Fidelity Puritan or Balanced Versus Three Fund Approach

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choral54
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Fidelity Puritan or Balanced Versus Three Fund Approach

Post by choral54 »

What are the pros and cons of using a single fund like Fidelity Puritan or Balanced versus a three fund approach and what funds?
Total Stock Market, Total Bond, Total International???
I also have an account at Vanguard so am open to their funds also.
brad.clarkston
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Re: Fidelity Puritan or Balanced Versus Three Fund Approach

Post by brad.clarkston »

Half a dozen of one, ...

Not a ton of deference over the long term if your OK with 40% bonds.

The plus would be less re-balancing with just one fund.
The con would it's less agile than a three fund port that re-balances.
theorist
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Re: Fidelity Puritan or Balanced Versus Three Fund Approach

Post by theorist »

I use Fidelity Puritan for some of my IRA holdings, and use Vanguard index funds in my Vanguard taxable account.

I have been happy with both. Some comments distinguishing them:

— Puritan now runs about 65/35 stocks / bonds, with a strong growth tilt. About 10% of its stock holdings are international. Using 3 fund, you can tune your allocation more finely, avoid the growth tilt if you want, and increase or decrease the international fraction. (My Vanguard account is at about 33% of equities international.)

— Puritan has an ER of around .50. My Vanguard funds are closer to .05 to .1. This is not a negligible difference, though .5 is ok, and I’ve been happy with Puritan, as I said.

— Puritan is not good for a taxable account. According to Morningstar, the average tax cost ratio over the past three years has been 1.85%. This is to be compared with e.g. VTSAX, which is .56%. If you hold index funds and municipal bonds in taxable, you’ll save quite a bit.

— on the other hand, you might want an active manager, and you might not want the bother of adjusting allocation and rebalancing yourself. (The merits of active management are highly questionable; all I’ll say here is that I’ve been happy with a few American, T Rowe Price, and Fidelity funds, but the vast majority of my funds are indexed.)

Good luck!
000
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Re: Fidelity Puritan or Balanced Versus Three Fund Approach

Post by 000 »

Puritan is too expensive and has manager risk.
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abuss368
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Re: Fidelity Puritan or Balanced Versus Three Fund Approach

Post by abuss368 »

choral54 wrote: Thu Jul 30, 2020 2:04 pm What are the pros and cons of using a single fund like Fidelity Puritan or Balanced versus a three fund approach and what funds?
Total Stock Market, Total Bond, Total International???
I also have an account at Vanguard so am open to their funds also.
The Three Fund Portfolio is tough to beat. Lease see Taylor’s thread.
John C. Bogle: “Simplicity is the master key to financial success."
RetiredAL
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Re: Fidelity Puritan or Balanced Versus Three Fund Approach

Post by RetiredAL »

If it was me, I would chose a mixture of FSPGX ( Large Cap Growth Index Fund ER = .035 ) and FXNAX (US Bond Index Fund ER = .025 ) over FPURX ( Puritan Fund ER = .5 ). But I am biased, as I already own FSPGX and FXNAX.
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choral54
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Re: Fidelity Puritan or Balanced Versus Three Fund Approach

Post by choral54 »

What funds would you use for the three fund approach to semi-mimick the allocation of the Puritan or Balanced Fund?
I have accounts at both Vanguard and Fidelity so either one's funds are fine.
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choral54
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Re: Fidelity Puritan or Balanced Versus Three Fund Approach

Post by choral54 »

What funds would you use for the three fund approach to semi-mimick the allocation of the Puritan or Balanced Fund?
I have accounts at both Vanguard and Fidelity so either one's funds are fine.
000
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Re: Fidelity Puritan or Balanced Versus Three Fund Approach

Post by 000 »

choral54 wrote: Fri Jul 31, 2020 7:59 pm What funds would you use for the three fund approach to semi-mimick the allocation of the Puritan or Balanced Fund?
I have accounts at both Vanguard and Fidelity so either one's funds are fine.
Consider Vanguard LifeStrategy Moderate Growth.
JBTX
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Re: Fidelity Puritan or Balanced Versus Three Fund Approach

Post by JBTX »

If you want US only vanguard balanced. If you also want international then vanguard lifestrategy moderate growth. Or a combination of the two.
Ferdinand2014
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Re: Fidelity Puritan or Balanced Versus Three Fund Approach

Post by Ferdinand2014 »

choral54 wrote: Fri Jul 31, 2020 7:58 pm What funds would you use for the three fund approach to semi-mimick the allocation of the Puritan or Balanced Fund?
I have accounts at both Vanguard and Fidelity so either one's funds are fine.
Fidelity:

FSKAX (Total stock) Er 0.015
FSGGX (Total international ACWI ex US) Er 0.055
FXNAX (Total investment grade bond) Er 0.025
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett
theorist
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Re: Fidelity Puritan or Balanced Versus Three Fund Approach

Post by theorist »

choral54 wrote: Fri Jul 31, 2020 7:59 pm What funds would you use for the three fund approach to semi-mimick the allocation of the Puritan or Balanced Fund?
I have accounts at both Vanguard and Fidelity so either one's funds are fine.
At Vanguard,

VTSAX +
VIGAX +
VTIAX +
VTBLX

should do it. I’d combine them at 25/25/10/40 to mimic Puritan. The first is total US stock, the second is US large growth, the third is total international, and the last is total bond. I include the growth index because of the significant growth tilt of Puritan (I took your question literally). Also you might bump the stock allocation up to 70% instead of 60 by adding 5% each to the total US stock and growth.

The total ER would save you a good 4/10 of a percent over FPURX.
rgs92
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Re: Fidelity Puritan or Balanced Versus Three Fund Approach

Post by rgs92 »

You really can't mimic Puritan or Balanced because they are actively managed funds. If you are in Fidelity you are probably better using one of the Fidelity Freedom Index funds (target funds with different target years).

FQIFX (the 2025 version with roughly 35/25/40 US stocks/Foreign Stocks/Fixed Income) is a very good substitute for Balanced and Puritan for the long haul. These funds are are frequently recommended here. You pay 11 or 12 basis points for expenses (0.11-0.12 %) , but in return you get continuous rebalancing like the active funds (Puritan and Balanced) have. This is a nice thing to have to cut down the volatility. And you don't have to go the trouble of rebalancing manually. Everything is on autopilot.

If you search through Bogleheads for the Freedom Index Funds you will see lots of mentions of them.
theorist
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Re: Fidelity Puritan or Balanced Versus Three Fund Approach

Post by theorist »

You can do a reasonable job imitating most balanced funds with a mix of index funds. Here was my first shot at getting Puritan, and I almost nailed it for CAGR (and had less volatility):

Image
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ps56k
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Re: Fidelity Puritan or Balanced Versus Three Fund Approach

Post by ps56k »

We used Puritan in our 403b - as not much else was attractive
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choral54
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Re: Fidelity Puritan or Balanced Versus Three Fund Approach

Post by choral54 »

Thank you for all the input. It is much appreciated!
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choral54
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Re: Fidelity Puritan or Balanced Versus Three Fund Approach

Post by choral54 »

I am studying my question again today. Is it best to use a two fund approach or three fund approach?

Is FSPGX 60% and FXNAX 40% a bad way to go versus Puritan? Or would you add something else? I am not very well versed in investments.

Still trying to figure out what to do. I also have a sizeable portion of money in Life Strategy Growth and am thinking about switching to
index funds for that too.

Thanks for your advice in advance!
w3ldon
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Re: Fidelity Puritan or Balanced Versus Three Fund Approach

Post by w3ldon »

Putting 60% in growth will be a much larger tilt than is in Puritan right now. That means that your portfolio is less diversified (taking on more risk). See the above post by theorist. They constructed a very similar portfolio to the Puritan; you could do the exact same percentages with fidelity funds if you want something similar to Puritan.

So you would do 30% FSPGX, 30% FSKAX, 40% FXNAX to mimic Puritan.
crefwatch
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Re: Fidelity Puritan or Balanced Versus Three Fund Approach

Post by crefwatch »

I don't want to overstate the case, but Puritan (which I owned in the distant past) is often quite an aggressive fund. It doesn't really belong in the same sentence as "[plain vanilla] Balanced Fund." Even in the case where the balanced fund doesn't reach for yield with low-rated bonds, it's likely to be less aggressive than Fidelity Puritan.

I am not bad-mouthing Puritan for its purposes. And I'm not leaning on Boglehead mantras about "managed" funds. I'm just pointing out a particular aspect of Puritan that seems under-reported in this thread. If you want to own Puritan, fine with me.

There is a certain type of investor for whom balanced funds have a particular value, in helping them resist panic sales when part of the market goes down. But if you have a two or three-fund portfolio, I hope you remember to look at the total each month or quarter, not just at the constituents.
Seasonal
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Re: Fidelity Puritan or Balanced Versus Three Fund Approach

Post by Seasonal »

theorist wrote: Sat Aug 01, 2020 10:53 am You can do a reasonable job imitating most balanced funds with a mix of index funds. Here was my first shot at getting Puritan, and I almost nailed it for CAGR (and had less volatility):
Using the investor versions of the Vanguard funds you can go back to 1993. Your mix is portfolio 1 and FPURX is portfolio 2

Image
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choral54
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Re: Fidelity Puritan or Balanced Versus Three Fund Approach

Post by choral54 »

So 30% Vanguard Growth Index, 30% Vanguard Total Stock Market Index, and 40% Total Bond Index according to the previous post?

How often do you rebalance when not using a balanced fund?
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choral54
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Re: Fidelity Puritan or Balanced Versus Three Fund Approach

Post by choral54 »

I think I am going to try the route outlined by theorist.

Would you use VWUAX or VIGAX for the 30% growth index?

Thanks in advance!
theorist
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Re: Fidelity Puritan or Balanced Versus Three Fund Approach

Post by theorist »

choral54 wrote: Mon Aug 10, 2020 7:29 pm I think I am going to try the route outlined by theorist.

Would you use VWUAX or VIGAX for the 30% growth index?

Thanks in advance!

I hold some VIGAX. Very low ER, no manager risk. I have no complaints!
theorist
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Re: Fidelity Puritan or Balanced Versus Three Fund Approach

Post by theorist »

choral54 wrote: Sun Aug 09, 2020 5:58 pm So 30% Vanguard Growth Index, 30% Vanguard Total Stock Market Index, and 40% Total Bond Index according to the previous post?

How often do you rebalance when not using a balanced fund?
One standard approach to rebalancing is to use 5% bands for equities vs bonds, and larger bands within different types of equities. Some studies of different methods — all of which work pretty well — are discussed here:

https://www.vanguard.com/pdf/ISGPORE.pdf
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