I am looking for a place to park my wife's relatively small IRA for a while (up to 30 years). Although the amount is large enough for me to do some coarse asset allocation (e.g. 60% stock, 40% bonds), it is too small to divide among too many asset subclasses. So I am thinking of a balanced index fund.
What brokerage firms should I be looking at?
I know about Vanguard, Fidelity and Schwab. Any others?
(We have not decided on a long-term course for those funds. The IRA is small enough that we are likely to simply liquidate it entirely in a few years, when we are no longer subject to early-withdrawal penalties. The decision will depend on other factors that will be clearer to us when the time comes. For now, I am assuming a long-term horizon.)
I think for 100% index balanced fund, Vanguard may be the only option. Fidelity & Schwab's balanced funds use a mix of actively-managed and index funds.
You might consider a target retirement fund keyed to your wife's retirement age. These funds are on autopilot for someone who wants to "select and forget" the investment. Fidelity, Vanguard, and T Rowe Price have good ones. Compare asset allocations and expense ratio between vendors for the target year that applies to your wife.
A couple of specific non-targeted balanced funds:
Vanguard LifeStrategy Moderate Growth. Expense ratio: 0.26%, Ten year average annual return: 7.39%.
Fidelity Balanced. Expense ratio: 0.64%, Ten year average annual return: 9.99%.
VSMGX. approx 63% stocks, 30% bonds, rest is cash. built out of 3 Vanguard indexes, plus their Asset Allocation fund. The latter lets them adjust the balance a little bit. It's also about 10% international.
A bit more aggressively, there's also VASGX, which is 83% stocks, 10% bonds, 6% cash, about 15% int'l.
FBALX - Also about 63% stock, 31% bonds, some cash and a little less international - about 6%. It is actively managed, and a good bit more volatile than the comparable Vanguard fund listed above. And it's fairly large ($26BB) but not huge. I've been looking at this one lately and considering recommending it to someone as a "set it and forget it" fund. I'd actually like to see a little more international exposure for such a one-stop-shopping kind of fund, but it's a pretty nice mix anyway.
Fidelity's been advertising it a bit lately, too - if you go to the fidelity web page, there's a big ad for it right up front. I wonder what's led them to do that (as opposed to, say, any of their zillion other funds).
(I like some of the Vanguard offerings, but won't use them in Fido brokerage accounts - because the fees to do so are rather large)
You can use Lipper's fund screener to find a bunch of these funds.
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Select "Mixed Equity" Asset Type, and for Lipper Classification: Mixed-Asset Target Allocation (Conservative or Growth or Moderate)
Finally, under creiterion #3 (Additional Fund Attributes), check off Index Based Funds and No Load.
You'll get 4 Growth funds: Schwab Market Track Growth, Vanguard Balanced Index (2 share classes), and Vanguard Life Strategy Moderate Growth.
You'll get 4 Moderate funds: Schwab Market Track Balanced and Conservative funds, Vanguard Life Strategy Conservative Growth, and Vanguard Tax Managed Balanced.
You'll get 2 Conservative funds: Vanguard Life Strategy Income, and Wells Fargo DJ Target Today. These are likely too conservative (the WF fund is
12% equity, 33% bond, and 55% MM).
(The Fidelity Balanced fund doesn't show up because it isn't an index [based] fund, but falls into the Target Allocation Growth category. The Vanguard Tax-Managed balanced fund is inappropriate for the OP's IRA because the bond side is invested in tax-exempt munis.)
People have already described the Vanguard and Fidelity funds. The Schwab Market Track Funds are described here:
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The Balanced fund is the closest Schwab Mkt Track fund to a traditional balanced fund: 60/40 (equity/bond+cash). The market track funds use Schwab's S&P 500 index fund, Schwab Small Cap Index Fund, Schwab Int'l Index fund, and Schwab's total bond market fund as their underlying funds. Their downside is that they add a large extra layer of expenses, viz. 0.50%. Their upside is a very low minimum investment: $100.
If one insists on index balanced funds, the choices are really Vanguard and Schwab. Between the two, Vanguard is superior IMHO (better performance, cheaper funds, more dedicated to investor).
If one is not wed to index funds, then Vanguard STAR is designed as an all-in-one fund, including international exposure. If one is willing to accept a greater equity exposure, then Fidelity's 4-in-1 index fund is worth consideration ($2500 min for IRAs) - it is 85/15 equity/bond; within the equity, approximately 2/3 is large cap, 1/6 small cap, 1/6 international large cap.
Based on the responses so far, it seems that those are the "only" brokerages to consider? Is that right? (Surprise.)
I tried to look at Wachovia, but I could not find any specifics online. I'm not happy with Wachovia anyway because it seems to require an annual fee for online brokerage services other than merely looking at your account balance and positions.
(Even though I do not anticipate making trades in this particular account, I want to have that flexibility.)
Are you asking about brokerage or fund family? You can buy funds from any brokerage -- you just may need to pay commissions. I ran across 2 more 100% index balanced funds:
ELDFX Elfun Diversified -- 0.20% ER STFBX State Farm Balanced -- 0.13% ER
The brokerage has to offer the funds, though. For instance, E*Trade doesn't seem to offer the Schwab Market Track funds I mentioned in a previous post.
The OP described an IRA account so small one might use a single balanced fund for broad coverage. For such a small IRA account, something like ThinkOrSwim might be a good match - 3 free fund trades per month (any fund), no IRA fees (except closing). (Disclaimer: I have no experience with ThinkOrSwim.)
Impressive research; unfortunately, each of these is open only to employees, retirees, etc.
"The Elfun Family of funds is for the most part not open to investors outside of GE." Barron's, "The Best Mutual Fund Families", Feb 5, 2007
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"Shares of the Funds may be purchased by current and retired agents and employees of the Start Farm Insurance Companies and by their family members. ..."
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