:50 pm

Bones_Jones wrote:
Fri Nov 09, 2018 3:09 pm
Fidelity ZERO Total Market Index Fund (FZROX)
https://fundresearch.fidelity.com/mutua ... /31635T708
I don't know about SEP IRAs, but the ZERO funds are available in my Fidelity solo 401(k) and my understanding is that they're not available in other employer plans. Maybe a SEP is considered a retail plan like regular IRAs though?

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