As some indications lead to a flat growth economy, thinking about IRA funds for the year. We currently have all our IRA funds at Fidelity
I've been selling from the Fidelity Growth and Fidelity Fund accounts which are more large growth and large blend, and putting the money into the Equity-Income fund.
Switch to a US market index fund, and an international stock index fund-- in roughly a 70/30 split*. The savings in MER are likely, compounded, to greatly exceed any increment in performance you might get by trying to pick the 'best' funds.
there is a case for a small cap value fund for a long term investor. But small cap has done very well, of late, and so has 'value' over growth. So I don't expect the returns to be as superior as they have been, historically.
I like Equity Income for long term. An equity income fund is a large cap fund with a ~3% yield, I think this is a good place for around
20-30% of assets.
FFIDX appears to be overweighted to my taste. FFIDX and FDGRX appear to be Large Cap growth funds and represent almost 2/3 of your portfolio and 2/5 of your wife's.
I like to Convertable fund your wife owns. I do not see any domestic small caps or international small caps. Depending on your age, I also see very little bonds (this is not a bad thing to me, just an observation).
My picks are more long term than just one year... I'd decide on a long term allocation, stick to it, and not worry so much about year-year changes.
Something like
25% large cap value
25% large cap growth
10% mid cap
10% domestic smallcap
20% international large cap
10% international small cap/ emerging markets
This is similar to the 70-30 split suggested by another poster.
As always, check the MERs! And the Total Expense Ratios (if available)
The benefit of an index fund is the low costs, plus consistent middle-of-the-range performance. In the long run, very few actively managed funds outperform the index. However inevitably some fund management companies have introduced high cost index funds (for no better reason than to confuse the customer and extract more revenue).
An alternative is a brokerage type account, where you can purchase (low cost) ETFs. Again not all ETFs are created equal-- the Barclays ishares are the ones I know best, and are fairly low cost.
But for most investors, a low cost index fund should do.
If you wish to add 'spice' to your allocation, then a 'value' fund can add long term performance (and greater stability in a market downturn). Value funds conspicuously missed the 'bubble' at the end of 1999 (called the 'internet bubble' but it is a misnomer, in stock market terms the bubble stocks were more the telecoms and media companies).
*however*
- lots of funds are called 'value'. Few actually consistently pursue a value discipline (Windsor II, Dodge & Cox, the Vanguard Value index funds do) of investing in low Price to Earnings and low Price to Book stocks. I don't know re the Fidelity range that well.
- 'value' has beaten growth very handily over the last few years. History says at some point this reverses.
A lot of people recommend 'small cap' funds for the same reason (historic record of outperformance). However I believe that small cap has done so well relative to large cap, the last few years, that this effect is unlikely to persist (when it was first widely discovered in the 1980s, a lot of small cap funds were launched, and the effect promptly disappeared for most of the 90s).
If one were determined to pursue this, a small cap value fund (with low costs!) for, say, 10% of the total equity investment would be a sensible level of risk.
Another thing you need to think about (first, really) is your asset allocation cash/bonds/stocks. This is what the 'lifestyle' funds do, and they don't make a bad 1-decision investment for the small investor. Again I don't know the Fidelity range.
My own view is that those under 40 probably don't want to own many bonds, and those within 10 years of retirement a lot of bonds. I've seen formulas like 100 minus your age or 110 minus your age is the percent in bonds-- both give weightings which feel right (but I am sure there are more sophisticated ways of working this out).
Another factor is inside/outside tax deferred accounts. In general, you want your interest income inside the tax deferred account, and your capital gains and dividends outside (low tax rates). However for most people, their 401k is all they have in terms of savings that they will use for retirement, and so my thought is they should go for maximum capital growth (ie equities).
An advantage of index funds outside tax deferred accounts is that they should minimise capital gains (they only buy and sell holdings when they have to) *however* it is important to check the situation within the individual fund (some have massive capital gains payouts to make).
In terms of which bonds to own, I am a big fan of either short to medium term corporate bond funds (less than 5 years to maturity, no 'junk') or US real return bonds (TIPS). I see these both as better substitutes than cash, normally.
On Jan 24, 2:49 pm, "P.Schuman" wrote: My suggestion (FWIW): wife - Equity-Income - FEQIX - 30% Convertible Securities - FCVSX - 21% Small Cap Value - FCPVX - 17% SE-Asia - FSEAX - 29%
me - Equity-Income - FEQIX - 30% Value - FDVLX - 23% Small Cap Value - FCPVX - 18% Spartan International Index - FSIIX - 21% Emerging Markets - FEMKX - 6%
messagenews:im4uh.4283$ snipped-for-privacy@newssvr11.news.prodigy.net...> I may just start moving toward the Fidelity Spartan group of index funds...
$100k
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yeah - I thought I WAS looking at the Invester class, which really threw me. I later went back and scrolled thru each fund offering to make sure - and confirmed the dif.
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