New to Mutual Funds

[nickadees45]

Hey all,

First, I am thankful to any responses!

I am just starting my investments in a 403b through Fidelity.  (Vanguard is not offered to me through my school district.)

I am currently on pace to pay of my house in seven years and plan on fully funding two 403b accounts (my wife and I are both teachers) within the next three years as we top out at our "career" salary.  So, for this first year I plan on contributing $4,800 to my account and $4,800 to her account respectively.

My thoughts at this point is putting her funds into two different Fidelity Spartan Funds.

Then, mine, I was thinking about diversifying it and being a little more aggressive the next couple of years to try and gain some more one the lower amounts of money that I going to be able to invest right now.  I know the risks are higher, and also the annual operating fee, but I'm thinking that the potential gains will outweigh the costs for now.  Then, once I am fully invested at the max in about 3 years, I would then move to the lower cost, lower risk Spartan funds like I plan on doing in my wife's account.

These are what I am thinking and what percent of my investments in that portfolio:

Spartan® Total Market Index Fund - Fidelity Advantage Class (FSTVX) 30%
Fidelity® Select Biotechnology Portfolio (FBIOX) 20%
Fidelity® Select Health Care Portfolio (FSPHX) 15%
Fidelity® Select Pharmaceuticals Portfolio (FPHAX) 10%
Fidelity® Select Retailing Portfolio (FSRPX) 10%
Fidelity® Select IT Services Portfolio (FBSOX) 10%
Fidelity® OTC Portfolio (FOCPX) 5%

Any feedback would be great!

[Frankies Girl]

These are what I am thinking and what percent of my investments in that portfolio:

Spartan® Total Market Index Fund - Fidelity Advantage Class (FSTVX) 100%
Fidelity® Select Biotechnology Portfolio (FBIOX) 20%
Fidelity® Select Health Care Portfolio (FSPHX) 15%
Fidelity® Select Pharmaceuticals Portfolio (FPHAX) 10%
Fidelity® Select Retailing Portfolio (FSRPX) 10%
Fidelity® Select IT Services Portfolio (FBSOX) 10%
Fidelity® OTC Portfolio (FOCPX) 5%

Any feedback would be great!

Fixed it for you.

You can't get more aggressive than going 100% into the total stock market index for now and maybe holding it this way for the next 10+ years (depending if you are trying to go for early retirement). The other ones are basically just redundancies in what you already would be holding in FSTVX, but paying way more in expense ratios to hold - they range from .74% up to the .88% - and the Spartan Total Stock Market fund's expense ratio is 0.07%. High expense ratios are a HUGE drag on growth, and there is no reason to buy into those funds unless you like to gamble (in which case, have at it, but with the understanding that this is what you're doing without much investing knowledge, and even with investing knowledge, it still not a great idea). You don't have to hold so many funds to get diversification. The FSTVX is supposed to be include almost all funds traded on the stock market after all (technically it holds several thousand, but it's still extremely diversified and should be all you really need).

I'm in that one with 75% of my portfolio, hold 10% in a Spartan REIT, and 10% in Spartan total bond market index fund and the rest in cash but I'm also already retired. If I was still 10+ years out, I'd go 100% in FSTVX. ;)

If you want a smoother ride, then do 80% stocks/20% bonds, adding in the Fidelity Spartan U.S. Bond Index Fund (FSITX) as the 20% (if available in your 403b).

You sound like you're not really sure about your exact plans, and how exactly all this investing stuff really works, so I'll direct you to the following:

http://www.bogleheads.org/wiki/Investment_policy_statement
This is for figuring out your why - goals, reasons, and what your short and long term plans are under all circumstances

http://www.bogleheads.org/wiki/Asset_allocation
How you invest

http://www.bogleheads.org/wiki/Fidelity
Comparable Fidelity funds to Vanguard (there are many of us on here that are perfectly happy with Fido; just stick with their Spartan series and avoid managed funds or paying for professional investment advisers)

http://jlcollinsnh.com/stock-series/
Best for last. This is the gold standard for understanding how the whole thing works and the simple and easy way to invest (index funds rock!)

[forummm]

Agree with Frankies Girl. You want the lowest cost fund. No question. If you use Fidelity, only use Spartan funds.

And "fully funding" a 403b means $18k per year per person. You may also have 457 available to you as well. That would be an additional $18k per year per person. And then you can both do IRAs on top of that.

[BarkyardBQ]

I have a Fidelity 403 and 457, here's the best allocation I've picked.

Spartan Total Market Index Fund - Advantage Class   65%
Spartan Extended Market Index Fund - Advantage Class   15%
Spartan International Index Fund - Advantage Class   20%

My wife's accounts holds similar Vanguard funds, and we have 5% international in our Vanguard Taxable.

Overall asset allocation:
us total         60%
extended         5%
small-value   5%
real estate     5%
intl total         25%

Held entirely between Vanguard ETFs, Index funds, and Spartan Index funds. OP don't try and over think it, pick the asset allocation you will hold for the rest of your life and always buy it until you FIRE. Rethink adding bonds as you get older.


As far as paying off your mortgage, you're better off investing, but it's a personal decision, it's mathematically advantageous to invest. Lot's of threads here about it, start here http://forum.mrmoneymustache.com/investor-alley/paying-off-mortgage-early-how-bad-is-it-for-your-fi-date/

[PencilThinMust]

Good stuff Frankies Girl, well explained.

[nickadees45]

Thanks Frankie's Girl and zdrave!  I have had good success in the stock market, but at this point my plan is to retire within 15 years and using the 403b is a major part of my plan.

Playing with fire of individual stocks is not where I want to be over the next 15 years.  It was way to stressful and I was constantly monitoring it.

As mentioned in one of the articles from Frankie's girl, going this route means making some choices and letting them ride out.

 I have readjusted by plan to stick with the Spartan Total Market Index.  Based on my plan, I only need to earn about 2% over the course of about the next 10 years and I will be on pace to reach the financial target I have established in my plan.

Question to zdrave, or anyone really.

Based on the numbers I have run and how I can financially afford to fund my 403b's and Roth IRA's over the next fifteen years at 5% interested per year, I have found that I would "only" have about an extra $100 per month in retirement if I paid my mortgage off as intended instead of paying it off sooner.

If I went ahead and paid it off as I am now, it would be done in 7 years.  That being said, I have read how paying it off slower and investing generally will offer you a higher yield, but then again no one knows what the market will do over the next 15 years. 

I definintely welcome your thoughts and opinions. I am most torn on that right now. I am leaning towards dragging it out longer.

[Eric]

Based on the numbers I have run and how I can financially afford to fund my 403b's and Roth IRA's over the next fifteen years at 5% interested per year, I have found that I would "only" have about an extra $100 per month in retirement if I paid my mortgage off as intended instead of paying it off sooner.

If I went ahead and paid it off as I am now, it would be done in 7 years.  That being said, I have read how paying it off slower and investing generally will offer you a higher yield, but then again no one knows what the market will do over the next 15 years. 

I definintely welcome your thoughts and opinions. I am most torn on that right now. I am leaning towards dragging it out longer.

For your reading pleasure:

http://forum.mrmoneymustache.com/investor-alley/paying-off-mortgage-early-how-bad-is-it-for-your-fi-date/