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  • Need help with Fidelity investment

    I am a new attending and a newbie in investment. I have S-Corp and set up solo 401k and IRA with Fidelity. The funds are currently in cash reserve. I want to invest them but don't know how. I heard about the Three-fund portfolio that would include Fidelity Total Market Index Fund (expense ratio 0.045%), Fidelity Total International Index Fund (expense ratio 0.11%) and Fidelity U. S. Bond Index Fund (expense ratio 0.05%). I also came across the Fidelity Four-in-One Index Fund (expense ratio 0.13%). I am not sure which is better for me.

    Does anyone have experience with any of these? Is it better to diversify with 3 or 4 different funds or just simply put all money into Fidelity 500 Index Fund (expense ratio 0.045%)? I am looking for long-term investment. What should I really consider?

    Any guidance would be appreciated.

     

     

  • #2
    For now, just start with the Fidelity 500 Index Fund until you can do some more research on your own. There is no way that a 1/3 allocation to bonds would be appropriate for a new attending.

    Bonds: What are they good for? Part 1

    Bonds: What are they good for? Part 2
    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3
      I have experience with all and used the Four-in-one index fund as a core holding early in my investment experience. It is a wonderful way to get diversification and rebalancing in an 85:15 (stock:bond) index product.

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      • #4




        I have experience with all and used the Four-in-one index fund as a core holding early in my investment experience. It is a wonderful way to get diversification and rebalancing in an 85:15 (stock:bond) index product.
        Click to expand...


        Do you consider the expense ratio of 0.13% for the Four-in-one index fund a bit high? It is more than twice of the Fidelity 500 Index Fund (expense ratio 0.045%).

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        • #5
          Since just starting -- would be favor of 500 index unless you're a more conservative type, then the 4in1 index.  I'm quite conservative in the investment side and 20 years out  -- still only 15% of total investment portfolio in bonds.

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          • #6







            I have experience with all and used the Four-in-one index fund as a core holding early in my investment experience. It is a wonderful way to get diversification and rebalancing in an 85:15 (stock:bond) index product.
            Click to expand…


            Do you consider the expense ratio of 0.13% for the Four-in-one index fund a bit high? It is more than twice of the Fidelity 500 Index Fund (expense ratio 0.045%).
            Click to expand...


            The expense ratio is 0.11%. It's cheap enough.

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            • #7
              FSTVX, FTIPX, FSITX imo

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              • #8




                FSTVX, FTIPX, FSITX imo
                Click to expand...


                How would you allocate these in portfolio?

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                • #9







                  FSTVX, FTIPX, FSITX imo
                  Click to expand…


                  How would you allocate these in portfolio?
                  Click to expand...


                  That depends on a few things. I'm assuming you are relatively young since you are a new attending, so I'd keep bonds lower than the majority of your colleagues. Being a newbie to investing, you have have never really experienced a true bear market to test you willingness to tolerate risk. The more risk you are willing to take, the higher the ratio of stocks to bonds. But you should be prepared to see your stock index funds lose 40+% during a downturn. You'll hear some rules like "percentage of bonds should be your age." But if you feel like you can stay the course over a 30 year career and not panic (ie sell) when the market drops, that's obviously too many bonds for someone just starting their career.

                   

                  As far as FSTVX to FTIPX, I've seen recommendations anywhere from recommending now international stock to 1:1 (Total stock to International stock). The argument for a greater percentage of domestic stock is that 1) the historic return is slightly better and 2) there is no lost income to currency transactions.

                   

                  All that being said, my asset allocation as someone in his early 30s, 1 year out of fellowship with a high risk tolerance is 60% US Equity, 30% International Equity, 10% US Bond. Hope that helps.

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                  • #10
                    This is far from easy to answer. The first thing to do is figure your asset allocation of stock/bonds. There are many rules of thumb, ranging from age in bonds to age -20. Another general rule of thumb is to never have less than 20% bonds. So 80/20 is a starting point, going up in bonds depending on your willingness, need and ability to take risk. Risk in the market is based on the percent of stocks in your portfolio. Financial Samarai has a good post on asset allocation.

                    http://www.financialsamurai.com/the-proper-asset-allocation-of-stocks-and-bonds-by-age/

                    the next next step is to figure what percent international. This can be anywhere from 20-40% equities. Once you have it figured out your aa, write it down in an investment policy statement and stick to it. Check out wci post on 150 portfolios better than yours, mainly to see his comments about aa.

                    this is the key part of his post to me:

                     

                    "The truth is that no one knows which portfolio is going to outperform in the future. You can change all the factors you want- more or less diversification, additional risks/factors, lower costs vs additional risk or diversification, more of this and less of that. Does it matter? Absolutely. Take a look at Madsinger’s Monthly Report some time. But it doesn’t matter that much. No diversified portfolio in that report has done better than 1-2% per year more than a similarly risky portfolio over the last 15 years. Now 1-2% does matter, especially over long periods of time, but keep in mind the edge that a very complex portfolio might provide over a very simple one can easily be eaten up by advisory fees, behavioral errors, and poor tax management.

                    I suggest you pick a portfolio you like and think you can stick with for a few decades, and then do so. Eventually, any given portfolio will have its day in the sun. Just don’t continually change your portfolio in response to changes in the investment winds. This is the equivalent of driving while looking through the rear view mirror, or, as Dr. Bernstein likes to phrase it, skating to where the puck was."

                     

                     

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                    • #11
                      I use the Fidelity 3 fund portfolio you described above.  I like the simplicity of a 3 fund portfolio.  The four in one index fund is fine too.  The expense ratio is only slightly higher but not a big deal.

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