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Core Position in retirement accounts?

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  • Core Position in retirement accounts?

    One of my retirement accounts (rollover IRA) at Fidelity has an option for the "Core Position" funds.

    -> Screenshot attached.

    DMFA has mentioned using either in a retirement account, but is either preferred? Cash (FDIC insured), or a money market (not FDIC insured)?

    I suppose ideally ones accounts don't have large (cash) core positions, I can see a variety of reasons one would have some -> significant cash on hand. Any reasons not to use the money market?

     

  • #2
    Unless you're very close to retirement (and by that I mean 1-2 years away), I can't see the point of keeping any cash in your retirement accounts.  It doesn't earn squat, and you can't get to it in an emergency without paying a penalty to the IRS (unless we're talking about a Roth IRA.).  And even if the IRA is a Roth, since cash won't show much growth, I'd keep it in a taxable account and save the tax-protected Roth space for stock mutual funds or ETFs, bonds, and REITs.  Why waste valuable tax-advantaged space on an asset that won't show much taxable growth?

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    • #3
      Thats just your sweep account, all brokerages have similar. Say you have a 100k position and you sell half of it because you want to rebalance. If you dont do the purchase immediately it will "sweep" into the fund as a placeholder until you do so. They have to have a position for it I guess, but usually its just a good way to make money off the cash investors arent using. Schwab or someone was under fire a couple years ago because they were auto filling people into large cash allocations for that reason.

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      • #4
        Oh, I agree artemis & Zaphod. Just sometimes you end up with some cash there - after a rollover, in between trades, from dividends, etc. For the days it does sit there - is there any reason not to use the money market?

        Just noticed it, and that it differed from my TD Ameritrade account which uses a money market by default, this Fidelity set up appears to default to (a less interest bearing) FDIC insured sweep account.

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        • #5
          I honestly don't think it matters which account you use as your sweep.  The FDIC insured account is safer, but you're not talking about large sums of money.

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