4%? How about 0%? What's going on?

[Green Jeans]

I guess I just don't pay much attention, so I deserve negative returns. But it still surprised me when my husband pointed out to me today that since 1999 we've put in $14,000 total ($2,000 per year) into Fidelity "Blue Chip Growth" and (I think we switched to this one after a few miserable years with Blue Chip) "Fidelity Cash Reserves" IRAs. The funny thing is our current balance stands at $13,753. Wow. What at investment.

Can someone suggest a better place for this IRA money and a simple way to get it there?

Or is this a case of hold tight, the tide always turns when you pull out, etc. How come everybody else seems to count on at least 4% return and some think more is possible? Is a seven year period too short to expect that? We did get a tax break because it was IRA money, but still...

Well, keeps up like this and there won't be much worry about the taxes on the gains if/when we take it out at 59 1/2.

 

[2B]

You've discovered the joys of non-diversification. If you look at the returns of different asset classes, the S&P 500 (which is probably where the stocks in your fund come from) has been flat since 1999. If you had been diversified into small cap, foreign, REITs and bonds/CDs, your return would have been better.

I personally have a lot of S&P 500 ETFs so I feel your pain. However, my diversification has given me a better return than 4% since 1999 although not much.

 

[mathjak107]

yep i agree ,thats why you need more asset classes...blue chip growth has been horrible over the last almost 5 years as its all blg cap...5 YR RETURN IS AN AVERAGE OF -1.6 A YEAR
fidelity insight sold us out of it years ago

 

[kat]

I got out of Blue Chip Growth a few years ago...... FundAlarm, a website that brings up problems with funds, had given it a poor rating.

Do some reading and looking around and you'll find a fund that seems a good fit. It's really too hard to recommend one to someone else.

kate

 

[lazyday]

Might be a good idea to do some reading and research. My favorite book is W. Bernstein's The Four Pillars of Investing.
Also liked Roger Gibson's Asset Allocation: Balancing Financial Risk, the hardcover (longer) version.

A replacement fund you might consider is BRLIX.

In my opinion, small cap stocks have gone up so much, they are probably more expensive then large caps, and largecap might outperform over the next 5 or 10 years.

So, it may or may not be smart to switch to a diversified portfolio that heavily overweights small cap comapred to the market weighting.

But, in some people's opinion, you would reduce your risk, if you switched to a broad market index, like Vanguard's VTI (an ETF).

Before you do anything though, I'd first form a plan, based on some background knowledge of investing.
If you just take someone's suggestion, then what if it does badly for a few years? Do you sell because it was bad advice, or buy more because it got cheaper?

 

[retire@40]

...How come everybody else seems to count on at least 4% return and some think more is possible?...

Actually, most people here are counting on at least a 7% average return over the long term. 3% to cover inflation and 4% withdrawal.

 

[rs0460a]

Christine Benz had an article on this fund (FBGRX), written this past January.  Since it's a "M* Premium" article, I won't cut/paste it here, but I can say that she views the fund as "overdue" for a turnaround and outlines the reasons for her view.

I'll certainly go with the comments of the others to "spread your bet" among different funds/asset classes, but if you're in a long time investment scheme, you may want to re-direct "future $$$" into other funds to see if this "turkey" does indeed turn around and re-direct the results when it "comes back to earth".

- Ron

 

[Cut-Throat]

Actually, most people here are counting on at least a 7% average return over the long term. 3% to cover inflation and 4% withdrawal.

I don't think so! - Most people that have a 4% withdrawal are planning on slowly eating up principal. 7% return with 4% withdrawal and 3% inflation would preserve Principal forever.

A 2% 'real' return would have me 'swimming' in money by the time I'm 90.

I would like to die Broke. Or at least not have close to the assets I have today.

 

[haha]

I don't think so! - Most people that have a 4% withdrawal are planning on slowly eating up principal. 7% return with 4% withdrawal and 3% inflation would preserve Principal forever.

Since FireCalc uses history, and since history has been at or above that 7% level when sufficiently long periods are considered, and since people here depend on FireCalc, doesn't that make what  Retire @40 said pretty much accurate?

A 2% 'real' return would have me 'swimming' in money by the time I'm 90.

If so, then wouldn’t a high TIPS portfolio likely be optimum for you? You would gain security, and not give up any return that you need..

I would like to die Broke. Or at least not have close to the assets I have today.

Is there way I could be of service to you in your desire to rid yourself of money? I like it, and would prefer having piles of it, even when I crossover. 

Ha

 

[Cut-Throat]

Well, I think there are certain periods of FireCalc history that have real returns below 4%. When I run FireCalc, a 4% Withdrawal rate may even give me a period or two of failure. That is eating up Principal. I will continue to re-evaluate my situation, if the returns are above that and may go higher than a 4% rate if I can. Remember 100% success rate in FireCalc is the Worst Case scenario. And the Worst Case has you running completely out of money at end of Plan (death)

I don't feel comfortable investing in any 'single' asset class. The stock market does not make me as nervous as you seem to be. Since I plan to stay 50-60% invested in stocks and you are mostly in Cash.

Have fun being the richest man in the Graveyard! Actually, you should be giving your money to me, as I seem to know how to spend it and enjoy it. Money that is not spent, is the same as lighting a fire to it.

 

[d]

You've discovered the joys of non-diversification

and if i read it correctly, timing:  stayed long enough with Blue Chip Growth to "enjoy" the drop, then moved to Cash Reserves to avoid the modest recovery.  a nice Fidelity choice, if that's where one wants to stay, and if one wants a one-fund portfolio, is Fidelity Four in One Index.

 

[mathjak107]

fidelity balanced fund is a pretty decent one stop shopping

 

[cute fuzzy bunny]

Well, I think there are certain periods of FireCalc history that have real returns below 4%. When I run FireCalc, a 4% Withdrawal rate may even give me a period or two of failure. That is eating up Principal. I will continue to re-evaluate my situation, if the returns are above that and may go higher than a 4% rate if I can. Remember 100% success rate in FireCalc is the Worst Case scenario. And the Worst Case has you running completely out of money at end of Plan (death)

I don't feel comfortable investing in any 'single' asset class. The stock market does not make me as nervous as you seem to be. Since I plan to stay 50-60% invested in stocks and you are mostly in Cash.

Have fun being the richest man in the Graveyard! Actually, you should be giving your money to me, as I seem to know how to spend it and enjoy it. Money that is not spent, is the same as lighting a fire to it.

C-T:

Not sure this is all true. As far as I know, the 4% SWR is 100% safe historically, there are many scenarios where the failure occurs WELL before death, etc.

I'm also thinking that virtually NO ONE is counting on eating principal to zero if they're subscribing to the 4% SWR approach, unless they're including the 9mm option at the end.

Are you factoring in the wifes income and your sizeable (vs the average ER wannabe) portfolio into your comments?

As far as the OP goes, you have a twofold issue. The first as thoroughly discussed is diversity or lack thereof.

The real problem is an offshoot of that...your large cap growth fund has done lousy the last 5 years...in fact, its been one of the worst 5 year periods for large cap growth. Large cap growth was just starting to smell good before the current 2-3 week "aiyee, inflation is going to kill us" scare.

So heres the tough decision...diversify now to solve the original problem, or stay put in the hope that the particular asset class you've chosen is about to "have its day".

Bear in mind I know nothing about the fund you're in, i'm not familiar with most of the fidelity offerings. If its a bad fund, its a bad fund. But it'd surely stink to jump ship only to see the fund pull in a 20% return over the next year or two.

 

[Cut-Throat]

C-T:

Not sure this is all true. As far as I know, the 4% SWR is 100% safe historically, there are many scenarios where the failure occurs WELL before death, etc.

Just run the simple FireCalc with a 45 year plan, which is mine - Keep it simple 1 million start - 60% in stocks. Take the rest of the inputs as defaults. I think it's only a 3.45% withdrawal rate that is 100% safe. That will get you close to broke in some periods. 4% will fail.

Are you factoring in the wifes income and your sizeable (vs the average ER wannabe) portfolio into your comments?

If my wife's not retired, I'm not retired. I'm just unemployed. My SWR will not start until she retires. My only comments were that the average user around here should not count on a 4% real return.

 

[cute fuzzy bunny]

Honestly not even interested in running the calculator, since I dont do "swrs", but if 4% fails, whats all this talk I hear about DCM's, the 4% SWR and so forth, if 4% isnt even close to the actual historic "SWR"?

 

[Cut-Throat]

if 4% isnt even close to the actual historic "SWR"?

4% is close, but it may not be possible going forward. I think it's a good number but if we hit a Depression style period, I would not continue to spend 4%!

 

[d]

But it'd surely stink to jump ship only to see the fund pull in a 20% return over the next year or two.

my initial thought as well, but i believe "zaniew" bailed at/near the bottom, missing the modest recovery.  if indeed held since 99, i too would be wary of bailing at this point ... large growth is "due" to recover ... what's the phrase ... growth is the new value?

there is an element of murphy's law with this of course.  if you bail, it recovers; if you hold, it doesn't.

 

[AltaRed]

FWIW, I've had a substantial sum in SPY units which follows the S&P500. Having gone through this same painful 5 year period, I am not going to bail now... just when large caps may have a rebound. That is market timing and that is a mug's game.

 

[haha]

I don't feel comfortable investing in any 'single' asset class. The stock market does not make me as nervous as you seem to be. Since I plan to stay 50-60% invested in stocks and you are mostly in Cash.

CT, I am about 55% cash and short bonds/TIPS. It is probably true that I would sell more equity were not for taxes. A good portion of this exposure is hedged into January with puts.

Also, I keep a core holding in energy and a smaller one in gold producers that I don't really try to trade. I believe that Peak Oil will become an important economic factor, probably sooner than most of us imagine. I also expect a $2000 gold price within 10 years, but I am not betting much on that outcome.

This allocation has me ahead about 15% for the last 12 months, even after paying my living expenses and considerable taxes.(An unavoidable byproduct of believing that most stocks should be bought and sold rather than just collected.) Most of that gain is from energy and gold, though they have both sold off rather viciously lately.

Lastly, regarding being the richest man in the graveyard- that as you probably know isn’t my goal. I just don’t like losing control, and in my opinion, a guy sitting there watching his portfolio take a big drawdown is out of control. He is in the land of believing in Santa Claus, only this Santa is called FireCalc.

While this may be cool for some, it isn't for me.

Ha

 

[d]

I am not going to bail now... just when large caps may have a rebound.

exactly! the problem, of course, is that while you and i wait it out, we could have made $ elsewhere.

That is market timing and that is a mug's game.

... aren't we in essense timing by waiting for what we think is an "inevitable" comeback?  ... or is it buy and hold?  a rose by any other name ...?  in anycase, as previously mentioned, there is undoubtedly murphy's law at work here.

 

[mathjak107]

market timing is basically trying to better the return the market gives you by outsmarting it......if you accept the returns the markets give you by buying and holding than no thats not market timing....you could argue that managed mutual funds are somewhat market timing and yes you would be correct....but not to the degree usually that being in or out of the markets or some hair brain trading system would be....

 

[doushioukanaa]

You can't think about your lost opportunities. If you had nothing and somebody handed you the post tax value of your nest egg in cash today, where would you put it?  That is the only question you need to answer. 

Remember, a decision to hold is equivalent to a decision to buy again and again.  Take what you have learned, and put your investments where they should go without looking into the rear view mirror.

It's not like you have a big tax deferred gain within that fund to benefit from either, and even if you did, it's never good to give too much consideration to tax implications.

 

[kathyet]

fidelity balanced fund is a pretty decent one stop shopping

What about the Vanguard new retirement Funds, 2010, 2015, 2025, they seem to be well balanced does any one have a opinion on them? They were just opened this past week. I think they might be the right mix for some.

Kathyet
PS Still working my way through the thread so sorry it it has already been posted.

 

[unclemick]

Ok - so Fidelity Blue Chip Growth is having a bad day at black rock - who cares.

Ie - ala POGO - who are YOU? Young, old, accumulation, distribution or transition to retire phase, DCA or lump investor, lean toward slice and dice or one nice fund to capture expected growth, and so on. What's the planned holding period - forever, rebalance as required, or a short 10-20yrs and then switch to a retirement mix, etc.

If I were 20 - I would DCA on hoping it would fall further with let's say a 30 yr expected holding period.

If I were 40 - maybe keep it and add some other asset classes to diversify around it.

If I were 60 - I'd switch to a lifecycle type fund at Fidelity(I prefer VG).

But that's just me.

heh heh heh

 

[New Thinking]

IMO - Seven years is not enough time to measure success in equities. Diversification may be helpful, but it is only $14,000..Just yesterday, there was a big article in the NY Times about how many feel tough times are ahead with inflation and perhaps even an economic slow down..The point was that blue chip stocks may come back in vogue to be the best bet over the next 5 - 10 years..Maybe ride it out with current funds and put new dollars into a different ETF or index fund with small caps, mid-caps, or international..It's the jumping around due to impatience and yield chasing that causes the average investor to lose money even when the stock market is flying..I would just sit tight. Don't go chasing returns.