Help need to pick right bond fund for Fidelity 401(k)

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shjin
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Joined: Thu Nov 10, 2016 6:03 pm

Help need to pick right bond fund for Fidelity 401(k)

Post by shjin » Thu Nov 17, 2016 1:40 am

This is my very first post. Bogleheads wiki was inspiring and I decided to better manage my portfolio and I need some help to choose bond fund.

My 401(k) is at Fidelity and it has the following two choices:

PIMCO TOTAL RETURN
===================
Exp Ratio (Gross): 0.27%
Weighted Avg Maturity: 8.74 Years
Duration: 5.64 Years

VANG ST BD IDX IS PL (VBIPX)
=========================
Exp Ratio (Net): 0.04%
Exp Ratio (Gross): 0.04%
30-Day Yield: 1.24%
Weighted Avg Maturity: 2.90 Years
Duration: 2.76 Years

I am in progress of opening BrokerageLink that allows more choices and I think Fidelity® U.S. Bond Index Fund - Premium Class (FSITX) will be available there:

Exp Ratio (Net): 0.05%
30-Day Yield: 1.99%
Weighted Avg Maturity: 7.30 Years
Duration: 5.63 Years

Reading from wiki, it sounds like I will be better to use US Bond Index fund, but I want to make sure if I am not missing anything here.

My soon-to-be ex-advisor said that I should consider active managed fund for bonds given low return of index bond funds in recent years and interest rate increase by new president-elec. Should I ignore this statement? I plan to ignore it, but again need opinion here just in case.

retiredjg
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Joined: Thu Jan 10, 2008 12:56 pm

Re: Help need to pick right bond fund for Fidelity 401(k)

Post by retiredjg » Thu Nov 17, 2016 4:56 pm

I think you should check on the expense ratio for the PIMCO Total Return. I think the lowest it is offered is .46% (saw that in an article). We've seen dozens, maybe hundreds, of 401k plans and I don't ever recall seeing it less than .46%.

Perhaps they have just opened an institutional share class?

If the Brokerage link is free, I'd use the Fidelity US Bond Index.

Ignore your advisor. He's guessing just like everybody else.

Topic Author
shjin
Posts: 8
Joined: Thu Nov 10, 2016 6:03 pm

Re: Help need to pick right bond fund for Fidelity 401(k)

Post by shjin » Thu Nov 17, 2016 10:53 pm

retiredjg wrote:I think you should check on the expense ratio for the PIMCO Total Return. I think the lowest it is offered is .46% (saw that in an article). We've seen dozens, maybe hundreds, of 401k plans and I don't ever recall seeing it less than .46%.

Perhaps they have just opened an institutional share class?
The Exp Ratio (Gross) is correct. It is 0.27%. The prospect page says the following note. I am not sure if this means it is an institutional share class:
Information on this investment option was provided by your plan sponsor, plan trustee, investment manager, trustee or third party data provider. This investment is not a mutual fund.
https://nb.fidelity.com/public/workplac ... w-all/TPG6

retiredjg
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Re: Help need to pick right bond fund for Fidelity 401(k)

Post by retiredjg » Fri Nov 18, 2016 6:46 am

Very interesting. A managed separate account rather than the mutual fund. I'd guess that is the reason for the very low ER for a PIMCO actively managed product.

I'd be very willing to use this PIMCO account if the brokerage link has a cost. Otherwise I'd use the intermediate term index fund FSITX available in the brokerage link.

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oldcomputerguy
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Re: Help need to pick right bond fund for Fidelity 401(k)

Post by oldcomputerguy » Fri Nov 18, 2016 8:28 am

I find it interesting that the PIMCO fund shows its holdings as 62% cash (and cash equivalents), with a return over the last year of 6.36%. I can't seem to wrap my head around these two facts taken together.

I also do not see anywhere on the linked-to page where one can read the prospectus of the fund. Perhaps I'm just suspicious and ornery, but I'd rather have more information about the fund before I invested in it. Just me.

I'm in FSITX in my Fido 401k as my sole bond holding, and sleep pretty well at night.
"I’ve come around to this: If you’re dumb, surround yourself with smart people; and if you’re smart, surround yourself with smart people who disagree with you." (Aaron Sorkin)

GordonG
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Re: Help need to pick right bond fund for Fidelity 401(k)

Post by GordonG » Fri Nov 18, 2016 11:17 am

I had PIMCO a while back, but ditched it. Who needs that expense ratio :shock: The bond fund I use with my Fidelity retirement account is VBTIX.

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