Opinions on my IRA Roll over Fidelity fund choices

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JP.mpls

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I recently retired and moved my 401K account into a Fidelity IRA rollover account

A little history:
I have been saving 15-20% of my income into a 401K account at a 80/20 allocation for the last 35 years. I believe I'm at FIRE status at the age of 60.

I have decided on a 60/30/10 allocation for now, but I might shift this down to 55/35/10, or even 50/40/10.

My question/comments:
I obviously have many more investment choices now that I'm no longer in a 401K account.

I recently made the following mutual fund choices at Fidelity, but I'm willing to admit that I'm not that knowledgeable about all of these fund types and choices, and I'm not extremely confident in the choices that I've made.

I'm hoping your comments increase my confidence in these choices, or move me in a better direction.

Let me know what you think. Am I on the right track, or are major changes needed. If you are recommending changes, please explain why.

30%: Fidelity Zero Large Cap Index Fund (FNILX)
30%: Fidelity Zero Total Market Index (FZROX)
15%: Fidelity U.S. Bond Index Fund (FZNAX)
15%: Fidelity Total Bond Fund (FTBFX)
10%: Fidelity Government Money Market (SPAXX)

Thanks in advance for any of your comments.

Take care, JP
 
Last edited:
Just one minor comment. You can substitute FZDXX instead of SPAXX for any money market funds. It is their premium money market fund.
You need 100k for the initial investment, but you can put in 100k on day 1 and take out whatever amount on day 2 and the balance of which there is no minimum can stay in the FZDXX fund.
 
The primary function of your AA is to keep you from selling low. So the thing to do is write out the reasons for your chosen AA. When you think something should change, go back and read why your AA is what it is.

I like https://www.aacalc.com/calculators/aa because it accounts for all income sources. However it ignores your personal risk tolerance.

Alternatively, and if the balance is sufficiently high, put about four years of spending in cash, and the rest in a total market stock index. Then when the market tanks you don’t have to sell low.
 
JP.mpls said:
I recently retired and moved my 401K account into a Fidelity IRA rollover account

A little history:
I have been saving 15-20% of my income into a 401K account at a 80/20 allocation for the last 35 years. I believe I'm at FIRE status at the age of 60.

I have decided on a 60/30/10 allocation for now, but I might shift this down to 55/35/10, or even 50/40/10.

My question/comments:
I obviously have many more investment choices now that I'm no longer in a 401K account.

I recently made the following mutual fund choices at Fidelity, but I'm willing to admit that I'm not that knowledgeable about all of these fund types and choices, and I'm not extremely confident in the choices that I've made.

I'm hoping your comments increase my confidence in these choices, or move me in a better direction.

Let me know what you think. Am I on the right track, or are major changes needed. If you are recommending changes, please explain why.

30%: Fidelity Zero Large Cap Index Fund (FNILX)
30%: Fidelity Zero Total Market Index (FZROX)
15%: Fidelity U.S. Bond Index Fund (FZNAX)
15%: Fidelity Total Bond Fund (FTBFX)
10%: Fidelity Government Money Market (SPAXX)

Thanks in advance for any of your comments.

Take care, JP
Click to expand...

Your choices are fine. If you want to simplify things, you could just use FZROZ for equities and FZNAX for bonds and be done.

https://www.bogleheads.org/wiki/Bogleheads®_investing_start-up_kit
 
You may want to consider equivalent ETF’s instead of mutual funds as costs for ETF’s are often lower.
 
By holding FNILX and FZROX, which also holds everything that FNILX holds, you are tilting your equity portfolio towards large caps. This is a bit unusual, because people usually talk about tilts towards small caps and value stocks. This argument is based on the Fama/French 3-factor capital assets pricing model (https://www.investopedia.com/terms/f/famaandfrenchthreefactormodel.asp). The other thing is that you are 100% home country bias, which is not universally thought to be a good thing (https://famafrench.dimensional.com/videos/home-bias.aspx).

Personally, we hold about 90% in VT, a total world stock fund and about 10% in a bit of a tilt towards international/small/value via some DFA funds. The latter is kind of an experiment rather than the result of profound belief.
 
OldShooter said:
By holding FNILX and FZROX, which also holds everything that FNILX holds, you are tilting your equity portfolio towards large caps. This is a bit unusual, because people usually talk about tilts towards small caps and value stocks. This argument is based on the Fama/French 3-factor capital assets pricing model (https://www.investopedia.com/terms/f/famaandfrenchthreefactormodel.asp). The other thing is that you are 100% home country bias, which is not universally thought to be a good thing (https://famafrench.dimensional.com/videos/home-bias.aspx).

Personally, we hold about 90% in VT, a total world stock fund and about 10% in a bit of a tilt towards international/small/value via some DFA funds. The latter is kind of an experiment rather than the result of profound belief.
Click to expand...

I was going to add in my answer that some ex-US equities would be a good diversifier, but that that is a topic for another thread...
 
Scuba said:
You may want to consider equivalent ETF’s instead of mutual funds as costs for ETF’s are often lower.
Click to expand...

The Fido index mutual funds have an ER of 0.00%
 
JP.mpls said:
30%: Fidelity Zero Large Cap Index Fund (FNILX)
30%: Fidelity Zero Total Market Index (FZROX)
15%: Fidelity U.S. Bond Index Fund (FZNAX)
15%: Fidelity Total Bond Fund (FTBFX)
10%: Fidelity Government Money Market (SPAXX)

Thanks in advance for any of your comments.

Take care, JP
Click to expand...
Large Cap Index is completely contained in the Total Market Index, so there is no point in have Large Cap Index at all. You can make Total Market Index then 60% of the portfolio.

Total Bond Fund is an expensive actively-managed bond fund that may do better than an Index fund because it takes on more risk with some lower-rated bonds. There is no reason to own it. Instead, you can just put all your bond money into US Bond Index which is a true total US bond index fund that is passively-managed and has a much lower expense ratio than the fake-named Total Bond fund.

There is no point in having a cash drag on your portfolio. All the studies state that owning cash in a retirement portfolio is a poor choice. People own it for "peace of mind" but not for anything worthwhile. I'd say get rid of it.

You have no international equities in this list. That's a choice, but maybe you were not aware you did that.

See also: https://www.bogleheads.org/wiki/Fidelity
 
Dtail said:
Just one minor comment. You can substitute FZDXX instead of SPAXX for any money market funds. It is their premium money market fund.
You need 100k for the initial investment, but you can put in 100k on day 1 and take out whatever amount on day 2 and the balance of which there is no minimum can stay in the FZDXX fund.
Click to expand...


Dtail,
Thanks. I just made this change. I'm assuming there is some advantage to owning FZDXX over SPAXX.
JP
 
SnowballCamper said:
The primary function of your AA is to keep you from selling low. So the thing to do is write out the reasons for your chosen AA. When you think something should change, go back and read why your AA is what it is.

I like https://www.aacalc.com/calculators/aa because it accounts for all income sources. However it ignores your personal risk tolerance.

Alternatively, and if the balance is sufficiently high, put about four years of spending in cash, and the rest in a total market stock index. Then when the market tanks you don’t have to sell low.
Click to expand...


SnowballCamper,
Thanks for your comments.

- A lot of information on that calculator link. It will take me some time to assess it.

- I'm surprised your position is all stocks or money market, no bond funds.

- I do have about 3 years worth of spending in cash, but like I said, I might move my stock allocation down from 60% toward 50%.



Take care, JP
 
JP.mpls said:
Dtail,
Thanks. I just made this change. I'm assuming there is some advantage to owning FZDXX over SPAXX.
JP
Click to expand...

FZDXX current yield is 1.85%
SPAXX current yield is 1.62%

FZDXX is always the highest yield in the Fidelity portfolio of MM type of funds.
 
LOL! said:
Large Cap Index is completely contained in the Total Market Index, so there is no point in have Large Cap Index at all. You can make Total Market Index then 60% of the portfolio.

Total Bond Fund is an expensive actively-managed bond fund that may do better than an Index fund because it takes on more risk with some lower-rated bonds. There is no reason to own it. Instead, you can just put all your bond money into US Bond Index which is a true total US bond index fund that is passively-managed and has a much lower expense ratio than the fake-named Total Bond fund.

There is no point in having a cash drag on your portfolio. All the studies state that owning cash in a retirement portfolio is a poor choice. People own it for "peace of mind" but not for anything worthwhile. I'd say get rid of it.

You have no international equities in this list. That's a choice, but maybe you were not aware you did that.

See also: https://www.bogleheads.org/wiki/Fidelity
Click to expand...


LOL,
- I was trying to lean my stock holdings toward Large Cap, because I see them as being safer. (My personal bias.)
- I like holding a few years worth of cash. I agree, it drags my portfolio down. I will think about it. FYI: SnowBall avoids all bonds, and only holds stocks or cash for an allocation.

- The International fund in my Vanguard 401K always did poorly, so I tend to not diversify into international. My thoughts: By owning Large Cap stocks, I'm investing in world wide companies. (Again, just personal bias that might not be logical.)
- I'm going to purge the managed bond fund, and just use the total bond index. Dtail suggested this change also.



Thanks, JP
 
My conclusions based on all of the replies:
(In general, it sounds like I'm on the right track, but a few recommended changes would be an improvement.)


- Use FIDO's premier money market fund FZDXX instead of SPAXX. Higher returns, $100K minimum. I made this change.

- Get rid of the managed bond fund FTBFX, and use the index total bond fund FXNAX. I made this change.

- I'm missing International funds, but I'm looking at Large Cap investments as world wide corporations with international exposure. Possibly a mistake on my part. I have not moved any money into an international stock index.

- I'm heavy on Large Cap, thinking they are a safer exposure to stocks. Another possible mistake on my part. I still have 30% in a Large Cap index I might change this to 20% in the future.

- I have 10% of my allocation in cash. Several people disagreed with this conservative approach.

- I have 30% bonds. Snowball recommended no bonds.

- I have some work to do on my allocations. I might move closer to 50% stocks. I'm at 60% right now.



Thanks to all, and take care, JP
 
Where's your hedge?

Saw no Value or International stock funds or gold hedge.
Historically, the first two have surpassed Standard and Poor over various rolling time periods. Did you not want to buffer your retirement portfolio with at least a 8-12% hedge in one of those? Perhaps a tiny amount in gold if all goes to hell in a handbasket--recession or war? 3-5%
 
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