Fidelity 401k and Hello

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
Mac Inger
Posts: 9
Joined: Fri Oct 12, 2018 3:25 pm

Fidelity 401k and Hello

Post by Mac Inger »

Hello Bogleheads. First time caller, recent listener.

I have a fulltime job for the first time in my life :annoyed and they provide a 401k with Fidelity. Have done a bit of digging for the recommended Fidelity funds on a 401k but i do not have any of those available through my employer.

Here is a screengrab of my options. Any opinions for a standard 3 fund folio?

thanks a lot for this and all other education :sharebeer

PS. Is there any advantage to the "Annual Increase Program" - where your contributions increase automatically by a max 3% every year at a set date ?

Image
Image
Image
Last edited by Mac Inger on Fri Oct 12, 2018 4:35 pm, edited 1 time in total.
User avatar
ruralavalon
Posts: 26297
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: Fidelity 401k and Hello

Post by ruralavalon »

Welcome to the forum :) .

For a bond investment consider:
Vanguard Total Bond Market Index Fund Institutional, expense ratio ????%.

Your screen grab didn't include any domestic stock funds or any international stock funds. Please post those, with expense ratios if possible.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
mervinj7
Posts: 2496
Joined: Thu Mar 27, 2014 3:10 pm

Re: Fidelity 401k and Hello

Post by mervinj7 »

Just to be clear, your 401k is managed by Fidelity. It doesn't necessarily mean that you will have access to Fidelity mutual funds since the funds are chosen by your company's retirement adviser. The list in the screenshot seems incomplete. I see only bond options (the Vanguard one is great) and Target Retirement funds from state street. Can you get a complete list that includes the equity options? I've never seen a 401k without at least one.
Also, do you have access to BrokerageLink?
alter
Posts: 250
Joined: Thu Feb 26, 2015 10:27 pm
Location: Chicago

Re: Fidelity 401k and Hello

Post by alter »

You have bond funds listed twice. I'd be very surprised if your 401k only offered target date funds and a couple bond funds.
Topic Author
Mac Inger
Posts: 9
Joined: Fri Oct 12, 2018 3:25 pm

Re: Fidelity 401k and Hello

Post by Mac Inger »

My bad! I had posted the same image twice. Original post edited/updated.


Re. Bonds, i was looking at VBTIX that is available but i felt dirty paying fidelity fees for it. Guess i do not have an option.
Attached are the expenses for VBTIX. How does that look to you guys?

https://ergin.smugmug.com/Random-Upload/i-rvQB8Gf/A

Couldnt upload image, was getting hopelessly blurred.
alter
Posts: 250
Joined: Thu Feb 26, 2015 10:27 pm
Location: Chicago

Re: Fidelity 401k and Hello

Post by alter »

I would do all the vanguard options, maybe a 4 fund portfolio...some variation of this:

10% in the vanguard bond fund
10% in vanguard total international
60% in the vanguard s&p500
20% or so in the vanguard extended market
User avatar
oldcomputerguy
Moderator
Posts: 17878
Joined: Sun Nov 22, 2015 5:50 am
Location: Tennessee

Re: Fidelity 401k and Hello

Post by oldcomputerguy »

There are some very good options here for a three-fund portfolio. I'd choose the Vanguard Institutional Index fund (which is an S&P500 index fund) for domestic stock, the Vanguard Total International Stock fund for my international allocation (assuming one was desired) and the Vanguard Total Bond fund for your fixed-income.

If you wanted to cover the entire US stock market rather than just the S&P500, you could add on the Vanguard Extended Market Index fund. That fund combined with the S&P500 fund in a 1:4 ratio simulate a total market index fund, resulting in a four-fund portfolio rather than a three-fund. (This is very similar to what Fidelity does with their FFNOX Four-In-One Fund.)
There is only one success - to be able to spend your life in your own way. (Christopher Morley)
Topic Author
Mac Inger
Posts: 9
Joined: Fri Oct 12, 2018 3:25 pm

Re: Fidelity 401k and Hello

Post by Mac Inger »

Maybe easier if i type it out:


Stock funds:

Large Cap
PRGFX - ER Gross: 0.67 - ER Net: Same - Fee: 0.51
VWNEX - ER: 0.21 - ER Net: Same - Fee: 0.2
VINIX - ER: 0.035 - ER Net: Same - Fee: 0.035

Mid Cap
HWMIX - ER: 0.99 - Fee: 0.75
VIEIX - ER: 0.06 - Fee: 0.05

Small Cap
CAMZX - ER: 1.1 - Fee: 1

International
FDIKX - ER Gross: 0.82 - ER Net: Same - Fee: 0.65
LZEMX - ER Gross: 1.08 - ER Net: Same - Fee: 1
VTSNX - ER Gross: 0.09 - ER Net: Same - Fee: 0.07

Bonds
MWTSX - ER Gross: 0.37 - ER Net: Same - Fee: 0.35
VBTIX - ER Gross: 0.04 - ER Net Same - Fee: 0.03
User avatar
CalculatedRisk
Posts: 274
Joined: Tue Sep 11, 2018 8:04 pm

Re: Fidelity 401k and Hello

Post by CalculatedRisk »

Mac Inger wrote: Fri Oct 12, 2018 3:46 pm Any opinions for a standard 3 fund folio?
Use a self-directed brokerage account. On Fidelity, it is called "BrokerageLink" and will allow significantly open up access for you, including access to Fidelity's zero-cost mutual funds.

Anyone care to enlighten me on why Bogleheads spend so much time picking through the limited/expensive 401k options and not immediately recommending a self-directed brokerage account?
User avatar
Duckie
Posts: 9767
Joined: Thu Mar 08, 2007 1:55 pm

Re: Fidelity 401k and Hello

Post by Duckie »

CalculatedRisk wrote:Anyone care to enlighten me on why Bogleheads spend so much time picking through the limited/expensive 401k options and not immediately recommending a self-directed brokerage account?
Many plan don't offer a self-directed brokerage account. Any many that do offer it have extra fees tacked on.
User avatar
CalculatedRisk
Posts: 274
Joined: Tue Sep 11, 2018 8:04 pm

Re: Fidelity 401k and Hello

Post by CalculatedRisk »

Duckie wrote: Fri Oct 12, 2018 7:48 pm
CalculatedRisk wrote:Anyone care to enlighten me on why Bogleheads spend so much time picking through the limited/expensive 401k options and not immediately recommending a self-directed brokerage account?
Many plan don't offer a self-directed brokerage account. Any many that do offer it have extra fees tacked on.
This makes sense. I guess I lucked out with my plan. From what I've read, more and more plans are providing it as an option, so hopefully more people can take advantage of it.
User avatar
ruralavalon
Posts: 26297
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: Fidelity 401k and Hello

Post by ruralavalon »

In my opinion participating in the automatic Annual Increase Program is a good idea.

Mac Inger wrote: Fri Oct 12, 2018 4:50 pm Maybe easier if i type it out:


Stock funds:

Large Cap
PRGFX - ER Gross: 0.67 - ER Net: Same - Fee: 0.51
VWNEX - ER: 0.21 - ER Net: Same - Fee: 0.2
VINIX - ER: 0.035 - ER Net: Same - Fee: 0.035

Mid Cap
HWMIX - ER: 0.99 - Fee: 0.75
VIEIX - ER: 0.06 - Fee: 0.05

Small Cap
CAMZX - ER: 1.1 - Fee: 1

International
FDIKX - ER Gross: 0.82 - ER Net: Same - Fee: 0.65
LZEMX - ER Gross: 1.08 - ER Net: Same - Fee: 1
VTSNX - ER Gross: 0.09 - ER Net: Same - Fee: 0.07

Bonds
MWTSX - ER Gross: 0.37 - ER Net: Same - Fee: 0.35
VBTIX - ER Gross: 0.04 - ER Net Same - Fee: 0.03
For a three fund portfolio I suggest:
1) Vanguard Institutional Index Fund Institutional (a S&P 500 index fund) (VINIX) ER 0.03%;
2) Vanguard Total International Stock Index Fund Institutional (VTSNX) ER 0.09%; and
3) Vanguard Total Bond Market Index Fund Institutional (VBTIX) ER 0.04%.

For domestic stocks I suggest using a total stock market index fund where available; otherwise an S&P 500 index fund (such as Vanguard Institutional Index Fund Institutional, VINIX, in your 401k) is good enough by itself for domestic stocks. "In a 401(k) plan with limited choices one might very well opt for an S&P 500 index fund to serve as the domestic stock component of a three-fund portfolio." Wiki article, Three-fund portfolio, "Other considerations".

An S&P 500 index fund covers 81% of the U.S. stock market investing in stocks of selected large-cap and mid-cap U.S. companies, and in the 26 years since the creation of the first total stock market index fund the total return of the two types of funds has been almost identical. Morningstar, "growth of $10k" graph, VTSAX vs VFIAX. In the first 10 years the S&P 500 fund did better, in the last 10 years the total market fund did better, and over the 26 years the total market fund gave a little more return (0.11% per year), but at the cost of a little more volatility (risk): nisiprius post, in the forum discussion "Exchanging the S&P 500 for the TSM". See also Allan Roth, CBS Moneywatch, "John C. Bogle on the S&P 500 vs. the Total Stock Market". So it seems that adding a little in mid/small cap stocks trying to mimic the holdings of a total stock market fund has historically made little difference in performance.

If you want to add Vanguard Extended Market Index Institutional (VIEIX), then an 81/19 mix of S&P 500 and extended market will approximate the content of a total stock market index fund. Wiki article, "Approximating total stock market". In my opinion this is not necessary, it is optional if you prefer to do this.
Last edited by ruralavalon on Sat Oct 13, 2018 7:46 am, edited 3 times in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
3funder
Posts: 1814
Joined: Sun Oct 15, 2017 9:35 pm

Re: Fidelity 401k and Hello

Post by 3funder »

oldcomputerguy wrote: Fri Oct 12, 2018 4:45 pm There are some very good options here for a three-fund portfolio. I'd choose the Vanguard Institutional Index fund (which is an S&P500 index fund) for domestic stock, the Vanguard Total International Stock fund for my international allocation (assuming one was desired) and the Vanguard Total Bond fund for your fixed-income.

If you wanted to cover the entire US stock market rather than just the S&P500, you could add on the Vanguard Extended Market Index fund. That fund combined with the S&P500 fund in a 1:4 ratio simulate a total market index fund, resulting in a four-fund portfolio rather than a three-fund. (This is very similar to what Fidelity does with their FFNOX Four-In-One Fund.)
+1; you have excellent options and have received excellent advice.
Global stocks, US bonds, and time.
Topic Author
Mac Inger
Posts: 9
Joined: Fri Oct 12, 2018 3:25 pm

Re: Fidelity 401k and Hello

Post by Mac Inger »

Thank you all very much!
I am checking on Brokerage Link but feel confident now with the funds you recommended.

:sharebeer
User avatar
oldcomputerguy
Moderator
Posts: 17878
Joined: Sun Nov 22, 2015 5:50 am
Location: Tennessee

Re: Fidelity 401k and Hello

Post by oldcomputerguy »

Mac Inger wrote: Sat Oct 13, 2018 8:40 am Thank you all very much!
I am checking on Brokerage Link but feel confident now with the funds you recommended.

:sharebeer
I had my 401k with Fidelity prior to retirement. The company offered BrokerageLink to us in 2016, and I used it to access the new Fidelity Total International Fund, because I didn't like the existing international investment options in the plan. Given the investment options in your plan, I'd submit that in your case BrokerageLink will just add needless complexity to an already simple, elegant, and satisfactory array of investment options. But it's your choice, certainly.
There is only one success - to be able to spend your life in your own way. (Christopher Morley)
User avatar
ruralavalon
Posts: 26297
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: Fidelity 401k and Hello

Post by ruralavalon »

I don't think that using the BrokerageLink will be helpful, since the funds offered in your 401k itself are so great.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Topic Author
Mac Inger
Posts: 9
Joined: Fri Oct 12, 2018 3:25 pm

Re: Fidelity 401k and Hello

Post by Mac Inger »

Simple works. I have enough complexity in my life as is.

@ruralavalon, we recently moved to IL from CA. The winter is coming...strange new beast for us.
Lafder
Posts: 4117
Joined: Sat Aug 03, 2013 7:56 pm
Location: East of the Rio Grande

Re: Fidelity 401k and Hello

Post by Lafder »

Writing out the ER's really helps you see the best options. You have already gotten good suggestions on the best options.

If you can afford to max your 401k each year, the annual increase is not necessary since you are already at the max :) The way that is done as a $ amount per paycheck or % can vary between employers. Your max contribution will jump up the year you turn 50 due to the catch up provision. Note that the annual max of 18,500 is for the employee contribution only. The employer match is in addition.

Congrats on your job with benefits and low expense options! And welcome here!

lafder
Topic Author
Mac Inger
Posts: 9
Joined: Fri Oct 12, 2018 3:25 pm

Re: Fidelity 401k and Hello

Post by Mac Inger »

Thank you for the welcome and the info!
I did take a pay cut (from independent contractor to fulltime...taxes are night/day) which is making it much more difficult to save, but hopefully worth it as a career move in the long run.
We shall see :)
User avatar
ruralavalon
Posts: 26297
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: Fidelity 401k and Hello

Post by ruralavalon »

Mac Inger wrote: Sat Oct 13, 2018 10:47 am Simple works. I have enough complexity in my life as is.

@ruralavalon, we recently moved to IL from CA. The winter is coming...strange new beast for us.
We had snow here yesterday :( . Heading to Florida in January :) .
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
User avatar
ruralavalon
Posts: 26297
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: Fidelity 401k and Hello

Post by ruralavalon »

Mac Inger wrote: Sat Oct 13, 2018 11:07 am Thank you for the welcome and the info!
I did take a pay cut (from independent contractor to fulltime...taxes are night/day) which is making it much more difficult to save, but hopefully worth it as a career move in the long run.
We shall see :)
You no longer have to pay self-employment tax, that will offset some of the pay cut :) .
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Post Reply