Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

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Paul Romano
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Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

Post by Paul Romano » Mon Mar 05, 2018 8:31 am

Reuters article

"Special Report: Fidelity puts 6 million savers on risky path to retirement"

https://www.reuters.com/article/us-fund ... SKBN1GH1SI

BOSTON (Reuters) - For three years, the mutual funds in Fidelity’s flagship retirement franchise have outperformed at least 85 percent of their competitors, reversing a decade-long trend of subpar performance.

Since a strategy overhaul that took full effect in 2014, Fidelity has substantially increased exposure to stocks, including those from volatile emerging markets. The firm also scrapped a long-held belief of sticking to pre-set allocations of stocks, bonds and other assets in target-date funds.

Instead, Fidelity portfolio managers now try to time market shifts, for instance by moving billions of dollars out of money-losing commodities bets and into Chinese stocks and U.S. tech shares, regulatory filings show.

Plan sponsors dumping Freedom Funds more recently include a host of college retirement systems that shifted money in 2017 to target-date funds offered by Vanguard, according to announcements by the plans.

Today, many target-date fund managers have turned to riskier investments to boost returns, and Fidelity has gone further than its peers, said Ron Surz, president of research firm Target Date Solutions.

“These funds with high concentrations in stocks are a time bomb,” Surz said.

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Re: Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

Post by deltaneutral83 » Mon Mar 05, 2018 9:06 am

I saw a lot of Financial porn in that article. It mentioned short term moves in the market over a two week span as if that matters. If the Fidelity Target Funds are more equity weighted than their counterparts, then of course they are going to lag when equities are down, why is that news? I don't necessarily see a problem with 60/40 being an aggressive AA in retirement for a host of folks, this is the problem with TF, it's a one size fits all. I think the root of the problem is the active vs. passive situation moreso than the AA of the TF's.
The funds, he said, are so popular in part because investors believe they are designed to“not lose money.”
Well what are these funds, money markets, CD's ???

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Re: Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

Post by rkhusky » Mon Mar 05, 2018 9:42 am

They must be talking about the Fidelity Freedom funds, which are actively managed with high fees, and not the Fidelity Freedom Index funds.

Diogenes
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Re: Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

Post by Diogenes » Mon Mar 05, 2018 10:00 am

Reuters is known for clickbait articles, usually from one end of the spectrum.
They want to attract you to read. Nothing particularly newsworthy in the story, just an eye-catching headline.
Each of us is responsible for our own 'path to retirement,' not one brokerage house, no matter how they structure their funds.

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Re: Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

Post by Katietsu » Mon Mar 05, 2018 10:07 am

So the article might not be the best written. But, one example in the article is that the target date 2020 Fund has a stock allocation of 60%! And apparently has other riskier than normal choices baked in. I would guess most people with money in a target date fund have never even heard the phrase asset allocation. Many never even picked the Fund, it was just the default choice in their plan. So, for better or worse, I do think it is noteworthy that Fidelity is making a choice to employ an asset allocation that is outside the norm for a group of clients who have no idea that this is the case.

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Re: Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

Post by tfb » Mon Mar 05, 2018 10:13 am

Katietsu wrote:
Mon Mar 05, 2018 10:07 am
So the article might not be the best written. But, one example in the article is that the target date 2020 Fund has a stock allocation of 60%!
The Vanguard 2020 fund has a stock allocation of 55%, not that much different. 40% of the stock allocation is in international!
Harry Sit, taking a break from the forums.

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Re: Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

Post by Katietsu » Mon Mar 05, 2018 10:27 am

Diogenes wrote:
Mon Mar 05, 2018 10:00 am

Each of us is responsible for our own 'path to retirement,' not one brokerage house, no matter how they structure their funds.
I do not want to comment on whether or not this should be true in principle. But in practice, the number of people who have even the most rudimentary understanding of their 401k investments is tiny. Yes, some of them could improve their understanding with just a bit of efffort. But many have no realistic chance of understanding how their funds are “structured”. It is this exact group of people who the government and industry says can just go use a target date fund.

I mean 40 million adults are unbanked or underbanked. Back before online banking, I tried to teach my sister in law with a college degree (English) and decent job to balance her checkbook and eventually gave up. And I just found out a neighbor with a total AGI of $5000, with income consisting of two small pensions and a social security check paid $260 to a franchise tax preparer when there was no reason for her to file a tax return at all. I could fill the whole screen with these stories.

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Re: Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

Post by nisiprius » Mon Mar 05, 2018 10:42 am

Eh, the Freedom Funds have always been that way. At one point, a few years ago when it was trendy, they were up to 10% in commodities.

My employer offered a Fidelity-managed 401(k) and I personally held the Fidelity Freedom 2015 fund from 2003 through 2007. What finally made me drop it was that I got a notice saying they were changing the fund rules to allow increasing the allocation to so-called "high yield" bonds. I remember being on the phone with a Fidelity rep and that it was like pulling teeth to get him to acknowledge that "high yield" bonds were the same thing as "junk bonds," which, for better or worse, I didn't want. I actually wrote to columnist Chuck Jaffe about it, and he actually replied. His comment was that he wasn't going to say that a "high yield" bond allocation might not be appropriate, but that he agreed that the change in policy gave an unfortunate impression of chasing performance.

So, anyway, what did it all amount to? Fidelity Freedom 2015, FFVFX, blue (and with, at the time, an expense ratio up in 0.70% territory) versus Vanguard Target Retirement 2015, VTXVX, red.

Not a big deal. In my opinion.

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Yes, this is a nice, clear case of Fidelity taking more risk (standard deviation 5.52% versus 4.68%) to get only slightly more return... and thus a lower Sharpe ratio. If they had taken the same risk as Vanguard, they would have had a lower return than Vanguard.

In theory, I don't like what Fidelity did. In practice, eh, no real serious complaints. It was incremental risk, not catastrophic-collapse risk.

Oh, and of course, lest we forget, Vanguard goosed up the stock allocation in all its target date funds in 2006... they've always said that it was not because of the fact that rivals were beating them, but because their research showed that the people choosing target-date funds were not as risk-averse as they'd thought...but anyway they boosted risk in their own funds.

The Fidelity Freedom funds (the classic messes, with more than twenty random subfunds including all kinds of weird stuff like "Fidelity Series Canada Fund," and an 0.04% (!!!!!!!) allocation to the "Fidelity Series International Credit Fund"--well, it's not my cup of tea but if Lipton's is the only tea available I'll drink Lipton's. It is tea.
Last edited by nisiprius on Mon Mar 05, 2018 10:48 am, edited 2 times in total.
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Re: Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

Post by Clever_Username » Mon Mar 05, 2018 10:48 am

Diogenes wrote:
Mon Mar 05, 2018 10:00 am
Reuters is known for clickbait articles, usually from one end of the spectrum.
There was an article in The Onion, America's Finest News Source, about this recently, but the headline has a swear word in it so I think I should refrain from giving a direct link.
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Re: Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

Post by KSActuary » Mon Mar 05, 2018 1:13 pm

Target date funds compete for billions of cash flow each year and juicing a stock allocation is one way of getting ahead, so to speak. I believe that many people would be surprised what's in their target date funds.

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Fidelity puts 6 million savers on a risky path to retirement

Post by david » Mon Mar 05, 2018 3:02 pm

[Thread merged into here, see below. --admin LadyGeek]

https://www.cnbc.com/2018/03/05/fidelit ... ement.html

The abstract from the article:
  • For three years, the mutual funds in Fidelity's flagship retirement franchise have outperformed at least 85 percent of their competitors.
  • Yet client money has continued to flow out of the firm's Freedom Funds as retirement plan sponsors shift workers' savings to rivals in the target-date fund business.
  • A recent global market sell-off underscored how Fidelity's growing appetite for risk could amplify investor losses.
I didn't realize how active the retirement funds at Fidelity were. I'm sure others have not as well.

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Re: Fidelity puts 6 million savers on a risky path to retirement

Post by jalbert » Mon Mar 05, 2018 3:17 pm

Fidelity offers both actively managed and index-fund based target retirement funds.

The Freedom Funds are built using mostly actively managed funds (some index funds for some core exposures). The Freedom Index Funds are built exclusively with index funds.
Last edited by jalbert on Wed Mar 07, 2018 5:41 pm, edited 2 times in total.
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Re: Fidelity puts 6 million savers on a risky path to retirement

Post by wolf359 » Mon Mar 05, 2018 4:11 pm

jalbert wrote:
Mon Mar 05, 2018 3:17 pm
Fidelity offers both actively managed and index-fund based target retirement funds.

The Freedom Funds are built using mostly actively nanaged funds (some index funds for some corre exposures). The Freedom Index Funds are built exclusively with index funds.
If you search for "target date fund" on the fidelity site, it will only list the actively managed option. (They HAVE both active and index versions, but they only OFFER you active version.) If you search for "target date index fund," the first hit is a description of index funds; then a link to the actively managed fidelity freedom funds. You have to search explicitly for "fidelity freedom index fund" to get to the index version.

I like Fidelity products, and I'm a customer, but it's because they play games like this that I trust Vanguard more.

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Re: Fidelity puts 6 million savers on a risky path to retirement

Post by inbox788 » Mon Mar 05, 2018 4:26 pm

wolf359 wrote:
Mon Mar 05, 2018 4:11 pm
jalbert wrote:
Mon Mar 05, 2018 3:17 pm
Fidelity offers both actively managed and index-fund based target retirement funds.

The Freedom Funds are built using mostly actively nanaged funds (some index funds for some corre exposures). The Freedom Index Funds are built exclusively with index funds.
If you search for "target date fund" on the fidelity site, it will only list the actively managed option. (They HAVE both active and index versions, but they only OFFER you active version.) If you search for "target date index fund," the first hit is a description of index funds; then a link to the actively managed fidelity freedom funds. You have to search explicitly for "fidelity freedom index fund" to get to the index version.

I like Fidelity products, and I'm a customer, but it's because they play games like this that I trust Vanguard more.
YES. I think this is DELIBERATE. They purposely choose confusing names (eliminated Spartan from their index funds), and count on a fraction of their customers to choose the more expensive fund, often without realizing the consequences. That's also why I have my funds with Vanguard.

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Re: Fidelity puts 6 million savers on a risky path to retirement

Post by brentflog » Mon Mar 05, 2018 4:31 pm

This is a bad article or at least a bad headline. All asset allocation decisions that are different from the investable global market portfolio are ACTIVE. The changes Fidelity made are no different than those made by folks on these boards who tilt (value or small or whatever). The article talks about them over-weighting emerging markets a few years ago and acts like it was a really risky decision. EM had way better valuations than most other asset classes which could allow one to make the argument that they were less risky. Vanguard has made asset allocation changes within their target date funds over the years too. I like the Fidelity Freedom index funds better than Vanguard's target dates because Vanguard has way to big of an allocation to foreign bonds. This makes little sense to me with the low yields and longer durations.

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Re: Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

Post by LadyGeek » Mon Mar 05, 2018 4:59 pm

FYI - I merged david's thread into the on-going discussion.
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Re: Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

Post by gmaynardkrebs » Mon Mar 05, 2018 5:12 pm

Just the latest reason why there is no Fidelityheads forum.

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Re: Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

Post by Ron » Mon Mar 05, 2018 7:16 pm

gmaynardkrebs wrote:
Mon Mar 05, 2018 5:12 pm
Just the latest reason why there is no Fidelityheads forum.
Sure there is - just not by that name: http://socialize.morningstar.com/NewSoc ... 00026.aspx

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Re: Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

Post by Spirit Rider » Mon Mar 05, 2018 8:41 pm

gmaynardkrebs wrote:
Mon Mar 05, 2018 5:12 pm
Just the latest reason why there is no Fidelityheads forum.
There is no reason for one. Despite the name and the affinity many members have for Vanguard. You will find a significant percentage of forum members implement the Boglehead philosophy at least partially at Fidelity, Schwab, etc...

I'm not a fan of target date retirement funds at any provider including Vanguard. I feel that even Vanguard "juices" their target date funds at the risk of their owners. Typically owners are far more risk adverse than the funds they are in.

Knowledgeable Bogleheads would say that they should know what is in what they invest in. However, they typically have mistakenly put their trust in the fund companies so they don't have to.

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Re: Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

Post by xerxes101 » Mon Mar 05, 2018 9:16 pm

I remember Fidelity pulled this exact same thing during early 90's. Back then, there were 3 different types of Asset Manager funds. I was in Asset Manager Growth Fund (I believe they still exist, or they may have been consolidated into a single fund). The manager had invested a lot of money in the emerging market debt. The emerging market debt which was a very risky at the time eventually tanked and the shareholders off course had to pay the price :oops: . It was not immediately obvious to everyone why the fund manager had invested such a high percentage of the fund in a risky vehicle like that. The reputation of the so called "star manager" of course tanked with the funds.

One more reason to be happy about investing in low-cost index funds :happy ....because as far as I am concerned this is another case of fund manager going rogue :annoyed

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Fidelity Article

Post by bogleweed » Tue Mar 06, 2018 12:07 am

[Thread merged into here, see below. --admin LadyGeek]

What do you think about this?

https://www.yahoo.com/finance/news/spec ... 52578.html

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Re: Fidelity Article

Post by Ged » Tue Mar 06, 2018 12:11 am

What it means is the Fidelity has been increasing the percentage of stocks in some blended products to get better returns.

This increases volatility. Which may be a risk that its customers aren't expecting.
Last edited by Ged on Tue Mar 06, 2018 12:12 am, edited 1 time in total.

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Re: Fidelity Article

Post by MikeMak27 » Tue Mar 06, 2018 12:12 am

It’s paid advertising by another investment services firm that casts doubt to try and get accounts away from fidelity. Yahoo’s journalism quality and standards are next to nil. Just scroll thru their website’s homepage to look at all the click bait and hidden adervisting articles. It’s a shameful attempt at honest reporting.
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Re: Fidelity Article

Post by oldcomputerguy » Tue Mar 06, 2018 6:08 am

MikeMak27 wrote:
Tue Mar 06, 2018 12:12 am
It’s paid advertising by another investment services firm that casts doubt to try and get accounts away from fidelity. Yahoo’s journalism quality and standards are next to nil. Just scroll thru their website’s homepage to look at all the click bait and hidden adervisting articles. It’s a shameful attempt at honest reporting.
To be fair, the original article didn't come from Yahoo, it came from Reuters. Yahoo simply reposted it. This article was discussed already here in this thread.
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Re: Fidelity Article

Post by nisiprius » Tue Mar 06, 2018 7:37 am

What do I think? I think Fidelity is a pretty good financial services company--overall, all together, slightly better than Vanguard, but not in ways that matter to me.

I think Fidelity, as a mutual fund company, offers a lot of quite decent mutual funds. Their index funds are better than "decent."

I think target-date funds in general are a good idea, particularly in 401(k) plans where inexperienced investors are being asked to make choices, and that Fidelity deserves some credit for being an early adopter. (This article says Wells Fargo and BGI invented them and introduced them in 1994, Fidelity offered theirs in 1996, Vanguard not until 2003).

I think the Fidelity Freedom Funds--I worked for an employer with a Fidelity-managed 401(k) plan and personally owned one for about four years--are run-of-the-mill. I'm not enthusiastic about them, I don't see them as atrocious. Yep, too high an expense ratio. Yep, weird list of components, constant change in the composition, seeming performance chasing. So they're goosing up stock allocation? Vanguard did the same thing in 2006. In fact, due to Vanguard's change in 2006, you could have been in a Vanguard target date fund for more than ten years and had your stock allocation be about the same at the end as it was at the beginning).

Eh, I don't much like the Fidelity Freedom Funds. And Starbucks coffee is overpriced and doesn't taste good. Grumble, grumble, grumble.
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Re: Fidelity Article

Post by midareff » Tue Mar 06, 2018 7:51 am

The measure of success in the mutual fund field would seem to be what ### have you done for me recently. The US and world markets are full of sectors, sub-sectors and regions. Is it really ramping up risk to move from sectors or regions that are under performing to move to those that are on par or over performing? If EM is stagnant, year after year, does it make sense to remain fully allocated there hoping something starts or move the money somewhere else and wait for the start. Which is the risk.. the forward momentum or the doing nothing while inflation eats your money?

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Re: Fidelity Article

Post by welderwannabe » Tue Mar 06, 2018 7:54 am

It should be worth noting that this article seems to be referring to the actively managed Freedom funds, not the Freedom index target date funds. The problems they are referring to seem to be normal actively managed fund issues...trying to chase returns to justify fees.
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Re: Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

Post by workerbeeengineer » Tue Mar 06, 2018 8:01 am

Katietsu, Any thoughts as to a remedy for these uninformed investors?
Katietsu wrote:
Mon Mar 05, 2018 10:27 am
Diogenes wrote:
Mon Mar 05, 2018 10:00 am

Each of us is responsible for our own 'path to retirement,' not one brokerage house, no matter how they structure their funds.
I do not want to comment on whether or not this should be true in principle. But in practice, the number of people who have even the most rudimentary understanding of their 401k investments is tiny. Yes, some of them could improve their understanding with just a bit of efffort. But many have no realistic chance of understanding how their funds are “structured”. It is this exact group of people who the government and industry says can just go use a target date fund.

I mean 40 million adults are unbanked or underbanked. Back before online banking, I tried to teach my sister in law with a college degree (English) and decent job to balance her checkbook and eventually gave up. And I just found out a neighbor with a total AGI of $5000, with income consisting of two small pensions and a social security check paid $260 to a franchise tax preparer when there was no reason for her to file a tax return at all. I could fill the whole screen with these stories.

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Re: Fidelity Article

Post by Jack FFR1846 » Tue Mar 06, 2018 8:05 am

I think that Fidelity is like the galaxy in total. You can fall for the lies and the temptation of the Dark Side with its expensive, actively managed funds or you can side with the Republic and choose low cost index funds, created by the light side of the Force. If kept apart, the two sides exist without issue. It's when one is tempted by the promises of those led by Lord Sith that the worlds collide and your portfolio becomes another victim.
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Re: Fidelity Article

Post by AtlasShrugged? » Tue Mar 06, 2018 8:51 am

I think Fidelity, as a mutual fund company, offers a lot of quite decent mutual funds. Their index funds are better than "decent."
This....x1,000. I have all my stuff through Fidelity (401K, Roth) in index funds, and they are just fine. Fidelity's website, and customer service are absolutely outstanding.
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Re: Fidelity Article

Post by HueyLD » Tue Mar 06, 2018 8:56 am

Jack FFR1846 wrote:
Tue Mar 06, 2018 8:05 am
I think that Fidelity is like the galaxy in total. You can fall for the lies and the temptation of the Dark Side with its expensive, actively managed funds or you can side with the Republic and choose low cost index funds, created by the light side of the Force. If kept apart, the two sides exist without issue. It's when one is tempted by the promises of those led by Lord Sith that the worlds collide and your portfolio becomes another victim.
Very well put, Jack. You understand Fido very well.

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Re: Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

Post by iceport » Tue Mar 06, 2018 9:45 am

To go along with the active management, which is a good enough reason to avoid the Fidelity Freedom funds, check out the asset allocation! Twenty-nine underlying funds in the 2040 fund. Seriously.

I've long thought the "asset allocation" of these funds does double duty to spray their underlying funds with assets.

Fidelity Freedom® 2040 Fund AS OF 1/31/2018
Fidelity Series Intrinsic Opportunities Fund 9.43%
Fidelity Series Growth & Income Fund 8.96%
Fidelity Series Growth Company Fund 8.13%
Fidelity Series Stock Selector Large Cap Value Fund 6.70%
Fidelity Series Value Discovery Fund 4.76%
Fidelity Series Opportunistic Insights Fund 4.45%
Fidelity Series Blue Chip Growth Fund 4.04%
Fidelity Series All-Sector Equity Fund 3.87%
Fidelity Series Small Cap Opportunities Fund 3.42%
Fidelity Series 1000 Value Index Fund 2.49%
Fidelity Series 100 Index Fund 2.07%
Fidelity Series Small Cap Discovery Fund 1.14%
Fidelity Series Real Estate Equity Fund 0.72%
Fidelity Series Commodity Strategy Fund 1.94%
Fidelity Series International Growth Fund 9.15%
Fidelity Series International Value Fund 9.13%
Fidelity Series International Small Cap Fund 2.23%
Fidelity Series Canada Fund 0.91%
Fidelity Series Emerging Markets Fund 9.22%
Fidelity Series Long-Term Treasury Bond Index Fund 1.95%
Fidelity Series Investment Grade Bond Fund 0.45%
Fidelity Series Inflation-Protected Bond Index Fund 0.73%
Fidelity Series High Income Fund 1.32%
Fidelity Series Floating Rate High Income Fund 0.21%
Fidelity Series International Credit Fund 0.04%
Fidelity Series Emerging Markets Debt Fund 0.62%
Fidelity Series Real Estate Income Fund 0.41%
Fidelity Series Government Money Market Fund 1.29%
Fidelity Series Short-Term Credit Fund 0.26%
Last edited by iceport on Wed Mar 07, 2018 1:58 am, edited 1 time in total.
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Re: Fidelity Article

Post by ruralavalon » Tue Mar 06, 2018 10:04 am

oldcomputerguy wrote:
Tue Mar 06, 2018 6:08 am
MikeMak27 wrote:
Tue Mar 06, 2018 12:12 am
It’s paid advertising by another investment services firm that casts doubt to try and get accounts away from fidelity. Yahoo’s journalism quality and standards are next to nil. Just scroll thru their website’s homepage to look at all the click bait and hidden adervisting articles. It’s a shameful attempt at honest reporting.
To be fair, the original article didn't come from Yahoo, it came from Reuters. Yahoo simply reposted it. This article was discussed already here in this thread.
I wasn't aware of the market timing in the actively managed Fidelity Freedom funds.

The article doesn't mention the Fidelity Freedom Index Funds.
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Re: Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

Post by ColoRetiredGirl » Tue Mar 06, 2018 10:15 am

tfb wrote:
Mon Mar 05, 2018 10:13 am
Katietsu wrote:
Mon Mar 05, 2018 10:07 am
So the article might not be the best written. But, one example in the article is that the target date 2020 Fund has a stock allocation of 60%!
The Vanguard 2020 fund has a stock allocation of 55%, not that much different. 40% of the stock allocation is in international!
Please correct me if I am wrong but many people already in retirement on this site have indicated an AA of 60/40. Therefore, why would you frown on this AA in a 2020 fund? I have the impression an AA of 60/40 is the new conservative allocation for retirees. I agree having 40% in international maybe too aggressive. :confused

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Re: Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

Post by WanderingDoc » Tue Mar 06, 2018 1:34 pm

ColoRetiredGirl wrote:
Tue Mar 06, 2018 10:15 am
tfb wrote:
Mon Mar 05, 2018 10:13 am
Katietsu wrote:
Mon Mar 05, 2018 10:07 am
So the article might not be the best written. But, one example in the article is that the target date 2020 Fund has a stock allocation of 60%!
The Vanguard 2020 fund has a stock allocation of 55%, not that much different. 40% of the stock allocation is in international!
Please correct me if I am wrong but many people already in retirement on this site have indicated an AA of 60/40. Therefore, why would you frown on this AA in a 2020 fund? I have the impression an AA of 60/40 is the new conservative allocation for retirees. I agree having 40% in international maybe too aggressive. :confused
You're right, 60/40 is the "new" conservative allocation for retirees, now that we're in a 10 year bull run. Stand by for a few years and see what the conservative allocation becomes then ;)
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Re: Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

Post by LadyGeek » Tue Mar 06, 2018 5:27 pm

I merged bogleweed's thread into the on-going discussion, which is in the Investing - Theory, News & General.

bogleweed, Welcome!
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Re: Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

Post by tfb » Tue Mar 06, 2018 11:05 pm

ColoRetiredGirl wrote:
Tue Mar 06, 2018 10:15 am
tfb wrote:
Mon Mar 05, 2018 10:13 am
Katietsu wrote:
Mon Mar 05, 2018 10:07 am
So the article might not be the best written. But, one example in the article is that the target date 2020 Fund has a stock allocation of 60%!
The Vanguard 2020 fund has a stock allocation of 55%, not that much different. 40% of the stock allocation is in international!
Please correct me if I am wrong but many people already in retirement on this site have indicated an AA of 60/40. Therefore, why would you frown on this AA in a 2020 fund? I have the impression an AA of 60/40 is the new conservative allocation for retirees. I agree having 40% in international maybe too aggressive. :confused
I don't frown on that AA in a 2020 fund. I was only pointing out Fidelity's 60/40 isn't that much out of line relative to Vanguard's 55/45 with 40% of the 55 in international.
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Re: Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

Post by gostars » Wed Mar 07, 2018 12:52 am

iceport wrote:
Tue Mar 06, 2018 9:45 am
To go along with the active management, which is a good enough reason to avoid the Fidelity Freedom funds, check out the asset allocation! Twenty-nine underlying funds in the 2040 fund. Seriously.

I've long thought the "asset allocation" of these funds does double duty to spray their underlying funds with assets.

Fidelity Freedom® Index 2040 Fund - Investor Class AS OF 1/31/2018
I think you meant to title this as the non-Index version. The Index version holds 62.023% TSM, 1.319% commodities, 27.201% global ex-US large caps, and 9.444% US aggregate bond. That still seems super aggressive to me for something designed for people who are around age 40-45, but at least it's not holding a bunch of random noise.

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Re: Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

Post by iceport » Wed Mar 07, 2018 1:57 am

gostars wrote:
Wed Mar 07, 2018 12:52 am
iceport wrote:
Tue Mar 06, 2018 9:45 am
To go along with the active management, which is a good enough reason to avoid the Fidelity Freedom funds, check out the asset allocation! Twenty-nine underlying funds in the 2040 fund. Seriously.

I've long thought the "asset allocation" of these funds does double duty to spray their underlying funds with assets.

Fidelity Freedom® Index 2040 Fund - Investor Class AS OF 1/31/2018
I think you meant to title this as the non-Index version. The Index version holds 62.023% TSM, 1.319% commodities, 27.201% global ex-US large caps, and 9.444% US aggregate bond. That still seems super aggressive to me for something designed for people who are around age 40-45, but at least it's not holding a bunch of random noise.
You're right. I had too many tabs open.

The index version is practically a three fund portfolio.
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Re: Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

Post by sambb » Wed Mar 07, 2018 4:28 am

most investors would be fine wuth FF

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Re: Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

Post by Dandy » Wed Mar 07, 2018 8:24 am

You're right, 60/40 is the "new" conservative allocation for retirees, now that we're in a 10 year bull run. Stand by for a few years and see what the conservative allocation becomes then ;)
+1

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Re: Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

Post by tibbitts » Wed Mar 07, 2018 8:49 am

Dandy wrote:
Wed Mar 07, 2018 8:24 am
You're right, 60/40 is the "new" conservative allocation for retirees, now that we're in a 10 year bull run. Stand by for a few years and see what the conservative allocation becomes then ;)
+1
It's amazing how far recommendations on Bogleheads have evolved, and how fast. Maybe the author could recycle the article by swapping "Bogleheads" for "Fidelity."

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Re: Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

Post by Paul Romano » Wed Mar 07, 2018 9:38 am

"Vanguard extends TDF dominance with 'unbelievable' growth
Its target-date assets have grown by $270 billion since 2015"

Investment News article:

Vanguard extends TDF dominance with 'unbelievable' growth [link fixed by admin LadyGeek]
Vanguard controlled $623 billion in total TDF assets at the end of 2017, including assets held in mutual fund and collective investment trust funds, according to a new target-date report published by Sway Research, which studies asset management distribution in retirement plans. That's roughly $400 billion more than its closest competitors, Fidelity Investments and T. Rowe Price, and represents a 36% share of the approximately $1.7 trillion in target-date mutual funds and CITs.

In fact, Vanguard increased its TDF assets by $270 billion since 2015, according to the report, which is more money than Fidelity, the second-largest provider, manages in total. Fidelity oversees $244 billion.

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Re: Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

Post by digarei » Wed Mar 07, 2018 10:05 am

tibbitts wrote:
Wed Mar 07, 2018 8:49 am
Dandy wrote:
Wed Mar 07, 2018 8:24 am
You're right, 60/40 is the "new" conservative allocation for retirees, now that we're in a 10 year bull run. Stand by for a few years and see what the conservative allocation becomes then ;)
+1
It's amazing how far recommendations on Bogleheads have evolved, and how fast. Maybe the author could recycle the article by swapping "Bogleheads" for "Fidelity."
Well, interest rates have evolved, too. A 60/40 portfolio may be needed now whereas the bond allocation of a 40/60 portfolio provided more of the return in prior decades. Right?
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Re: Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

Post by ruralavalon » Wed Mar 07, 2018 11:20 am

digarei wrote:
Wed Mar 07, 2018 10:05 am
tibbitts wrote:
Wed Mar 07, 2018 8:49 am
Dandy wrote:
Wed Mar 07, 2018 8:24 am
You're right, 60/40 is the "new" conservative allocation for retirees, now that we're in a 10 year bull run. Stand by for a few years and see what the conservative allocation becomes then ;)
+1
It's amazing how far recommendations on Bogleheads have evolved, and how fast. Maybe the author could recycle the article by swapping "Bogleheads" for "Fidelity."
Well, interest rates have evolved, too. A 60/40 portfolio may be needed now whereas the bond allocation of a 40/60 portfolio provided more of the return in prior decades. Right?
I don't believe Boglehead's recommendations have changed much if at all.

As I recall asset allocation ideas have always been in the area of 60/40 for newer retirees to 40/60 for older retirees. For some data on allocations, on this forum Google "Dale Maley Boglehead's Stock Allocation, percent"
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Re: Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

Post by iceport » Wed Mar 07, 2018 11:50 am

digarei wrote:
Wed Mar 07, 2018 10:05 am
tibbitts wrote:
Wed Mar 07, 2018 8:49 am
Dandy wrote:
Wed Mar 07, 2018 8:24 am
You're right, 60/40 is the "new" conservative allocation for retirees, now that we're in a 10 year bull run. Stand by for a few years and see what the conservative allocation becomes then ;)
+1
It's amazing how far recommendations on Bogleheads have evolved, and how fast. Maybe the author could recycle the article by swapping "Bogleheads" for "Fidelity."
Well, interest rates have evolved, too. A 60/40 portfolio may be needed now whereas the bond allocation of a 40/60 portfolio provided more of the return in prior decades. Right?
More importantly, the research has evolved on funding long retirements with an asset pool, instead of an annuitized income stream. From my perspective, the target retirement funds have been glacially slow to incorporate the best available information, which points to higher terminal equity allocations.

Granted, these funds are faced with other constraints, such as industry competition and unknowledgeable customer perceptions and behaviors.
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Re: Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

Post by blackcat allie » Sun Mar 11, 2018 1:31 am

Noob question, please - for the higher priced Fidelity "Freedom" Funds in 401k plan, do you pay the main expense ratio listed on plan AND the expense ratios for *each* of their constituent funds? :shock: :(

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Re: Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

Post by digarei » Sun Mar 11, 2018 1:47 am

Black Cat wrote:
Sun Mar 11, 2018 1:31 am
Noob question, please - for the higher priced Fidelity "Freedom" Funds in 401k plan, do you pay the main expense ratio listed on plan AND the expense ratios for *each* of their constituent funds? :shock: :(
One expense ratio for one fund, even if it is a fund of funds. However participating in your 401(k) plan probably entails an administrative fee or plan fee. They are separate.
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Re: Reuters-" Special Report: Fidelity puts 6 million savers on risky path to retirement"

Post by blackcat allie » Sun Mar 11, 2018 11:31 am

[/quote]
One expense ratio for one fund, even if it is a fund of funds. However participating in your 401(k) plan probably entails an administrative fee or plan fee. They are separate.
[/quote]

Thanks @digarei . Some good news there

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