Fidelity recommendation

[johnbb]

I've had two meetings with Fidelity. I'm in the process of rolling over my 260K 401K to them (waiting for the check). The first meeting they recommended the Fidelity Asset Manager 20% fund. Prior to my second meeting I received their managed fund proposal:

Domestic Large Growth Stock Funds: 11%
- 3.0% John Hancock US Global Leaders Growth Fund
- 3.0% Marsico Focus Fund
- 2.5% T. Rowe Price Growth Stock Fund
- 2.5% Fidelity Advisor Diversified Stock Fund

Domestic Large Blend Stock Fund: 2.0%
- 2.0% Legg Mason Value Trust

Domestic Large Value Stock Fund: 3.0%
- 3.0% Goldman Sachs Large Cap Value Fund

Domestic Small Blend Styock Fund: 2.0%
- 2.0% PAS Small Cap Fund of Funds

Other: 9.0%
- 3.0% Merger Fund
- 3.0% Fidelity Real Estate Income Fund
- 3.0% PIMCO Commodity Real Return Strategy

Foreign Stock Funds: 4.0%
- 2.0% PAS International Fund of Funds
- 2.0% PIMCO Foreign Bond Fund (Unhedged)

Bond Funds: 59%
- 15% Fidelity Investment Grade Bond
- 13% PIMCO Total Return Fund
- 8.0% Fidelity Total Bond Fund
- 7.0% Metropolitan West Low Duration Bond Fund
- 5.0% Fidelity Mortgage Securities Fund
- 4.0% Fidelity Capital & Income Fund
- 4.0% Fidelity High Income Fund
- 3.0% T. Rowe Price High Yeild Fund

Money Market/Short-Term Fund: 10%
- 10% PIMCO Short-Term Fund


The cost to manage this portfolio is .9% I have very little experience in this, and want a conservative investment strategy, since I have so little in my 401K. I am 62, and the only other asset I have is 400K equity in my home, which I will sell in four years (I can't sell sooner). I don't have a lot of confidence in my ability to make investment decisions, and I don't have a lot of time to spend on it, since I am caretaker for a family member. Does the above strategy seem reasonable, and am I making a huge mistake in having Fidelity manage my account (I do plan on maybe managing it myself in later years as I learn more and have more time to devote to it).

 

[wabmester]

Does the above strategy seem reasonable, and am I making a huge mistake in having Fidelity manage my account (I do plan on maybe managing it myself in later years as I learn more and have more time to devote to it).

Run away from that managed portfolio nonsense. They want to charge you a high fee on top of putting you in a bunch of expensive funds. A large chunk of your returns will go to Wall Street.

It looks like you (or they) decided on a fairly low equity allocation. That's fine, but there's no need for the expensive and exotic funds they've selected. If I were you, I'd go to Vanguard and choose one of their balanced funds. For example, Wellesley will give you a roughly 40/60 stock/bond allocation. Vanguard will probably also offer you a free financial plan if you tell them you're going to move a large sum over to them.

 

[mathjak107]

there are some excellent newsletters out there for no more than 100-125.00 bucks a year that have excellent records, model portfolios for all risk levels and guide you every week with any updates.

thats the road i have have taken with great success for almost 20 years.

if your using fidelity you cant go wrong with either fidelity insight or fidelity monitor.

 

[Dawg52]

Run away from that managed portfolio nonsense. They want to charge you a high fee on top of putting you in a bunch of expensive funds. A large chunk of your returns will go to Wall Street.

It looks like you (or they) decided on a fairly low equity allocation. That's fine, but there's no need for the expensive and exotic funds they've selected. If I were you, I'd go to Vanguard and choose one of their balanced funds. For example, Wellesley will give you a roughly 40/60 stock/bond allocation. Vanguard will probably also offer you a free financial plan if you tell them you're going to move a large sum over to them.

I agree. I have my money with Fidelity but I wouldn't pay a fee to have them manage my account. The fund recommended above is all you need. Or a Target fund would mirror what they recommended for a whole lot less money. Look at those with Vanguard or Fidelity has the Freedom funds if you prefer Fidelity.

 

[Sheryl]

I'll second the previous opinions. That's an incredibly complex portfolio for someone who says

I have so little in my 401K.

I also keep my $ in Fidelity accounts, but don't let them manage it.

You need to realize that you are paying a significant expense ratio within each of those funds on top of the almost 1% the advisors are skimming. Then if they start moving your money around every few months, who knows what sorts of other fees and taxes you'll pay

As the others said, find a nice balanced fund, or one of the target retirement funds and park your money there. When your situation changes and you feel more confident, you can always start making other investments.

 

[HFWR]

Twenty-one funds? Egads...

 

[astromeria]

FOUR large growth funds and EIGHT bond funds? : What's up with that?

Surprised they didn't recommend more Fidelity funds--several are better IMO than what they recommended here.

 

[mickeyd]

Wow, that's a lot of funds for only $260k. Way too many managed funds in there IMHO. Are you sure that this is not a joke?

"Run Away, Run Away" Monty Python and the Holy Grail

 

[FIRE'd@51]

That's 21 funds (if I counted correctly) - crazy! wab's suggestion of the Vanguard Wellesley Fund makes much more sense. Since you have more than 100K, be sure to use their Admiral share class if you decide to go that route. ER is only 0.14%, and the fund's yield is about 4.4%.

Additionally, it's my understanding that, if the check is made out to you, 20% will be withheld for taxes. You then will have to make that up from other funds in order to avoid a tax on 20% of the distribution. Better to do a direct rollover.

 

[tryan]

Why not just put 40% in the Total Stock Market index and 60% in the Total Bond Market index ...lot less work and fees.

My 2 cents.

 

[rmark]

"Domestic Small Blend Styock Fund: 2.0%"

I thought that said Shylock fund, as in Shakespears "Merchant of Venice".

Way too many funds. Thats a portfolio designed to generate income for the sales force, not for the customer.

 

[mathjak107]

i run 3 seperate portfolios for three different time frames using two newsletters and alot more dough and i have about 10 stock funds and about 6 bond funds in total so 21 crazy

 

[johnbb]

Thanks for all the advice and insight. I've decided to not go with the managed fund, but am not sure what to invest in. I'm spending this week-end doing research. There was a suggestion that I use a newsletter to guide me. Which of the following would you recommend?

Fidelity Monitor
Jim Lowell's Fidelity Investor
Fidelity Insight

Any others?

My initial approach was to go with a conservative strategy (50% Bonds, 20% Stock, 30% Short-Term), but now I'm thinking of a Balanced approach (45% Stock, 40% Bonds, 10% Short-Term, 5% Foreign). I'm not sure if I should buy one Mutual Fund (Fidelity Freedom Fund?), or split my assets into two or three funds. Suggestions will be appreciated.

I will be getting $1468 from SS, and need to take a distribution of $2k/month. In four years, I'll be able to sell my house with $400K equity as of now.

 

[mickeyd]

Which of the following would you recommend?

None of them.

They can only tell you what fund did best LAST month. None of them can give you much insight into what is best for you in the future. These newsletter are a fantastic way to make a lot of money...for the editor of the newsletter.

I suggest that you pick up a few investing books at the library (no cost). This will educate you in how to build an asset allocation that is unique to you and your needs. It is not very difficult and once you know how to do it the knowledge will be with you forever.

 

[mathjak107]

fidelity insights growth model is a little more conservative than fidelity monitors....

i use fidelity insights growth model, having been following it now for almost 20 years. results have been superb.

i follow fidelity monitors growth and income and income preservation models for shorter term money, only been following this one for around 2 years since i toned the aggressiveness down .

i highly recommend them both...

the information on morningstar thats avail as far as fund holdings and allocations is very out dated most of the time.

its to hard to develop a really well balanced well diversified portfolio without knowing up to the minute whats held by funds so theres no overlap and no heavy weighting in areas you may not want. Especially if you stay within one fund family where you can buy 3 different funds and get the same holdings.

these newsletters get very current information that i dont have access too., they know these funds inside and out and over all the mixes are far better than i have been able to do on my own for many reasons..

the guidance by them calling the fine tuning and the fact that while i may have bailed and ran in the 2,000's they kept us in and even took advantage of the drops was well worth it. the worst drop i had in the 2,000 bear market was 14.5% in the growth model. 100,000 in 1987 in the fidelity insight growth mix is now 1.1 million


WORKS FOR ME!

 

[bpp]

In your shoes I would go with a Vanguard Target Retirement fund, or else one of the Fidelity Freedom Funds, until I had studied enough to feel confident doing something else. Low cost, simple, and diversified, so it is hard to go wrong. One might even decide to leave it that way after having studied up on the alternatives.

 

[Lyle]

I have subscribed to both Fidelity Monitor and Insite for 10-15 years. Both are good solid news letters. I prefer the Fidelity Monitor Growth and Income, but you would not go wrong following either news letter. If you are looking for comparisons between news letters suggest you look at Hulbert Financial Digest. They have been following a lot of news letters for many years.
Lyle

 

[LOL!]

...
100,000 in 1987 in the fidelity insight growth mix is now 1.1 million

100,000 in 1987 in Dodge&Cox Balanced is 0.89 million now
100,000 in 1987 in Dodge&Cox Growth is 1.15 million now
VFINX is 0.78 million

 

[mathjak107]

with fidelity newsletters we are not talking just a fund. we are talking the returns of an entire portfolio of diversification and asset allocations. the model consists of many funds in it ,usually 4-5 and thats the return on everything as a whole. usually with far less risk than the beta of the s&p500

 

[unclemick]

1966 - 2006 Forty years of stock, fund selection and reading a lot of books, newsletters, etc.

Target Retirement 2015(85% of portfolio) for my 13th year of ER.

15% individual stocks - like watching football - some things you just gotta do - it's da hormones!

heh heh heh heh

 

[Alex]

It sure seems very complicated to me. Why would anyone use 20+ funds when it is proven that as little as 3 funds are enough to beat 90% of investors (the coffee house portfolio is one of them)?? IMHO, you need at most maybe 8-10 funds to give you exposure to all of the asset classes. Tell Fidelity to shove it!!

 

[samclem]

I think bpp gave some good advice on this one.

Regarding newsletters--I don't think you should bother with them, for two reasons:
1) On average, their recomendatons do no better than the market as a whole. Sure, SOME claim to be better, or can show charts sindicating some of their portfolios have done well historically. But, you can't tell how many other portfolios the've had over the years and have quietly abandoned, etc. There's very little evidence that newsletters are, on the whole, worth a nickel. But, many people swear allegiance to various newsletters and feel they really have the inside track.

2) You don't sound like you have enough time to wait breathlessly for the next hot tip the newsletter would crank out, then act on it. You have other things on your plate right now, and probably will have for some time.

So, this would not be a good time to take on a new hobby.

I'd recommend that you invest in an appropriate Vanguard Target Retirement Fund. Your investements will be simplified, your costs will be very low, your returns will be far better than most individual investors get, and you'll have time to read more and learn about investing--if that's something that interests you. Then you can get fancy or tilt the allocations a little. In the meantime your money will be in a safe and sane allocation and you won't be lining some broker/advisor's pockets with funds you can't afford to give away.

Everyone has their favorite books, look around on this site and you'll find many good recommendations. My recommendation would be Willliam Bernstein's book "The Four Pillars of Investing." I think this is a superb starter book, it is readable and helps people to avoid the most costly mistakes many investors make. The table of contents, introduction, and Chapter 1 can be read for free at this web site. The web site itself has a treasure of articles written by Bernstein--well researched, interesting if you like statistics.
http://www.efficientfrontier.com/t4poi/t4poi.htm

Best of luck! Whatever you decide to do, there are folks here to help out.

 

[mathjak107]

all depends on the newsletter. i agree about most of them,they are more fortune teller than financial advice. having read quite a few over my 20 years of investing most are long gone. two though that i would recommend without any reservations at all are the 2 we are mentioning. no fortune telling, no claim of knowing the next upturn, just good solid planning of well diversified portfolios that cover all the bases and avoid chasing the hot money.

 

[samclem]

. . . and guide you every week with any updates.

It just didn't sound, to me, as if johnb needs another thing to check/do every week. That's aside fom the whole debate about the worth of the advice.

 

[CRABBY JERRY]

MATHJAK107. I subscribed to the Fidelity Insight and Fundsnet newsletters for a few years before I felt confident enough to start moving money into the growth portfolio for both my investing money and also retiring monies. I also put my father in-law into the income and perservation portfolio. I wish I had done so sooner as we have been happy with the results. Maybe I could do better but I feel better if I loose money with something I do rather than paying for some hotshot to loose it for me. Thanks for the positive vote on my choices. Jerry