Every year I contribute $5000 to a traditional IRA with fidelity. I always put the money in the same index fund, Fidelity four-in-one Index, FFNOX. It has an expense ratio of .26%. Should I keep putting money in the same fund every year? Or does it make sense to find something with lower expense ratio? I would think from an accounting/ recordkeeping point of view, it would be best to put everything in the same fund or close the account?
You've got one right question below and one wrong one:
While many of us feel very strongly that it's in the investor's best interest to keep expenses to a minimum, the fact is that
0.26% is *very* low. You could beat it, sure, with a couple of straight-up index funds (ie. Admiral shares of certain Vanguard index funds are as low as 0.07%). But you're not buying a simple straight-up index fund. FFNOX (actually, per Morningstar, at 0.21%) has a very low expense ratio for a blended fund. And it's got subtantial assets not just in the large-cap US equity market (which is easy to invest in and keep expenses low) but also in small caps, international equities and a bond index. So, no, if you're moving just to save on expenses, I'd be surprised to find many funds which provide you with that kind of diversification which have a lower expense ratio. You'd have to build the asset class mix yourself out of several funds, manage the rebalancing on your own, not to mention have enough in each of the asset classes to get into the lower-cost share classes in question.Expense-wise, FFNOX is a pretty good deal. That isn't to say that it's a great fund necessarily, or that it's the fund most suitable for you or your situation. Those are separate issues. But it certainly is inexpensive.
If this is your IRA, then you don't have to worry about tax lots, cost-basis (well, unless you do non-deductible contributions, but in that case, it's still not tied to the individual investments but rather to the IRA as a whole via your annual form 8606).
The question you're missing here, and the most important one, is whether the investment itself is suitable for you and your situation and your time horizon, risk tolerance and does it mix in appropriately with the rest of your asset allocation.
FFNOX is actually a pretty great one-stop-shopping fund. It's aggresively invested, with 60% in US equities (48% US Large-Caps via an S&P 500 Index) and 12% small-caps, plus about 25% international large caps and about 15% in an investment grade bond fund. And it's all done through the use of low-cost, transaction and expense-efficient index funds. If you're looking for an 85% stock / 15% bond portfolio, you could do a hell of a lot worse than that.
The question is whether that's the blend you're looking for and within the blend if you'd rather have more exposure to other asset classes (ie. value, small-caps, emerging markets, a different blend of bonds).
And that's not a question we can come close to answering, certainly not based on what little you've posted.
Hope that helps.
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