Fidelity vrs. Vangaurd -please help with portfolio

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invhelpme
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Fidelity vrs. Vangaurd -please help with portfolio

Post by invhelpme » Sat May 08, 2010 9:17 am

Hello Bogleheads,

I currently have an IRA with Fidelity. I am invested in almost entirely actively managed funds My asset allocation is way too aggressive for my age. I am 47 and the portfolio consists of 95% equities/5% bonds. I am in funds like Contrafund, Low Price Stock, Emerging Markets, Diversified International,ect. All of the funds have ER's of around 1% which I know is a little too expensive. I am really tired of the huge swings in the portfolio because of this crazy market volatility. I want to reduce my allocation to 50%stocks/50%bonds and possibly move the portfolio to Vangaurd. Please help.

1. Please reccommend some Fidelity and Vanguard portfolios using index funds to give me the 50/50 split.

2. I would like to have anywhere from four to eight funds in the portfolio.

3. I am not against having some managed funds. I was thinking about spliting the portfolio between 50% Wellington and 50% Wellesley Income. The Wellington is 60% stocks/ 40% bonds and the Wellesly is 60% bonds/ 40% stocks. This would give me the 50/50 split I am looking for although I have no exposure to international or much small cap. What do you think? Thanks for your time.

ResNullius
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Post by ResNullius » Sat May 08, 2010 9:28 am

The two W's at Vanguard are great funds, but rather than purchasing a balanced fund (regardless the allocation), you might want to consider simply buying the Total Market Index and the Total Bond Index (or Vanguard Intermediate Corp Bond). Also, I see no reason for having 6 to 8 equity funds, because you actually end up with glorified index fund. Almost all actively managed equity funds use the appropriate index as the core of the fund, then play around with about 20% of the rest of the money, usually making sector bets by overweighting one sector or the other. Just my two cents. By the way, I actually spread my equity allocation (currently about 38%) between SP500, CapOp, PrimeCap, and WindsorII, and my fixed allocation (currently about 62%) between short and intermediate corp and tax exempt bond funds, all with Vanguard. Good luck.

livesoft
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Post by livesoft » Sat May 08, 2010 9:35 am

Several possible Vanguard and Fidelity portfolios are listed in the wiki and at www.fundadvice.com

Why not propose your own portfolio first? It would show that you understand a little what you intend to do. It is scary to me to respond to your query with a "Do this" because you might actually do it without thinking about it.

If you don't understand, then there are helpful books like "The Bogleheads' Guide Investing" and "The Investor's Manifesto" which have sample portfolios in them like you probably want along with involved explanations of the portfolios. Have you read the books?

AlwaysaQ
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Post by AlwaysaQ » Sat May 08, 2010 9:45 am

Fidelity Index Funds include
Spartan Total Market Index - US
Spartan International Index - EAFE
Spartan ST, IT, and LT Treasury Index Funds
U. S. Bond Index - FBIDX
Four in One Index - FFNOX combines S&P 500, S&P Extended Market,
International Index, and U. S. Bond Index

Missing is Emerging Markets

YDNAL
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Re: Fidelity vrs. Vangaurd -please help with portfolio

Post by YDNAL » Sat May 08, 2010 9:54 am

invhelpme wrote:I currently have an IRA with Fidelity. I am invested in almost entirely actively managed funds My asset allocation is way too aggressive for my age. I am 47 and the portfolio consists of 95% equities/5% bonds. I am in funds like Contrafund, Low Price Stock, Emerging Markets, Diversified International,ect. All of the funds have ER's of around 1% which I know is a little too expensive. I am really tired of the huge swings in the portfolio because of this crazy market volatility. I want to reduce my allocation to 50%stocks/50%bonds and possibly move the portfolio to Vangaurd. Please help.
invhelpme,

I agree with livesoft that we don't know enough about you or your portfolio.

1) Are you still accumulating at age 47? If you do contribute, what other accounts do you have? It would make sense to use new contributions to change your desired allocation to Bonds.

2) Selling now because "of this crazy market volatility" suggests of reactionary vs. planned approach. Do you have a plan and Investment Policy Statement?
Investment Planning (includes suggested reading)
Investment Policy Statement
Landy | Be yourself, everyone else is already taken -- Oscar Wilde

invhelpme
Posts: 48
Joined: Sun Apr 04, 2010 12:14 pm

Post by invhelpme » Sat May 08, 2010 10:55 am

Thanks Landy and livesoft and all who have replied. I have read many books on investing including the ones you suggested. My main question is should I go through the hassle of moving the IRA from Fidelity to Vangaurd or just stick with Fidelity's Spartan Funds. This IRA is a rollover from a 403b we had. I no longer work there. My wife and I both have pensions from the state as we are both employed by the state. I will not be putting any more money into this IRA. I just want to get it more conservative. We both have Roth Ira's at Vangaurd composed of the Total Stock Market Index, Total International Index and the STAR fund. We max those Roth's out every year. My thoughts were 50% to Wellington and 50% to Wellesley Income Fund like I said in my original post. I am a dedicated listener to Sound Advice and am familiar with Paul Merrimans portfolios. I think he puts too much emphasis on international and value. Can you guys give me anymore help? I hope I answered your questions. Daren

GammaPoint
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Post by GammaPoint » Sat May 08, 2010 11:00 am

Hi Daren,

I moved a ROTH from Fidelity over to Vanguard to consolidate my ROTHs. It simplified the situation and made it easier for me (a new investor) to meet the fund minimums of my S&D type portfolio. There was a $50 fee on Fidelity's end, but I thought it was worth it.

Fidelity has the really nice Spartan index funds, but I didn't have the $10k in the ROTH to meet the minimum balance for those funds (without a fee). In any case, I have too many tax-inefficient assets in my AA to be holding large blend funds in my ROTHs so I would have moved it anyway.

YDNAL
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Re: Fidelity vrs. Vangaurd -please help with portfolio

Post by YDNAL » Sat May 08, 2010 11:42 am

invhelpme wrote:I currently have an IRA with Fidelity. I am invested in almost entirely actively managed funds My asset allocation is way too aggressive for my age. I am 47 and the portfolio consists of 95% equities/5% bonds. I am in funds like Contrafund, Low Price Stock, Emerging Markets, Diversified International,ect. All of the funds have ER's of around 1% which I know is a little too expensive.
invhelpme wrote:Thanks Landy and livesoft and all who have replied. I have read many books on investing including the ones you suggested. My main question is should I go through the hassle of moving the IRA from Fidelity to Vangaurd or just stick with Fidelity's Spartan Funds. This IRA is a rollover from a 403b we had. I no longer work there. My wife and I both have pensions from the state as we are both employed by the state. I will not be putting any more money into this IRA. I just want to get it more conservative. We both have Roth Ira's at Vangaurd composed of the Total Stock Market Index, Total International Index and the STAR fund. We max those Roth's out every year.
Daren,

With added information, I'm inclined to say that Vanguard is the way to go since I don't care for Fido's bond choices.

If you decide to transfer, make sure it is custodian -> custodian and let Vanguard do all work without you having to take possession of the money.
  1. Certainly, 5% Bonds is extremely aggressive and undiversified.
  2. Also, selling Contrafund, Low Price Stock, Emerging Markets, Diversified International because of "market volatility" is not appropriate. But, only you can determine if you are losing sleep over this.
    Contrafund = Large Growth
    Low Price Stock = Mid Value
    EM = EM
    Div Int'l = Large Blend (MSCI EAFE)
  3. I would suggest a gradual shift to Bonds as you put new money to Roth (TSM, TISM) every year. Did you already make 2010 Contributions?
Landy | Be yourself, everyone else is already taken -- Oscar Wilde

GammaPoint
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Re: Fidelity vrs. Vangaurd -please help with portfolio

Post by GammaPoint » Sat May 08, 2010 11:56 am

YDNAL wrote:I would suggest a gradual shift to Bonds as you put new money to Roth (TSM, TISM) every year.
I definitely agree on the gradual part. Going from 95% equities to 50% equities when the "market is crashing" is definitely selling low. If I were you I'd probably increase bond exposure each year by 3-5%. That would get you to 50-50 in 9-15 years depending on the rate. Of course if you would sleep better you could go faster, but I'm just saying this is what I'd do.

invhelpme
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Post by invhelpme » Sat May 08, 2010 11:57 am

Thanks Gamma and Landy. We dollar-cost average into the Roths putting $100 each/month into the TSM and International TSM at Vangaurd. I also have been putting $200/mo into the STAR to get some bond exposure. The reason I chose STAR is because of the lower $1000 minimum to get started. I'm thinking I should switch the Fidelity to Vangaurd and just use one of the Lazy Portfolios. Any comments?

GammaPoint
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Post by GammaPoint » Sat May 08, 2010 12:03 pm

invhelpme wrote: I'm thinking I should switch the Fidelity to Vangaurd and just use one of the Lazy Portfolios. Any comments?
If you want to follow a Lazy Portfolio then I would go to Vanguard or a low-cost brokerage like WellsTrade where you can cheaply access all the components of your "pie". I think it'd be cheaper and less of a hassle.

YDNAL
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Re: Fidelity vrs. Vangaurd -please help with portfolio

Post by YDNAL » Sat May 08, 2010 12:39 pm

invhelpme wrote:We both have Roth Ira's at Vangaurd composed of the Total Stock Market Index, Total International Index and the STAR fund. We max those Roth's out every year.
invhelpme wrote:Thanks Gamma and Landy. We dollar-cost average into the Roths putting $100 each/month into the TSM and International TSM at Vangaurd. I also have been putting $200/mo into the STAR to get some bond exposure.
Daren,

If his/her Roth IRAs are maxed annually, this is $833.33 monthly and not $300 (TSM, TISM, STAR).

Here's what I would do.
1) Transfer custodian -> custodian.
2) Replace Stock Funds at Fidelity with comparable Vanguard Funds.
3) Consolidate Contrafund/Low Price -> Total Stock, and consolidate EM/Devesified Int'l -> FTSE ex US Total Int'l. In other words, 4 funds to 2 funds.
4) As you contribute $833/month to Roth IRAs, transfer $833/month from new funds above (#2) to Intermediate Bond Index (VBIIX).
5) Perhaps an immediate increase to 25% Bonds (1/2 there) may be appropriate if you are losing sleep.
Landy | Be yourself, everyone else is already taken -- Oscar Wilde

retiredjg
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Post by retiredjg » Sat May 08, 2010 12:39 pm

invhelpme, it is really unclear what you have. At one point, you say your portfolio is 95%/5%. At another point, it appears that the IRA being discussed is 95%/5%. If you want a real answer based on real information, you have to give us the real information - a total picture of all your retirement assets. Discussion 1 part of a portfolio is not productive.

A very general answer is....if you want to stay at Fido, use only the Spartan funds ($10,000 minimums) and know you should supplement the Spartan International with emerging markets (not a Spartan fund).

See the second link at the bottom of this message for how to ask portfolio questions.

invhelpme
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Post by invhelpme » Sat May 08, 2010 1:16 pm

Landy, sorry I forgot to tell you I make a one time payment to our Roths to Vangaurd Inter.Term Bond index for $2600 then make the $100 payments automatically for the rest of the year to max them out at $5000 each. I like your suggestions but I am losing sleep over the volatility in my Fidelity account. I would sleep better knowing that 50% of that portfolio is in bonds as well. I would like to convert it to 50% bonds when I do the custodian movement. Perhaps buy 33% short term treasuries,33% intermediate treasuries and 34% TIPS. Would this be stupid? Daren

invhelpme
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Post by invhelpme » Sat May 08, 2010 1:18 pm

Thanks retiredjg, my portfolio at Fidelity is 95% equities and 5% bonds, way to aggressive. In my Roth I have TSM, TISM,STAR and VIIBX the intermediate bond index. Daren

YDNAL
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Re: Fidelity vrs. Vangaurd -please help with portfolio

Post by YDNAL » Sat May 08, 2010 3:02 pm

invhelpme wrote:Landy, sorry I forgot to tell you I make a one time payment to our Roths to Vangaurd Inter.Term Bond index for $2600 then make the $100 payments automatically for the rest of the year to max them out at $5000 each. I like your suggestions but I am losing sleep over the volatility in my Fidelity account. I would sleep better knowing that 50% of that portfolio is in bonds as well. I would like to convert it to 50% bonds when I do the custodian movement. Perhaps buy 33% short term treasuries,33% intermediate treasuries and 34% TIPS. Would this be stupid? Daren
It's relative.

1) You bought high and sell low. Not good.
2) you bought low and sell high(er). Better.
3) Your account balances are such than $10K annually to Roth - with simultaneous exchange in IRA from Stocks -> Bonds - will increase Bonds significantly in short order. Best.
4) Sleeping well at night... priceless! :)
Landy | Be yourself, everyone else is already taken -- Oscar Wilde

retiredjg
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Post by retiredjg » Sat May 08, 2010 4:39 pm

invhelpme wrote:Thanks retiredjg, my portfolio at Fidelity is 95% equities and 5% bonds, way to aggressive. In my Roth I have TSM, TISM,STAR and VIIBX the intermediate bond index. Daren
Daren, I think I was unclear about part of what I was trying to say. You can call things anything you want, but here, when you say "portfolio" we think you are talking about all the stuff you have squirreled away for retirement - even it if is in taxable, IRA, Roth IRA, 401, Fido, Vanguard, Schwab and your local credit union. We don't think of each custodian or each account as a separate portfolio.

It is important you understand that because when you are talking about one part of the portfolio and someone else is talking about the whole thing, the two of you may be talking to each other, but you are not having the same conversation.

invhelpme
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Post by invhelpme » Sat May 08, 2010 5:42 pm

retiredjg, sorry about the confusion. I shouldn't have said portfolio. I should have said the IRA portion of my portfolio. I don't care about the Roth right now. It is too small to matter. I am just concerned about what to do with the Fidelity account. Any more help would be greatly appreciated. Thanks, Daren

retiredjg
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Post by retiredjg » Sun May 09, 2010 9:35 am

invhelpme wrote:Any more help would be greatly appreciated. Thanks, Daren
Daren, I'm not sure what other help anyone can give. You have already received very good advice. Since you are still asking for help, I'm guessing you didn't really understand. I'll try to summarize.

It appears you WANT to move the IRA to Vanguard. That's a fine idea. It will simplify things. But if you decide you want to stay at Fido, that would work too. However, for the time being, let's assume you are moving the IRA.

Have Vanguard initiate a trustee to trustee transfer. They'll do all the work. I'm not sure if the Fido funds will move to Vanguard Brokerage Service (VBS) in their current form, or if they will liquidate what you have and move cash to the mutual fund side of Vanguard. This should take 2 to 4 weeks. If they are moved "in kind" (in their current form) you will be out of the market a shorter time. Many people consider this desirable, but it is not necessary if it does not work out that way for you.

When the money arrives, set your portfolio up so that you have your 50% stocks (some in international) and 50% bonds (part short term, intermediate term and TIPS is fine).

It will not matter what percentage is in His Roth, Her Roth, or His Rollover IRA. It is the overall percentage that matters. In other words, His Roth can be all stocks and Her Roth can be all bonds. This, of course, is just an example.

In the meantime, you are putting money into stocks in your Roth - just making the excess of stocks worse. Change your monthly contributions and put all your new money into VBIIX. That will get you started on moving away from 95% stocks.

Now about the speed in reducing your stock percentage. You said you are losing sleep so this should go faster rather than slower. That does not necessarily mean "really fast". In addition to putting your new money in bonds, you could exchange your STAR into bonds. You can even exchange that TSM and TISM into bonds right now. If you did all that, what would your overall (all your accounts together) stock to bond ratio be? Your goal is 50/50, but getting you even to 70/30 would put you in the range of what many people consider reasonable. Then you could continue on to your goal.

I know you are concerned about this, but take a deep breath and relax a little. I was 56 y/o and almost retired when I looked at my stock to bond ratio in my account at work. It was all out of whack - very similar to yours. I just didn't know anything about investing and had not looked at it. So I made a plan to exchange some stocks into bonds every Friday (or every other Friday - I don't remember which). My problem was fixed in 6 months or less.

Now if all the above just does not satisfy you, and you must reduce the volatility of your Fido account immediately, then exchange some stocks in your Fido account into bonds. Spartan Intermediate Term would be a good choice. Do a chunk this week and then a little more each week (or whatever) after that.

I hope this is helpful. If you need more specific advice, you are probably going to have to give us your entire portfolio. Again, it concerns me that you are looking at just one account rather than everything together. And you have not mentioned a new 401 or any work plan for your spouse. Trying to fix just the one account does not necessarily help your overall portfolio.

invhelpme
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Post by invhelpme » Sun May 09, 2010 7:09 pm

Retiredjg, thank you so much for taking the time to help answer my question with your responses. It has been very helpful and I can't tell you how much it means that you care. I just wish I could make up my mind if I should move to Vangaurd or purchase all Spartan Funds but I will have to decide that. Thanks again. Daren

retiredjg
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Post by retiredjg » Sun May 09, 2010 8:43 pm

invhelpme wrote:I just wish I could make up my mind if I should move to Vangaurd or purchase all Spartan Funds but I will have to decide that. Thanks again. Daren
Daren, it might be helpful to set this question on the back burner for a bit. Throughout this thread, you have sounded a bit stressed and these decisions are best made with a calm mind. When you stop trying to force the answer, the right answer will appear and you'll know what you really want to do.

In the long run, it likely will not matter if you stay or if you move to VG. Possibly, it would be best to get some more bonds on board now (not necessarily your entire goal, just progress), get your mind clear and your stress levels down, and then decide if you want to go to the trouble of making the move.

Remember to look at everything as one portfolio. Also, this investing thing is not an emergency. If you can keep yourself from doing stupid stuff, you will likely be just fine. Make a good plan, then do it - not vice versa.

Thanks for letting me know my post was helpful. Sometimes, we have no idea if something was helpful or not. :wink:

invhelpme
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Post by invhelpme » Sun May 09, 2010 9:24 pm

You are right. I'm stressed over this stupid market's volatility. It is just a waste of precious time to even follow what the market does daily. Can I blame it on the media? I doubt it. It's my own fault for watching what the markets are doing. The media loves this volatility and people watch and eat it up. I am going to take your advice and transfer to VG and start moving some of the equities into bonds little by little each month and see what happens. Also, I will watch what my positions are in the two Roth Accounts we have. I SO MUCH appreciate your help. Daren

retiredjg
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Post by retiredjg » Mon May 10, 2010 8:40 am

It is just a waste of precious time to even follow what the market does daily.
Pretty much!

Think about the role of the media. Yes, they are there to give us information, but to stay in business, they have to entice people to come back regularly. So the media finds it helpful to make everything exciting, dreadful, exuberant, terrible, mysterious. sexy, etc. And all that yelling keeps up in an excited state!

We call it "financial porn" and you should wean yourself off of it. I'm not saying you should not be informed. I'm saying stay away from media sources that regularly make you feel like the sky is falling.

And work your way toward an asset allocation you can stick with in good times and bad times. Then you don't have to worry on a daily basis.

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