which of these three fidelity options looks the best for 403b?

[dooo42]

I'm moving my 403b over to Fidelity and I think I have three options for my money. Help me choose which looks the best. Oh Yeah...I only have $50,000 in my 403b.

1. I could use their Freedom Fund 2040 with .81% Expense Ratio. The couch potato in me likes this. The ER isn't the best.. but it's not the worst I've seen.

2. The Fidelity Four-In-One Index Fund that has the 4 Spartan Funds (Spartan 500, International Index, US Bond Index, & Extended Market Index) Has .23% ER

3. Or I guess I could just go in and choose the Spartan Funds I want and allocate as I see fit. Would that be the same as choice 2? I'm not totally sure here because when i went to the Fidelity website, it seems there are two categories of Spartan funds "Investor Class" and "Advantage Class", with fees based on different basis points. Can someone explain that to me because i don't get it.

I think these are my best options. What do you think?

 

[JPatrick]

As index funds go, FSEVX pretty much beats them all, be it 1 yr, 3 yrs, or 10.
I don't think I'd drop the entire sum there, but it deserves a piece of the pie.
OTOH, the 4 in one concept sounds great, but hasn't performed great.

 

[Dimsumkid]

The Advantage Class has a minimum investment of $100k or more. With this you get lower fees.

 

[LOL!]

I don't understand JPatrick's advice. Since FFNOX contains the equivalent of FSEVX and presumably dooo42 wants an asset allocation that will work through thick and thin, I think the option 2 to use FFNOX is fine. However, if his/her asset allocation doesn't match that of FFNOX, then s/he should choose option 3. Hopefully, the desired asset allocation is not 100% small/mid-cap US stocks, but has some large caps, some small/mid caps, some international, and some bonds in it.

 

[JPatrick]

As index funds go, FSEVX pretty much beats them all, be it 1 yr, 3 yrs, or 10.
I don't think I'd drop the entire sum there, but it deserves a piece of the pie.
OTOH, the 4 in one concept sounds great, but hasn't performed great.

The investor version of this fund is FSEMX.
LOL, what do you see in the numbers that causes you to favor 4 in 1 over FSEMX? Doesn't 10 years provide a peak at thick and thin?
Again, not the entire sum, but I'd put it in any portfolio. It was my only index fund in 2010 and it kicked out ~29% and allowed much better sleep than did some of the 34 to 46 % returners.

 

[LOL!]

I own FSEMX. Lots of it. It is a specific asset class.

One doesn't go just by performance numbers when building a portfolio. Of course a bond fund won't have the same long-term performance at FSEMX, but it also won't have the same risk. You want the best risk/reward ratio on the efficient frontier.

 

[DblDoc]

If you are just starting out choice 2 is fine but realize it is equity heavy and going to be a bumpy ride. If you are less risk tolerant or want to reduce risk as you get older you could increase your allocation to bonds by adding just the bond index fund. If you want to slice and dice then go with option #3. I agree with LOL on JPatrick's advice - I would not bet the farm on a small/mid cap stock index. I overweight small value but only by 5%.

DD

 

[JPatrick]

If you are just starting out choice 2 is fine but realize it is equity heavy and going to be a bumpy ride. If you are less risk tolerant or want to reduce risk as you get older you could increase your allocation to bonds by adding just the bond index fund. If you want to slice and dice then go with option #3. I agree with LOL on JPatrick's advice - I would not bet the farm on a small/mid cap stock index. I overweight small value but only by 5%.

DD

Mercy...At least twice I noted that the entire sum should not be in this fund...
However, a glance at the track record vice other index funds ought to argue for a place in anyone's portfolio.
Yes, yes, bonds too, but choose carefully.
But again, the 4 in 1 has a nice ring to it, but the song it is playing is avoid for now.
Just my two cents..I yield to the record book.

 

[DblDoc]

Mercy...At least twice I noted that the entire sum should not be in this fund...

Granted. But your implication was to overweight it.

However, a glance at the track record vice other index funds ought to argue for a place in anyone's portfolio.

This is known as performance chasing. It doesn't work out well in the end.

Yes, yes, bonds too, but choose carefully.

Absolutely. I'm a big fan of gov't back securities and TIPS to be sure they are the least correlated with equities.

But again, the 4 in 1 has a nice ring to it, but the song it is playing is avoid for now.

What about it suggests one should avoid it? It is a reasonable balanced portfolio, although equity heavy, with a reasonable ER.

Just my two cents..I yield to the record book.

What record book? Again past performance does not predict future returns.

DD

 

[JPatrick]

Granted. But your implication was to overweight it.

This is known as performance chasing. It doesn't work out well in the end.

Absolutely. I'm a big fan of gov't back securities and TIPS to be sure they are the least correlated with equities.

What about it suggests one should avoid it? It is a reasonable balanced portfolio, although equity heavy, with a reasonable ER.

What record book? Again past performance does not predict future returns.

DD

Well I don't know if it's performance chasing or not, but I have found that if a stock or fund is going up today in a favorable market, chance are good that it will be going up tomorrow and will continue to until it doesn't..
I've applied this to sector funds and etfs for several years with great results.
Over the last 12 months my FIDO sector portfolio holdings are up from 31 to 46 %. Here's the interesting part---No crystal ball, I just bought them when they popped into the top 7 or 8 of the FIDO sector list. I'm still holding all of them and will sell when they are bumped by another sector.
If you are open minded you can read "ETF Strategies" by Vomund for a look at some back testing. I have modified his system somewhat, but we are in the same ballpark. I verifed his backtest of FIDO sector funds.
Granted, this is not for the passive investor, and certainly all my eggs are not in the same basket.
So if that is performance chasing, then I'm sorry--all the way to the bank

 

[dooo42]

you guys are getting crazy on me...what should i do?

 

[LOL!]

You should buy the Fidelity Four-in-One fund just like this person is gonna do:
Bogleheads :: View topic - Which of these three fidelity 403b options looks the best?

That will even make JPatrick happy since the 4-in-1 fund explicitly contains the FSEMX fund that he recommended.

Then go read some books on investing and asset allocation so that you are not dependent on anonymous message board posters on the internet for investing advice.

 

[JPatrick]

You should buy the Fidelity Four-in-One fund just like this person is gonna do:
Bogleheads :: View topic - Which of these three fidelity 403b options looks the best?

That will even make JPatrick happy since the 4-in-1 fund explicitly contains the FSEMX fund that he recommended.
I'm certain making me happy is not a priority of yours, nor should it be..but in the event it is, please don't buy the 4 in 1 at this time

Then go read some books on investing and asset allocation so that you are not dependent on anonymous message board posters on the internet for investing advice.

Now there's an idea I can get behind! Of course, even if you become the worlds best allocator, you still must pick investment vehicles.

Dirty old performance chasing, chart watching, JPatrick signing out..