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I'm 38 and have about $50k or so spread across three retirement
accounts: a Vanguard Target Retirement 2045 fund, a Fidelity Freedom
Fund 2040, and some misc holdings in Morgan Stanley. I'd like to merge
them all into either the Vanguard or the Fidelity fund, but I'm not
sure which one to choose.
The Vanguard fund has a lower expense ratio, and I like the tools on
its website, but it also has a $25 annual fee. The Fidelity fund has
no fees, and it also has a slightly higher percentage of foreign
investments. Other than that, I'm not really sure how to choose one
over the other.
On the other hand, maybe it's not necessary to merge them all? Or is
there a better option?
Ideally, I'd like to set up my own portfolio -- preferably one with a
lot of risk, because I'm way behind in my retirement savings. I'm just
really having trouble finding the time to research and monitor
everything, despite my interest in learning and participating actively
in investing; hence, I figured one of the targeted retirement funds
would be a good choice.
Thanks for any help.
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Mike wrote:
> The Vanguard fund has a lower expense ratio, and I like the tools on
> its website, but it also has a $25 annual fee.
Are you sure? Vanguard charges a $20 fee for any fund with less than
$10,000 in it, but that's nothing specific to TR 2045. Do you have less
than that amount in aggregate? Also, Vanguard waives that fee if you
elect for electronic statements.
Brian
--
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won't shut up.
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On Jul 4, 6:18 pm, Mike <r...@g...com> wrote:
> I'm 38 and have about $50k or so spread across three retirement
> accounts: a Vanguard Target Retirement 2045 fund, a Fidelity Freedom
> Fund 2040, and some misc holdings in Morgan Stanley. I'd like to merge
> them all into either the Vanguard or the Fidelity fund, but I'm not
> sure which one to choose.
Can you move those retirement accounts into an IRA? If so, you would
have many more investment options available.
> Ideally, I'd like to set up my own portfolio -- preferably one with a
> lot of risk, because I'm way behind in my retirement savings. I'm just
> really having trouble finding the time to research and monitor
> everything, despite my interest in learning and participating actively
> in investing; hence, I figured one of the targeted retirement funds
> would be a good choice.
Risk doesn't necessarily mean high return.
A retirement fund will have higher amounts of bonds than would be
optimal for capital appreciation.
You could try something to match the Russell 3000 to match the market.
Or you can try investing in various sectors like energy and technology
to get higher returns.
--
Ron
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> Are you sure? Vanguard charges a $20 fee for any fund with less than
> $10,000 in it, but that's nothing specific to TR 2045.
I just checked again, and turns out I misread things. Vanguard does
charge a $25 fee for simple IRAs, which is waived only if you have
less than $100k in the fund. The $20 fee is for nonretirement accounts
and, I just saw, traditional and Roth IRAs, and is waived after
putting in $10k. So no fee for me, after all.
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> Risk doesn't necessarily mean high return.
>
> A retirement fund will have higher amounts of bonds than would be
> optimal for capital appreciation.
True. My Vanguard and Fidelity target funds are both IRAs, though, and
right now they have about 80-90% stocks or more.
I was thinking about sector investing. I might look into that, too.
Thanks,
Mike
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On Jul 5, 6:04 am, Mike <r...@g...com> wrote:
> > Risk doesn't necessarily mean high return.
> > A retirement fund will have higher amounts of bonds than would be
> > optimal for capital appreciation.
> True. My Vanguard and Fidelity target funds are both IRAs, though, and
> right now they have about 80-90% stocks or more.
Do you have those funds in a brokerage account? If so, you would be
able to buy ETFs and individual accounts.
> I was thinking about sector investing. I might look into that, too.
I think that you need to have at least 20% in the energy sector with
current price increases.
--
Ron
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"Default User" <d...@y...com> writes:
> Mike wrote:
>
> > The Vanguard fund has a lower expense ratio, and I like the tools on
> > its website, but it also has a $25 annual fee.
>
> Are you sure? Vanguard charges a $20 fee for any fund with less than
> $10,000 in it, but that's nothing specific to TR 2045. Do you have less
> than that amount in aggregate? Also, Vanguard waives that fee if you
> elect for electronic statements.
There's a $25/fund fee if it's in a SIMPLE IRA, but it
doesn't sound like the OP is in one of those. No such
fee on nonretirement, IRA, Roth IRA, SEP-IRA of ESAs.
And, as you said, that fee's waived if you get electronic
delivery. The OP said he had about $50k across his
accounts - if that all went into the target 2045 fund,
he'd have no fees and still get all the paper statements.
The Fidelity Freedom fund-of-funds spreads their
assets across 23 different Fidelity funds (some of
which are quite good) - but that's a lot of
underlying funds, and most of them are actively
managed and just a bit too messy for my taste.
The Vanguard Target Retirement fund-of-funds spreads
their assets across 5 very efficient index funds. The
asset allocation is much easier to understand, the
fees are very much lower, the tax implications (important
if this is not a tax-favored account) are substantial -
there should be a lot less tax drag on the Vanguard
fund-of-funds.
Morningstar loves the Vanguard and the T. Rowe Price
target retirement funds.
If you had to put your retirement money, especially
money for long long future retirement (ie. our 38? yr
old OP), these are all decent options. Most folks
who muck about managing and trading and/or even just
selecting multiple funds on their own are probably
going to do far worse than someone who simply goes
into one of these and lets the fund do its job.
To the OP - you said these are all "retirement" funds -
is this all regular or Roth IRA accounts?
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"Mike" <r...@g...com> wrote
> The Vanguard fund has a lower expense ratio,
snip
> I'm just
> really having trouble finding the time to research and
> monitor
> everything, despite my interest in learning and
> participating actively
> in investing; hence, I figured one of the targeted
> retirement funds
> would be a good choice.
A rational decision.
I would argue VTIVX's expense ratio is a lot lower; 0.19%
vs. the FFFFX's 0.78%. Compounding this difference adds up
to around 15% difference in final portfolio value over 35
years. From what you say, I would switch all to the Vanguard
fund. But if you don't, I do not expect it to make much
difference. Studies (and common sense) indicate that what's
most important to fuss over (once you have a reasonable
allocation) is saving for retirement regularly and
abundantly.
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> The Vanguard Target Retirement fund-of-funds spreads
> their assets across 5 very efficient index funds. The
> asset allocation is much easier to understand, the
> fees are very much lower, the tax implications (important
> if this is not a tax-favored account) are substantial -
> there should be a lot less tax drag on the Vanguard
> fund-of-funds.
Cool, that helps, so based on that and what others have said, I'll
probably put the money into the Vanguard fund. I might check out T.
Rowe first, though.
Oh, and my Vanguard fund is a Roth IRA. The other two are old 401ks.
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On Jul 5, 1:53 pm, Mike <r...@g...com> wrote:
> Oh, and my Vanguard fund is a Roth IRA. The other two are old 401ks.
You might want to consider converting the 401ks to a standard IRA. The
standard IRA can then be converted to a Roth if your income is low
enough or you can wait until 2010.
--
Ron
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