Autoinvestment Mutual Fund - Help!

[username]

Hi,

I'm looking for a place to park my auto-investments for my dollar-cost-averaging. I have a weekly auto-investment that closely matches my desired asset allocation, then when I rebalance (1-2 times per year) I just bring the mutual fund to its minimum investment and put the rest into the index funds with lower ERs and realign my desired asset allocation.

I use fidelity and my bogglehead approach is 36% IXUS, 36% ITOT, and 28% AGG. I use FFNOX as my mutual-fund parking place, which I thought had an ER = 0.11, but I guess I'm buying the underlying funds which brings the ER up to ~0.21. I'm wondering if anyone knows about a mutual fund that I can use that has the same basic approach but with a lower ER.

I should say, the only reason that I park them in a mutual fund at all is because I can only auto-invest in mutual funds with fidelity, not ETFs. If someone knows another work-around, I'm all ears. But I basically prefer that set-it and forget-it approach, which is why auto-investing and dollar cost averaging is attractive to me.

Thanks for your advice!

[VagabondMD]

Why not simply autoinvest in the Fidelity index mutual funds, rather than the ETFs?

[Peds]

you are incorrect. the ER of FFNOX is just 0.11%.

[username]

I can't remember where I read that now. Thanks for the info.

[username]

Sorry, this post is in reply to  Vagabond MD . I'm getting used to the formatting.  

 

I think this is a good suggestion. The reason I have avoided it so far is that in my Roths I have about $2k each in Bonds, US Stocks, and International Stocks, while most fidelity mutual funds require $2.5k each as a minimum investment if I take the higher ER, and $10k minimum if I have an equivalent ER as the ETFs (unless I'm not understanding something?). I think the suggestion is great once I have at least $10k in each of the 3 funds to make the whole portfolio.

Am I missing something though?

[nachos31]

Welcome! Kudos on trying to automate your saving for retirement! It is frustrating that you can't autoinvest in the ETFs. It's also frustrating that you can't buy a fraction of a share with an ETF.

I would suggest investing in the mutual fund versions even if they have higher expense ratios as it seems that you are dealing with relatively small sums of money. At small sums, an expense ratio has smaller effect and does not matter as much.

You could do this one of two ways:

1) invest in only one mutual fund (e.g. Total US stock market) until you meet the minimum for cheapest expense ratio. Then add on the second fund and only invest in it until you meet the minimum, and so on and so forth.

2) invest in your ratio in all three mutual funds and soon enough you'll meet the minimums for the lowest expense ratios and transition to those versions of the mutual funds.

Which kind of account is this? Is it a Roth IRA or taxable/brokerage or 401k, etc? I'm assuming Roth IRA or taxable. If this is a taxable account then there could be tax ramifications to restructuring as I have suggested above.

[VagabondMD]

username wrote:

Sorry, this post is in reply to  Vagabond MD . I’m getting used to the formatting.  ?

 

I think this is a good suggestion. The reason I have avoided it so far is that in my Roths I have about $2k each in Bonds, US Stocks, and International Stocks, while most fidelity mutual funds require $2.5k each as a minimum investment if I take the higher ER, and $10k minimum if I have an equivalent ER as the ETFs (unless I’m not understanding something?). I think the suggestion is great once I have at least $10k in each of the 3 funds to make the whole portfolio.

Am I missing something though?

Click to expand...

In that case, I might recommend using the FFNOX fund until you get to $7500. Then, split the allocation between the three index funds (FSTMX, FSGUX, and FBIDX), the funds with $2500 minimum. Then, add to the funds that bring you up to your ideal allocation. Or, split your current allocation to the two equity index funds ($2500 each) and put your fixed income allocation in cash. There are an infinite number of ways to do this.

I would not hesitate to have $9000 in the "investor" fund because the ER is lower in the ETF, for example. The ER in the Total Stock Investor Class fund is 0.09%, plenty cheap, and in the ITOT ETF is 0.03%. On a $9000 balance, the difference is $5.40. The five buck difference is not going to prevent you from becoming wealthy. Once the balance hits $10k, it will automatically become the "premium" fund (FSTVX, ER 0.035%).