Help with Options in Fidelity Brokerage Account

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Nana
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Help with Options in Fidelity Brokerage Account

Post by Nana » Wed Oct 04, 2017 2:09 pm

I have just opened a joint brokerage account at Fidelity with my mother. She currently has an account set up with Fidelity Institution and thought she was getting a good deal. She invests $200 a month in the account, and now has around $200,000 in there. I checked further and the money is being invested in one fund, Fidelity Adv Value Strategies Class A; she is paying a 5.75% load, plus an average of 3.5% sales charge; every time new money is put in there each month. The E/R is 0.86%. OUCH!

So, I am moving money to Fidelity where I have other accounts so that I can manage, and not have the extra fees; just the fund fees. My question to the experts out here.... How should I invest the $200,000? I was looking at possibly Fidelity Nasdaq Composite Index Fund (FNCMX) and Vanguard Inst Index Fund Plus (VIIIX). I think FNCMX is indexed against the NASDAQ and VIIIX against S&P 500. I don't know if my rational that I should split the money between two indexes sounds right, or if I should not do any indexes at all.

Thanks for your advice.

mega317
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Re: Help with Options in Fidelity Brokerage Account

Post by mega317 » Wed Oct 04, 2017 2:41 pm

My opinion is that you need to tread very carefully when investing someone else's money. You could cause problems in the relationship if you suggest funds that lose money. Or you could cause problems if you keep it very safe and then don't gain as much as some other benchmark your mother wants to use.

As far as specific options, I would use some of the suggestions from your thread last week.

livesoft
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Re: Help with Options in Fidelity Brokerage Account

Post by livesoft » Wed Oct 04, 2017 2:47 pm

You should learn about taxes and then look at this wiki article about index funds at Fidelity:
https://www.bogleheads.org/wiki/Fidelity
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Nana
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Re: Help with Options in Fidelity Brokerage Account

Post by Nana » Sat Oct 07, 2017 1:52 pm

Hi - I'm reaching out again to clarify that this is actually my money that mother is investing for me, and I would really appreciate some guidance. She is 89 and doesn't really understand how the old account had been losing money due to the load and heavy sales charge. I was the one getting zapped with the capital gains; the fund had 121% turnover, as the account is under my SSN. So, she told me to move it and do the best that I could; she was really upset when she saw that her monthly $200 investment was being lowered by the load and sales fee, regardless of what the market was doing.

The Fidelity Advisor Value Strategies A (FSOAX) fund that we were invested in before was a Large Value w/mid blend. It was 91.15% stock and 8.26% Int'l stock.

I'd like to keep the new investment with my Fidelity brokerage account with a growth model, as I have plenty of other monies coming in and don't plan to touch this unless I really have to in the longterm. I need to be careful as this is a taxable account.

I know before you had suggested the three fund portfolio:
FSTVX Fidelity Total Market Index Premium
FTIPX Fidelity Total Int'l Index Premium
FSITX Fidelity US Bond Index Premium

I am wondering if the best bet would be to use just the FSTVX fund for this investment of around $200,000. Or do you have other suggestions that are not index funds that I should look at. I have also invested in the Fidelity Contrafund in my IRA, albeit has a higher E/R 0.68 and a turnover of 29% - it seems to be doing very well. Your thoughts?

Thanks!

livesoft
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Re: Help with Options in Fidelity Brokerage Account

Post by livesoft » Sat Oct 07, 2017 2:21 pm

Nana wrote:
Sat Oct 07, 2017 1:52 pm
I am wondering if the best bet would be to use just the FSTVX fund for this investment of around $200,000. Or do you have other suggestions that are not index funds that I should look at. I have also invested in the Fidelity Contrafund in my IRA, albeit has a higher E/R 0.68 and a turnover of 29% - it seems to be doing very well. Your thoughts?
FSTVX is fine. I wouldn't touch Contrafund in a taxable account. Do you see why?
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Nana
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Re: Help with Options in Fidelity Brokerage Account

Post by Nana » Sat Oct 07, 2017 2:48 pm

I am guessing I should not use the Contrafund in a taxable account because of the turnover and potential capital tax implication. If not, please explain so that I can learn. Thanks!!

livesoft
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Re: Help with Options in Fidelity Brokerage Account

Post by livesoft » Sat Oct 07, 2017 2:49 pm

One can look up the past history of distributions made by Contrafund quite readily. No guessing is required.
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Nana
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Re: Help with Options in Fidelity Brokerage Account

Post by Nana » Sat Oct 07, 2017 2:54 pm

I’m sorry but I don’t understand what you mean by distributions that are made by a fund, and how it affects the capital gains. I’m new to this and would really appreciate some help.

livesoft
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Re: Help with Options in Fidelity Brokerage Account

Post by livesoft » Sat Oct 07, 2017 2:57 pm

Distributions made by a mutual fund come usually in at least two forms: Dividends and capital gains distributions. A tax-efficient fund will usually still have dividends distributed, but will not have capital gains distributed.
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Nana
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Re: Help with Options in Fidelity Brokerage Account

Post by Nana » Sat Oct 07, 2017 2:58 pm

Thanks

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BL
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Re: Help with Options in Fidelity Brokerage Account

Post by BL » Sat Oct 07, 2017 3:01 pm

I would consider total US and total international funds in your preferred ratio (maybe 10-50% Int., or 20-40% more commonly suggested.)

These don't generally distribute CG, and most of the modest dividends are qualified and taxed at CG rates. There should also be a foreign tax credit if it is anything like Vanguard's total International.

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oldcomputerguy
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Re: Help with Options in Fidelity Brokerage Account

Post by oldcomputerguy » Sat Oct 07, 2017 3:06 pm

Nana wrote:
Sat Oct 07, 2017 2:54 pm
I’m sorry but I don’t understand what you mean by distributions that are made by a fund, and how it affects the capital gains. I’m new to this and would really appreciate some help.
Contra fund is what is referred to as an “actively managed”fund. This mans that the fund manager frequently buys and sells securities within the fund in an effort to increase the gains and profits in the fund. Each time the fund manager sells something for more than he paid for it, that’s a capital gain within the fund. Those capital gains (profits) are periodically distributed to the fund’s shareholders, who must pay income taxes on the gains just Like on any other capital gains. This is not very tax-efficient, as it increases the fund shareholder’s tax bill. If you look at the fund description, you’ll see a number listed for the fund labeled “turnover”. This number relates directly to the amount of buying and selling being done in the fund, and is one indication of how tax-efficient the fund is.

An index fund such as Total Stock Market simply buys stocks mirroring the makeup of the index, then holds them, so there is nowhere near the turnover and thus nowhere near the tax consequences.

Hope this help.
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BlueRidgePro
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Re: Help with Options in Fidelity Brokerage Account

Post by BlueRidgePro » Sun Oct 08, 2017 12:51 pm

I hope that you are aware that you are not restricted to Fidelity funds in a Fidelity account.

You can invest in pretty much any fund, including Vanguard. This includes no-load funds, for which Fidelity charges no fees.

My Fidelity account, for example, includes no Fidelity funds. I have Vanguard and other funds and ETFs and CDs. I've been happy with Fidelity's service and on-line features.

Nana
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Re: Help with Options in Fidelity Brokerage Account

Post by Nana » Sun Oct 08, 2017 2:12 pm

I did know that I could invest in other funds than Fidelity, but am not really sure which ones would be good. What are some that you might suggest for a taxable brokerage account with Fidelity other than Fidelity funds?

mhalley
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Re: Help with Options in Fidelity Brokerage Account

Post by mhalley » Sun Oct 08, 2017 2:39 pm

In a taxable account you would want to steer clear of actively managed funds. If you review the wiki on tax effecient fund placement, you can see where various funds are best located.
https://www.bogleheads.org/wiki/Tax-eff ... _placement
There is no need to look beyond fidelity funds as they have very inexpensive passive funds. You can review the wiki on fidelity.
https://www.bogleheads.org/wiki/Fidelity

BlueRidgePro
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Re: Help with Options in Fidelity Brokerage Account

Post by BlueRidgePro » Sun Oct 08, 2017 5:15 pm

There is a discussion of simple (lazy) portfolios on this site.

https://www.bogleheads.org/wiki/Lazy_portfolios

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