Comments on: Fidelity Offers Index Fund-Based Target Retirement Funds

By: Ern

Ern — Wed, 09 Sep 2009 21:06:41 +0000

Morningstar recently reviewed Target Date funds from several fund families: http://news.morningstar.com/ar.....?id=307299

Vanguard seems to be winning, due to low costs and good managers.

“There were, however, a couple of Below Average ratings: Fidelity Advisor Freedom and Principal. Fidelity Advisor Freedom, one of two series that Fidelity currently offers, features 18 funds with an average star rating of 2.81.”

By: Samson Smith

Samson Smith — Wed, 09 Sep 2009 06:22:05 +0000

Thanks for sharing, Index funds seem to be quite a good investment option, though they don’t give you whooping returns, over a period of time they grow steadily to give you good returns.

By: –› Lending Club is Giving Away $2500

–› Lending Club is Giving Away $2500 — Thu, 03 Sep 2009 13:21:06 +0000

[...] Fidelity Offers Index Fund-Based Target Retirement Funds [...]

By: David

David — Wed, 26 Aug 2009 13:09:24 +0000

Having expense ratios for retirement accounts anywhere near 0.79% is almost criminal. With the rock-bottom expense ratios available, I think its crazy to pay more than 0.4% for index funds that are all basically the same. Then again, I’m picky.

The difference between 0.2% and 0.79% over 30 years is the difference between making 16.5x and 14x your money. So, if you invested $100,000, that would be a $250,000 difference!

Fidelity is not the only party at fault, but the employer either doesn’t know how to choose good options or, even worse, they are making money from a deal with Fidelity. If that is what your employer is offering you, clearly they are not looking out for your best interests.

By: Jim

Jim — Wed, 26 Aug 2009 00:11:37 +0000

Vanguard already offers a target date index option – its regular target date funds. They are 100 percent index funds.

They have comparable, although slightly higher expense ratios.

@Jordan: Vanguard target funds hold a small portion in their emerging market index – 4.1% in the Target 2040 (for example). I would also assume any broad-based bond index fund, like those in either the Fidelity or Vanguard Target options, would include exposure to high yield (junk) bonds. I have not verified this however.

By: Thad

Thad — Tue, 25 Aug 2009 21:29:15 +0000

You can use Morningstar Xray tool to see what the allocations come out to. Go to http://www.morningstar.com > tools > instant xray on the bottom. Enter the fund symbols then use the percentage value to use what Fidelity is saying.

I looks to me like Fidelity is trying to add in all the funds so it looks like it is diversified beyond the typical total dom/intl/bond approach. (Oh, yea, it also looks like what individual portfolios look like when they chase the latest winners over 5-10 yrs

By: Maury

Maury — Tue, 25 Aug 2009 19:33:25 +0000

I think we would all be surprised how many people would invest in “Fidelity Undisciplined Equity”… I mean, it sounds like a hedge fund!

By: Independent George

Independent George — Tue, 25 Aug 2009 18:55:50 +0000

It’s funny – my Fidelity 401k actually offers me the Vanguard target retirement funds, but not the Fidelity versions (not that I’m complaining; I’m very loyal to the Vanguard brand, and hold all of my IRAs with them, too).

By: JT

JT — Tue, 25 Aug 2009 18:23:30 +0000

Wow, great news.

I’ve been constantly urging to my employer to switch to Vanguard (company of only 10 or so, and I’m the only one that really seems to care, so my input counts….) for the exact reasons listed above — index fund choices are extremely limited in most plans (in mine, all I get is FXTMX/FSEMX), and the Freedom Funds are a rip off. Looks like this isn’t news to Fidelity.

By: ebow

ebow — Tue, 25 Aug 2009 17:03:39 +0000

@Fern,

Fidelity has offered a number of index funds (FSMKX, FSEMX, FSIIX, FLBIX, etc.) but they may not be available to you through your 401k plan.

When I finally understood the wisdom of index funds rather than sector-specific funds, I’d already been investing in them (especially Fidelity Select funds) for a few years, and the market was down. I decided to direct new contributions to a specific mix of index funds and hold onto the previous investments at least until they recover some value.

By: Fern

Fern — Tue, 25 Aug 2009 16:06:12 +0000

This is great! Or is it? I’ve been perturbed that Fidelity did not have index fund options ever since I signed up for my 401k (or rather, since I heard how great index funds were). I didn’t really know what I was doing when I first chose my funds, so I chose a variety, but should I plan on switching over to their age-appropriate index fund now?

By: JerryV

JerryV — Tue, 25 Aug 2009 14:54:59 +0000

I’m not sure the Index option in the California 529 was fine print. I’ve been in the age-based Index fund for about 3 years, and it was just another option on the application form.

By: Jeremy Olexa

Jeremy Olexa — Tue, 25 Aug 2009 14:41:48 +0000

I couldn’t tell from the article. Will they offer index-based funds for non-401k holders too?

By: Jordan

Jordan — Tue, 25 Aug 2009 13:38:50 +0000

I would imagine there would be more than 3 funds in the index life cycle portfolio, and if they add sector indexes like high yield and emerging markets, that should push the fees up somewhat. I think that the 3 fund plan would be ideal if the investor is only looking for the cheapest diversification.

I wonder when life cycle funds will begin to add other asset classes to their portfolios besides just stocks and bonds.