Author Topic: 1) Fidelity 401K from employer - wanting easy index investing!  (Read 2415 times)

bliss88

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Greetings. My employer offers a Fidelity 401K. I want an easy set-it-and-forget-it plan and was wondering your thoughts on choosing a target-year-based asset allocation (eg Freedom premixed plans) that Fidelity offers? 
Also, given I'd like to retire in 12-13 yrs, should I up the bonds to 10% like Pete currently has w/ his Betterment? If so, does that mean I'll need to deconstruct the said plan and input my own #s for each investment but increasing % of bonds proportionally? All the other target funds with higher bond/stock ratio have a 25% bond/75% stock ratio (too much bond for right now, correct?).

I've pasted the allocation for Freedom 2040 plan I'm enrolled in ($10K in it, new job, will max it to $18K in one more month).
Other holdings: Betterment ($85), vanguard ROTH ($94.7K), Wealthfront brokerage ($43K), Lending Tree ($2.6K) --

My profile:
age 39, unmarried (for now)
will arrive to 4% x annual projected expenses in ~10-12 yrs if I continue with current saving/income situation  (though I do wonder how much people budget for health expenses pre-medical/medicare!)
expected living expenses per month:$2K
Total savings: $305K

Thank you so much for any guidance!

Asset Allocations
AS OF 6/30/2016
Domestic Equity Funds 64.46%
Equity Funds 63.01%
Fidelity Series Equity-Income Fund 9.64%
Fidelity Series Growth Company Fund 8.38%
Fidelity Series Growth & Income Fund 7.17%
Fidelity Series All-Sector Equity Fund 6.99%
Fidelity Series Stock Selector Large Cap Value Fund 6.39%
Fidelity Series Intrinsic Opportunities Fund 5.55%
Fidelity Series Blue Chip Growth Fund 4.77%
Fidelity Series Opportunistic Insights Fund 4.66%
Fidelity Series Small Cap Opportunities Fund 3.79%
Fidelity Series 100 Index Fund 2.23%
Fidelity Series 1000 Value Index Fund 1.31%
Fidelity Series Small Cap Discovery Fund 1.24%
Fidelity Series Real Estate Equity Fund 0.88%
Commodity Funds 1.45%
Fidelity Series Commodity Strategy Fund 1.45%

International Equity Funds 29.95%
Developed-Markets Equity Funds 20.36%
Fidelity Series International Growth Fund 9.16%
Fidelity Series International Value Fund 9.07%
Fidelity Series International Small Cap Fund 2.13%
Emerging-Markets Equity Funds 9.58%
Fidelity Series Emerging Markets Fund 9.58%

Bond Funds 5.53%
Investment-Grade Bond Funds 0.54%
Fidelity Series Investment Grade Bond Fund 0.54%
Inflation-Protected Bond Funds 0.51%
Fidelity Series Inflation-Protected Bond Index Fund 0.51%
High-Yield Bond Funds 3.02%
Fidelity Series High Income Fund 3.02%
Floating-Rate Funds 0.26%
Fidelity Series Floating Rate High Income Fund 0.26%
Emerging-Markets Debt Funds 0.68%
Fidelity Series Emerging Markets Debt Fund 0.68%
Real Estate Debt Funds 0.52%
Fidelity Series Real Estate Income Fund 0.52%


Short-Term Funds & Net Other Assets 0.06%

Fidelity Series Government Money Market Fund 0.03%
Fidelity Series Short-Term Credit Fund 0.03%

NET OTHER ASSETS 0.02%

Radagast

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Re: 1) Fidelity 401K from employer - wanting easy index investing!
« Reply #1 on: August 04, 2016, 08:35:44 AM »
What are all those? You actually own that? Do you keep those amounts your self, or it is done automatically? The first step is to get rid of every fund with an expense ratio above .5%. Then choose not more than 8 of your favorite remaining funds and invest in those, cheaper is generally better.

seattlecyclone

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Re: 1) Fidelity 401K from employer - wanting easy index investing!
« Reply #2 on: August 04, 2016, 08:52:44 AM »
You do not need to own all these funds. When you own multiple funds that invest in the same thing (such as domestic equity), you'll find there's a lot of overlap. Sometimes the funds even have strategies that are directly opposed to each other, such as owning a "growth" fund and a "value" fund at the same time. Read about a three-fund portfolio and see how close you can get to implementing it with the funds available in your plan.

Your current level of complexity makes your portfolio harder to understand, without increasing the returns or diversification in any measurable way. Simplify.

Choices

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Re: 1) Fidelity 401K from employer - wanting easy index investing!
« Reply #3 on: August 04, 2016, 09:06:15 AM »
Agree with above posters. You can buy a US total market index fund like FSTVX, an international index fund like FSIVX, and a bond index fund like FSITX. These are the premium funds so there might be similar funds with lower entry amounts.

Some argue against bond index funds, but the pros are that they're very liquid and very easy.

The Freedom funds have higher expense ratios and are unnecessary. You can balance them yourself as needed, though most people here would probably argue that you don't need as high a percentage in bonds as Fidelity would recommend. Even though you're retiring in your early 50s, you'll need that money to last you for 40 more years. You're likely to miss out on a lot of growth if you have too much in bonds.


NP

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Re: 1) Fidelity 401K from employer - wanting easy index investing!
« Reply #4 on: August 04, 2016, 10:07:14 AM »
Agree with above posters. You can buy a US total market index fund like FSTVX, an international index fund like FSIVX, and a bond index fund like FSITX. These are the premium funds so there might be similar funds with lower entry amounts.
Good advice. FSIVX is called 'international index' but is really a foreign developed markets index as opposed to total international, so I'd also include FPMAX to gain exposure to emerging markets.

Bourbon

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Re: 1) Fidelity 401K from employer - wanting easy index investing!
« Reply #5 on: August 04, 2016, 10:26:39 AM »
From your question it appears you are NOT investing in those individual funds, but are enrolled in the Fidelity 2040 target date fund.

Provided that fees are low enough, I don't object to target date funds.  It should re-balance automatically as it goes, so you will not need to change your bond allocation as you get closer to retirement, the fund will do that automatically.

Personally I prefer a higher equity to bond ratio, so I stick with the basic total market funds, or approximate them in 401k's where they are not available.  Requires an occasional rebalance on my part, but nothing drastic.