Small Investment

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Topic Author
wilsonbh
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Joined: Wed Dec 13, 2017 9:33 am

Small Investment

Post by wilsonbh »

I've got a small amount available to invest. I'm considering investing in one of these two funds. My goal is to stay ahead of inflation.

Fidelity FZROX
Fidelity FSKAX

You savvy investors, can you help me here? Tell me what you think, I would appreciate some feedback. Thanks in advance!!!
Last edited by wilsonbh on Tue Oct 29, 2024 11:47 am, edited 1 time in total.
delamer
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Re: Small Investment

Post by delamer »

What’s your goal for the money — retirement in 25 years, house downpayment in 5 years, car purchase in 2 years, etc.?
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
Topic Author
wilsonbh
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Re: Small Investment

Post by wilsonbh »

delamer wrote: Tue Oct 29, 2024 11:06 am What’s your goal for the money — retirement in 25 years, house downpayment in 5 years, car purchase in 2 years, etc.?
Looking to grow the funds but mainly just stay ahead of inflation. Not retirement money....

So mainly just hoping to keep ahead of inflation and possibly get a respectable return. Returns better than money market returns would be nice. I'm not skilled at these things. Don't have enough funds to justify a professional manager so here I am.
Last edited by wilsonbh on Tue Oct 29, 2024 11:49 am, edited 2 times in total.
steadyosmosis
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Re: Small Investment

Post by steadyosmosis »

I use only VTI in my taxable account (account is not at Vanguard), but I am not 'looking to grow the funds quickly'.
Early-retired ... portfolio AA 50/50 ... (46% tIRA, 33% RIRA, 16% taxable, 5% HSA) ... (16% SCHB, 16% VTI, 13% SCHF, 5% VITSX, 50% US Treasuries).
Dottie57
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Re: Small Investment

Post by Dottie57 »

wilsonbh wrote: Tue Oct 29, 2024 11:11 am
delamer wrote: Tue Oct 29, 2024 11:06 am What’s your goal for the money — retirement in 25 years, house downpayment in 5 years, car purchase in 2 years, etc.?
Looking to grow the funds quickly. Not retirement money....
You are not guaranteed to grow funds quickly with these funds. Suggest 2nd job if you want more money in near future. Investing is a long term.
Life is more than grinding it out in some drab office setting for an arbitrary number. This isn't a videogame where the higher score is better. -Nathan Drake
Topic Author
wilsonbh
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Re: Small Investment

Post by wilsonbh »

Dottie57 wrote: Tue Oct 29, 2024 11:33 am
wilsonbh wrote: Tue Oct 29, 2024 11:11 am

Looking to grow the funds quickly. Not retirement money....
You are not guaranteed to grow funds quickly with these funds. Suggest 2nd job if you want more money in near future. Investing is a long term.
Just need to stay ahead of inflation.
chinchin
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Re: Small Investment

Post by chinchin »

See below Wiki note on the Zero funds.

https://www.bogleheads.org/wiki/Three-f ... ote-Zero-6
not financial advice
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ruralavalon
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Re: Small Investment

Post by ruralavalon »

wilsonbh wrote: Tue Oct 29, 2024 11:03 am I've got a small amount available to invest. I'm considering investing in one of these two funds. My goal is to stay ahead of inflation.

Fidelity FZROX
Fidelity FSKAX

You savvy investors, can you help me here? Tell me what you think, I would appreciate some feedback. Thanks in advance!!!
wilsonbh wrote: Tue Oct 29, 2024 11:11 am
delamer wrote: Tue Oct 29, 2024 11:06 am What’s your goal for the money — retirement in 25 years, house downpayment in 5 years, car purchase in 2 years, etc.?
Looking to grow the funds but mainly just stay ahead of inflation. Not retirement money....

So mainly just hoping to keep ahead of inflation and possibly get a respectable return. Returns better than money market returns would be nice. I'm not skilled at these things. Don't have enough funds to justify a professional manager so here I am.
wilsonbh wrote: Tue Oct 29, 2024 11:41 am
Dottie57 wrote: Tue Oct 29, 2024 11:33 am

You are not guaranteed to grow funds quickly with these funds. Suggest 2nd job if you want more money in near future. Investing is a long term.
Just need to stay ahead of inflation.
Of those two funds my suggestion is Fidelity Total Market Index (FSKAX) ER 0.015%.

What is the intended use and time frame for this money (for example buy a car in 3 years, downpayment for a home in 5 years)? Will this be in a tax-advantaged account, like an IRA?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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arcticpineapplecorp.
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Re: Small Investment

Post by arcticpineapplecorp. »

wilsonbh wrote: Tue Oct 29, 2024 11:41 am
Dottie57 wrote: Tue Oct 29, 2024 11:33 am
You are not guaranteed to grow funds quickly with these funds. Suggest 2nd job if you want more money in near future. Investing is a long term.
Just need to stay ahead of inflation.
over what time period??

when do you need this money for spending? You say not for retirement, so is it for a time PRIOR to retirement and if so, when??

the time horizon is one element that will tell you if total stock market index fund is appropriate or not.

If it's a small investment and you want to keep pace with inflation you could look at I-Bonds. But know that if you sell it before 1 year you receive no interest and if you sell before 5 years you forfeit 3 months of interest.

TIPS are paying something in the 2% above inflation currently I believe. This is for individual tips, not a tips fund. If you want to buy tips or build a tips ladder, you'll have to do some more reading:

https://www.advisorperspectives.com/art ... ips-ladder

inflation this year is i think 3.1% or so. You can earn more than that right now in high yield savings, CD and/or Treasuries. This won't always be the case (the yield curve is still inverted).

the two funds you list are total stock market index funds. Over a long period they've outpaced inflation but in the short term there is volatility (average intrayear declines of 14%):

Image

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dbr
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Re: Small Investment

Post by dbr »

The only investment that will surely be at or ahead of inflation every day after you buy it would be I bonds. A TIPS bought at a positive real yield will exceed inflation by the time it reaches maturity, but not necessarily in between.

Stock funds as you listed can fail to exceed inflation for long times and experience huge losses from time to time. Eventually over time stocks may well exceed inflation on average.
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wilsonbh
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Re: Small Investment

Post by wilsonbh »

ruralavalon wrote: Tue Oct 29, 2024 3:07 pm
wilsonbh wrote: Tue Oct 29, 2024 11:03 am I've got a small amount available to invest. I'm considering investing in one of these two funds. My goal is to stay ahead of inflation.

Fidelity FZROX
Fidelity FSKAX

You savvy investors, can you help me here? Tell me what you think, I would appreciate some feedback. Thanks in advance!!!
wilsonbh wrote: Tue Oct 29, 2024 11:11 am

Looking to grow the funds but mainly just stay ahead of inflation. Not retirement money....

So mainly just hoping to keep ahead of inflation and possibly get a respectable return. Returns better than money market returns would be nice. I'm not skilled at these things. Don't have enough funds to justify a professional manager so here I am.
wilsonbh wrote: Tue Oct 29, 2024 11:41 am

Just need to stay ahead of inflation.
Of those two funds my suggestion is Fidelity Total Market Index (FSKAX) ER 0.015%.

What is the intended use and time frame for this money (for example buy a car in 3 years, downpayment for a home in 5 years)? Will this be in a tax-advantaged account, like an IRA?
My time frame is to keep the funding in the investment for 3 years. Would FSKAX be good for 3 years with expectations to beat inflation?
RiskAnalyst
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Re: Small Investment

Post by RiskAnalyst »

wilsonbh wrote: Tue Oct 29, 2024 3:48 pm
ruralavalon wrote: Tue Oct 29, 2024 3:07 pm

Of those two funds my suggestion is Fidelity Total Market Index (FSKAX) ER 0.015%.

What is the intended use and time frame for this money (for example buy a car in 3 years, downpayment for a home in 5 years)? Will this be in a tax-advantaged account, like an IRA?
My time frame is to keep the funding in the investment for 3 years. Would FSKAX be good for 3 years with expectations to beat inflation?
Why 3 years? A planned expenditure then?

In general, diversified equities holdings (like FSKAX) do provide positive expected real returns ("beating inflation") over the long term—not necessarily over the short term. Equities, even diversified over entire markets, may be highly volatile over any short period.

Given that, how much loss of principal could you tolerate at the 3 year mark? 20%? 50%? None?
Not a professional risk analyst | Early accumulator
Doctor Rhythm
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Re: Small Investment

Post by Doctor Rhythm »

You need to recognize stocks are volatile. They can go up or down by a lot in a short time period. In three years, you will most likely be ahead of inflation, but it would also be unsurprising if you're down by double digits.
dbr
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Re: Small Investment

Post by dbr »

wilsonbh wrote: Tue Oct 29, 2024 3:48 pm
ruralavalon wrote: Tue Oct 29, 2024 3:07 pm

Of those two funds my suggestion is Fidelity Total Market Index (FSKAX) ER 0.015%.

What is the intended use and time frame for this money (for example buy a car in 3 years, downpayment for a home in 5 years)? Will this be in a tax-advantaged account, like an IRA?
My time frame is to keep the funding in the investment for 3 years. Would FSKAX be good for 3 years with expectations to beat inflation?
No. It is possible at the extreme to lose 50%-60% of your investment by the time want it back. It is as likely as not that in three years you will not exceed inflation. It is also reasonably possible to beat inflation by some or by a lot.
zwally33
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Re: Small Investment

Post by zwally33 »

I suggest FSKAX for the long run. FZROX; zero expense ratio, sounds good, but when YOU do the research, you'll find out it has its limitation. I did the research!
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grabiner
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Re: Small Investment

Post by grabiner »

wilsonbh wrote: Tue Oct 29, 2024 3:48 pm My time frame is to keep the funding in the investment for 3 years. Would FSKAX be good for 3 years with expectations to beat inflation?
No, because it's fairly common to lose up to a third of a stock-market investment in a 3-year period. Stock is only appropriate for money you won't need for a much longer time.

For three years, you could buy a three-year TIPS or a short-term TIPS fund, which is guaranteed to beat inflation. (Longer-term TIPS have higher yields, but will lose money if TIPS rates rise in the next three years.) Alternatively, you could get a guaranteed nominal return on a three-year CD, which is likely to outperform inflation.
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delamer
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Re: Small Investment

Post by delamer »

Doctor Rhythm wrote: Tue Oct 29, 2024 4:27 pm You need to recognize stocks are volatile. They can go up or down by a lot in a short time period. In three years, you will most likely be ahead of inflation, but it would also be unsurprising if you're down by double digits.
This is the crux of the matter.

The S&P 500 index was at 1468 at the end of 2007. It was 2013 before it ended a year at a higher level than in 2007.

On the other hand, it is currently more than twice was it was at the end of 2018.

You pays your money and you takes your chances.

Source: https://www.macrotrends.net/2526/sp-500 ... al-returns
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
billfromct
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Re: Small Investment

Post by billfromct »

zwally33 wrote: Tue Oct 29, 2024 5:23 pm I suggest FSKAX for the long run. FZROX; zero expense ratio, sounds good, but when YOU do the research, you'll find out it has its limitation. I did the research!
zwally,

Since you “did the research”, what “is its limitation”?

bill
zwally33
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Re: Small Investment

Post by zwally33 »

Well, let me say that it's not for me. That is why I suggest research is needed. If you decided later on to move/transfer the account to another brokerage, not possible. The account has to stay with Fidelity and has to be in a taxable account. Now, if a person decide after their research, its for them, then go for it.
gavinsiu
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Re: Small Investment

Post by gavinsiu »

For short term, it depends if your goal is specific or not. Let's say you are saving for a down payment, because the stock market often go up more than down, your chance of getting something like above cash or bond return is pretty good, except that you may be unlocky and get a 50% loss right when you need to use it. Stocks are not guaranteed to keep up with inflation at least in the short term.

For short term, something like ibond and TIPS would keep up with inflation. The trouble with ibonds is that you are limited to $10K a year though you can probably get around it. The return is right now around 1.3% above inflation, there may be MM that return more than that now. You also have to hold ibonds for a year and 5 years to avoid a penalty. TIPS would be the other option, but you have to pay taxes on the phantom income.
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HipCoyote
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Re: Small Investment

Post by HipCoyote »

Don't have enough funds to justify a professional manager so here I am.
Do you have enough money for you to spend a few hours, read the wikis and create a plan? Of course you do!
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