Questions on Restructuring Portfolio and VTSAX vs FSTVX

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Questions on Restructuring Portfolio and VTSAX vs FSTVX

Post by ibt23 » Wed Dec 06, 2017 3:46 pm

Hi, I am posting to get some advice on how to restructure my portfolio, change my investment strategy and divide up my holding locations. Here is a little background:

• I am single, earn around 90,000 a year, and will potentially be ineligible for Roth IRA contributions within the next couple of years.
• I am 35 years old and will retire around 65.
• I have 74,000 in a Fidelity Roth IRA with 50,000 in stocks and Fidelity Balanced Mutual Fund, 4,000 in bonds, and 20,000 in cash.
• I have 50,000 in a Vanguard 403B with 40,000 in Vanguard Total Stock, 5,000 in Vanguard Total International Stock, and 5,000 in Vanguard Total Bond.

I’d like to take a simple index fund approach to investing with my Roth IRA by selling a good portion of my individual stocks, my Fidelity Balanced Fund (which I think is too conservative for my age) and with the rest of my cash, investing in VTSAX, but Fidelity does not offer this fund. They offer FSTVX, Fidelity Total Stock Premium, (their version of Vanguard’s Total Stock Admiral Class Fund). In some of the research I’ve done, people claim that Vanguard Total Stock is a better fund with a better return over time.

My questions are:

1. Is Vanguard Total Stock Admiral Class a slightly better fund and if so, does it merit opening a second Roth IRA in Vanguard and rolling over some of my money from Fidelity? In this scenario, I would have two Roth IRA’s, both of which I might not be able to contribute to in a couple of years. This seems messy to me, but I am willing to do it if it will yield greater long-term gains. Alternatively, should I simply buy Fidelity Total Stock in my Fidelity Roth IRA and then when I can no longer contribute to my Roth, open an individual brokerage account with Vanguard and get the Vanguard Total Stock/International there?

2. Should I get a total stock fund at all in my Roth IRA, or is this a redundancy of my 403B Vanguard Total Stock Fund? Should I instead invest in more aggressive sector-based indexes such as small cap, tech, etc.?

Thanks for reading, I’d appreciate any help.

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Earl Lemongrab
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Re: Questions on Restructuring Portfolio and VTSAX vs FSTVX

Post by Earl Lemongrab » Wed Dec 06, 2017 5:50 pm

If you review the growth of 10k for both funds over the past 20 years, the difference is about $110 in favor of Vanguard. That's probably due to higher ERs in past years for the Fidelity fund.
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Re: Questions on Restructuring Portfolio and VTSAX vs FSTVX

Post by livesoft » Wed Dec 06, 2017 6:31 pm

It seems you should just transfer your Fidelity Roth over to a new Vanguard Roth and go from there. You don't have to since the two fund VTSAX and FTSVX are the same within round-off error as far as Roth IRAs go. In some sense, you are thinking the grass is greener on the other side, but it is really the same. You just don't seem to want to be on both sides.

Now some folks might say it is good to be involved with two different brokerages: Fidelity and Vanguard. And some would say that Fidelity is better and some would say that Vanguard is better. The reality is that both are very good and some people like one or the other or both.

As for overlap, you will have overlap always if you stay with your 3-fund portfolio. It's a good strategy. I would put equity funds in your Roth IRA and your 403(b). I would put bond funds in your 403(b) for now.

If you have to ask if you should invest in different funds and sector funds, then the answer is: No, you should not. At some point you won't have to ask and maybe you will do it then.

If you become ineligible for a Roth contribution, then you may wish to read up on Backdoor Roth IRA for the future.
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Re: Questions on Restructuring Portfolio and VTSAX vs FSTVX

Post by aj76er » Wed Dec 06, 2017 6:38 pm

FSTVX is a great fund, especially for tax-advantaged accounts.
VTSAX is a great fund for both tax-advantaged and taxable accounts.

VTSAX has the slight edge for taxable accounts due to the underlying ETF structure they rarely (if ever) need to distribute capital gains. In a tax-sheltered account, it doesn't matter as long as you re-invest all dividends and capital gains.

Thus, in tax-sheltered accounts, you can't go wrong with either fund. If you like Fidelity (i.e. their website and customer service) then I see no problem using FSTVX for the long term in your 403b and/or Roth accounts.
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Re: Questions on Restructuring Portfolio and VTSAX vs FSTVX

Post by ibt23 » Sat Dec 09, 2017 12:31 pm

Thanks for the advice everyone, it helped greatly. I will be going with FSTVX.

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