Author Topic: Need help replicating a Target Retirement Fund  (Read 4725 times)

krock

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Need help replicating a Target Retirement Fund
« on: February 18, 2014, 03:38:16 PM »
Hey All,

In my employer-provided 401K Im currently fully vested in one fund (Fidelity Freedom K 2050 Fund (FFKHX)), but because of the .69% exp ratio (and that my portfolio is approx. 100k right now) Im thinking its better to break out into a four-fund portfolio (FXSIX, FSEVX, FSIVX, FSITX) that have much lower aggregate expenses

Give me a head-check on my plan of attack below (the below allocation *approximately* mirrors blended fund FFKHX (leaves out a few small-cap/reit slices not dead-set on making it identical to FFKHX Ill win some freedom and lose a little exposure to other classes)):

At the bottom are the other funds offered in my plan feel free to make suggestions that would help me replicate FFKHX (90/10 allocation).

401k Approx. Value: 100k

Current 401k Allocation:

(100%) - Fidelity Freedom K 2050 Fund (FFKHX)
- Exp Ratio (Gross) - 0.69%
- Exp Ratio (Net) - 0.69%
- Distribution and/or service fee(12b-1) Fees - 0.00%
- Management Fee - 0.00%

Proposed 401k Allocation:

(45%) - FXSIX - Spartan 500 Index Institutional
- Exp Ratio (Gross) - 0.05%
- Exp Ratio (Net) - 0.04%
- Exp Cap (Dated) - 0.04%
- Distribution and/or service fee(12b-1) Fees - 0.00%
- Management Fee - 0.025%

(20%) - FSEVX - Spartan Extended Market Index Adv.
- Exp Ratio (Gross) - 0.07%
- Exp Ratio (Net) - 0.07%
- Distribution and/or service fee(12b-1) Fees - 0.00%
- Management Fee - 0.06%
- Short-Term Redemption Fee - .75% (90 Day Period)

(25%) - FSIVX - Spartan International Index Adv.
- Exp Ratio (Gross) - 0.17%
- Exp Ratio (Net) - 0.04%
- Exp Cap (Dated) - 0.12%
- Distribution and/or service fee(12b-1) Fees - 0.00%
- Management Fee - 0.06%
- Short-Term Redemption Fee - 1.00% (90 Day Period)

(10%) - FSITX - Spartan US Bond Index Adv.
- Exp Ratio (Gross) - 0.17%
- Exp Ratio (Net) - 0.10%
- Exp Cap (Dated) - 0.10%
- Distribution and/or service fee(12b-1) Fees - 0.00%
- Management Fee - 0.05%


FID BLUE CHIP GR K (FBGKX)   Large Cap Growth   0.61%
FID FUND K (FFDKX)   Large Cap Growth   0.42%
FID OTC K (FOCKX)   Large Cap Growth   0.62%
SPTN 500 INDEX INST (FXSIX)   Large Cap Blend   0.05%
FID EQUITY INCOME K (FEIKX)   Large Cap Value   0.54%
BARON ASSET INST (BARIX)   Mid-Cap Growth   1.05%
FID VALUE K (FVLKX)   Mid-Cap Value   0.54%
AF EUROPAC GROWTH R5 (RERFX)   Foreign   0.55%
SPTN INTL INDEX ADV (FSIVX)   Foreign   0.17%
FID FREEDOM K 2000 (FFKBX)   Asset Allocation   0.45%
FID FREEDOM K 2005 (FFKVX)   Asset Allocation   0.50%
FID FREEDOM K 2010 (FFKCX)   Asset Allocation   0.54%
FID FREEDOM K 2015 (FKVFX)   Asset Allocation   0.57%
FID FREEDOM K 2020 (FFKDX)   Asset Allocation   0.59%
FID FREEDOM K 2025 (FKTWX)   Asset Allocation   0.62%
FID FREEDOM K 2030 (FFKEX)   Asset Allocation   0.67%
FID FREEDOM K 2035 (FKTHX)   Asset Allocation   0.68%
FID FREEDOM K 2040 (FFKFX)   Asset Allocation   0.68%
FID FREEDOM K 2045 (FFKGX)   Asset Allocation   0.69%
 FID FREEDOM K 2050 (FFKHX)   Asset Allocation   0.69%
FID FREEDOM K 2055 (FDENX)   Asset Allocation   0.69%
FID FREEDOM K INCOME (FFKAX)   Asset Allocation   0.45%
FID PURITAN K (FPUKX)   Asset Allocation   0.47%
SPTN US BOND IDX ADV (FSITX)   Intermediate-Term   0.17%
USAA INCOME FUND (USAIX)   Intermediate-Term   0.58%
MIP II CL 1   Stable Value   0.56%
« Last Edit: February 19, 2014, 04:02:31 PM by krock »

Exflyboy

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Re: Need help replicating a Target Retirement Fund
« Reply #1 on: February 18, 2014, 03:55:26 PM »
Hmm I'm surprised the fees are that high.. Think I will check on my 2025 fund

I would have thought a 2050 fund would be almost 100% stock so why not a simple stock ETF like VSTX... the admiral shares?

Frank
« Last Edit: February 18, 2014, 03:57:41 PM by frankh »

krock

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Re: Need help replicating a Target Retirement Fund
« Reply #2 on: February 18, 2014, 04:08:11 PM »
Hey Frank - my current employer 401k plan through Fidelity doesn't allow me to buy funds outside of what's offered by Fidelity  (investment options listed in my post), so any ETFs, Vanguard funds, etc. are out of the scenario.

My ROTH/taxable are with Vangaurd though, and I'm pretty much a VTSAX guy through and through...but those accounts are another topic of discussion - looking here for advice on how to replicate/break out of the FFKHX fund.

Thanks.

krock

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Re: Need help replicating a Target Retirement Fund
« Reply #3 on: February 19, 2014, 04:03:02 PM »
Anyone have thoughts on this?

GlassStash

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Re: Need help replicating a Target Retirement Fund
« Reply #4 on: February 19, 2014, 08:32:00 PM »
I'm not an expert on Fidelity funds (or any funds for that matter), but after a brief once over it looks fine. Even with the management fees, you seem to be saving ~.50% by switching from the Freedom fund. Keep in mind that this does add more complexity to your portfolio (albeit not much more). You will have to stay on top of rebalancing, yearly or quarterly, or w/e you decide.

Also, I'm interested in your overall asset allocation. Not because I want to recommend you go one way or the other, but because I'm curious.

ThermionicScott

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Re: Need help replicating a Target Retirement Fund
« Reply #5 on: February 19, 2014, 10:07:23 PM »
Anyone have thoughts on this?

Target Retirement funds are great because they have the glide slope programmed in, and all you have to do is keep chucking in savings until it's time to retire.  That said, I don't have the sense to use something so simple, and prefer to manage all the moving pieces myself.  ;^)

I would offer that the glide slope in Fidelity or Vanguard retirement funds isn't that special or magical.  It starts off pretty aggressive (say, 90/10), and becomes more conservative a few years out from the retirement date, usually winding up around 50/50.  A lot of folks prefer an "age in bonds" formula where your age is the percentage of your portfolio devoted to bonds, so that it becomes conservative more gradually.  Since I don't have a strong opinion on US vs international stocks (and more importantly, I know that I don't know more than the next guy about what they'll do), I split the stock portion evenly between the two.  So for someone who is, say, 28 years old, a good starter portfolio would be:

36%  SPTN 500 INDEX INST (FXSIX)   Large Cap Blend   0.05%
36%  SPTN INTL INDEX ADV (FSIVX)   Foreign   0.17%
28%  SPTN US BOND IDX ADV (FSITX)   Intermediate-Term   0.17%

It's hard to know which piece will outperform the others over time, but this split is simple, well-diversified, has low costs, and is likely to do well over the long run with occasional rebalancing.  Good luck!  :^)

FrugalSpendthrift

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Re: Need help replicating a Target Retirement Fund
« Reply #6 on: February 19, 2014, 10:27:42 PM »
I just did something similar, switching from the freedom 2050 to the following spartan funds.

Current Investment Elections
Asset Class   Subclass   Fund Name   Current %
Stock Investments    LARGE CAP    SPTN TOT MKT IDX ADV   63%
Stock Investments    INTERNATIONAL    SPTN INTL INDEX ADV   27%
Bond Investments    INCOME    SPTN US BOND IDX ADV   10%
Total: 100%

I was just trying to approximate vanguards VTIVX, which I use in some other accounts.

krock

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Re: Need help replicating a Target Retirement Fund
« Reply #7 on: February 20, 2014, 02:51:51 PM »
Thanks for your insight so far.


Since I don't have a strong opinion on US vs international stocks (and more importantly, I know that I don't know more than the next guy about what they'll do), I split the stock portion evenly between the two.  So for someone who is, say, 28 years old, a good starter portfolio would be:

36%  SPTN 500 INDEX INST (FXSIX)   Large Cap Blend   0.05%
36%  SPTN INTL INDEX ADV (FSIVX)   Foreign   0.17%
28%  SPTN US BOND IDX ADV (FSITX)   Intermediate-Term   0.17%

It's hard to know which piece will outperform the others over time, but this split is simple, well-diversified, has low costs, and is likely to do well over the long run with occasional rebalancing.  Good luck!  :^)


It looks like both of you are leaving out the Extended Markets
I just did something similar, switching from the freedom 2050 to the following spartan funds.

Current Investment Elections
Asset Class   Subclass   Fund Name   Current %
Stock Investments    LARGE CAP    SPTN TOT MKT IDX ADV   63%
Stock Investments    INTERNATIONAL    SPTN INTL INDEX ADV   27%
Bond Investments    INCOME    SPTN US BOND IDX ADV   10%
Total: 100%

I was just trying to approximate vanguards VTIVX, which I use in some other accounts.


I understand some investor's rationale (whether well or ill-advised) about giving a 50/50 split to US/Foreign Markets, however, I guess you could say I'm more prone to leaning towards the US economy remaining as the leader in equities growth (but as ThermionicScott suggested - who really knows) - investing is something of a bet one way or another...as is everything!

It looks like both ThermionicScott and FrugalSpendthrift left out the FSEVX - Spartan Extended Market Index Adv. allocation I proposed.  I did this because it allows some some small-cap exposure within my total stocks allocation.

Do you guys think it's better to just focus on Large Cap (FFKHX - Fidelity Freedom K 2050 Fund) and International (FSIVX - Spartan International Index Adv.) forgo mid-cap exposure (FSEVX - Spartan Extended Market Index Adv.)?

Anyone else who has feedback/suggestions please weigh-in.  Much appreciated!
« Last Edit: February 20, 2014, 03:21:48 PM by krock »