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Author: DigbyRC Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76406  
Subject: My Pick of 403b Fidelity Funds Date: 1/4/2000 5:19 PM
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I'm restricted to Fidelity funds because of the nature of my 403(b) plan. I've about 150 mutual funds, and about 100 bonds/blends to
pick from. Right now I only have a little over $3,000 to move out of the default money market account.

Taking pure Foolish advice as given in the Foolish Guide to Investing I would put 100% in FUSEX (Fid. Spartan US EQ Index) 'cos of
the low expenses and the long term, more or less guarranteed growth.

However, I see many of you don't subscribe to that philosophy and actively pursue high performance funds, more or less regardless
of fees. And I've learned,from postings here, that high turnover is irrelevant from a "hidden cost" perspective when the money is all
part of a tax deferred account.

Therefore, I'm thinking of putting 50% in FUSEX then splitting the remainder between three of the following

FDCPX (Fid. Select Computers)
FSDCX (Fid. Select Electronics)
FSCSX (Fid. Select Software)
FSPTX (Fid. Select Technology)
FDEGX (Fid. Aggressive Growth)

All of which have +70% one year growth and +20% ten year growth.

But Fool's supposedly don't pick based on past performance they pick on the soundness of the investment - I can't seem to figure
how you do this with mutual funds (apart from the assessments at MorningStar and FundAlarm which I've read for all of them and
they seem, overall "good" to "very good").

So I'm asking three questions.

1) With just $3,000 to invest should I be concerned about fees ? I.e. Should I just stick with the index fund ?

2) What do you think of the five other funds I picked ? Are they recognized by the "investment community" as high quality funds
with good management teams, sort of like, I guess, Janus is. Can I do better than them ?

3) Is going with three of them a better plan than, say, just one, seeing as funds in themselves are highly diversified already.

Looking forward to hearing what you think. I have been very impressed with how helpful and educational the Fool environment is.

Thanks, in advance,

Dr. C
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Author: Dodgeball Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17362 of 76406
Subject: Re: My Pick of 403b Fidelity Funds Date: 1/5/2000 5:35 AM
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IMHO, it is always a good idea to worry about fees regardless of the amount invested. Most Fools try to keep their fees to 2% or less.

Without knowing anything about your choice of funds, it seems as if you have quite a vast selection to choose from. Please keep in mind however, that an index fund may well hold 500 different companies.

You may want to do a little more reserach in regard to the turnover rate of the funds that you have chosen.

One more point: is your 403b an annuity or is it actually a 403b(7)? Keep in mind that a 403b which offers annuities may have "hidden" expenses.

Good luck,
Dave

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Author: DigbyRC Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17373 of 76406
Subject: Re: My Pick of 403b Fidelity Funds Date: 1/5/2000 9:45 AM
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Dodgeball,

Yep it's a full-on standard 403b.

I know the turnover rates of all the funds. It's low for the index fund (4%) and very high for the high performance funds (100%+. E.g. FSPTX was 339% for '99). However, my understanding from the posts on this site is that turnover is a non-issue, in regard to expenses, for tax-deferred investors, as these investors do not share in the burden of capital gains taxes that the fund pays each time it sells at a profit.

- Dr.C.

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Author: Dodgeball Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17403 of 76406
Subject: Re: My Pick of 403b Fidelity Funds Date: 1/5/2000 7:38 PM
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Dr.C:

Wow, those turnover ratios are high! You do not share the burden of capital gains taxes, but less of your money is actually put to work due to management fees. In other words, a portion of your money is going to the fund manager who is buying and selling the stocks which make up the mutual fund. Since an index fund is basically computer driven, you don't have to pay a fund manager to trade postitions.

Read the page on this site which talks about retirement investing. You may also want to check out the section entitled "All About Mutual Funds" for more info.

Hope this helps.

Dave

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Author: mphipps Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17414 of 76406
Subject: Re: My Pick of 403b Fidelity Funds Date: 1/5/2000 11:50 PM
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<And I've learned,from postings here, that high turnover is irrelevant from a "hidden cost" perspective when the money is all>
But you need to look turnovers and not just ignore them. I think I state they should not be used as principle screen test but might be used as tie breaker.
IOM Answer to your questions.
1) With just $3,000 to invest should I be concerned about fees ? I.e. Should I just stick with the index fund ?

Mphipps relpies: In my option you should have 20% in technology fund. That is singular. IMO your 3000 should go into Index and larger percentage of monthly contributions go into tech fund. If I am correct about technology it will get to the 20% quickly.

2) What do you think of the five other funds I picked ? Are they recognized by the "investment community" as high quality funds
with good management teams, sort of like, I guess, Janus is. Can I do better than them ?

Mphipps replies: who knows. I check the funds out. All meet the 20% rules. But I think they all invest pretty much in the same thing. I like the electronic fund and Technology fund. I think a would recommend salary funded investments in Technology fund. Sort of even out the others are just a like to specialized.
I think going with just one of the Tech funds is best approach.
Sum up. IMO $3k goes in index fund and 50% of salary inputs go into technology and 50% go into index
If you want another fund I would look for international and not another tech.



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Author: DigbyRC Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17429 of 76406
Subject: Re: My Pick of 403b Fidelity Funds Date: 1/6/2000 1:04 PM
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Dodgeball and mphipps,

Thanks for the advice, much appreciated.

I recognize now the lack of diversity between all those funds, and yep, I'll go take a look at what stocks they're actually invested in.

I think that yes, it probably does make sense, especially right now with the market no longer rip roaring into infinity and beyond to put the whole $3K in FUSEX index and then split future salary deposits between FUSEX, One Tech Fund and One "Other" Fund that's invested different to Tech Fund.

Regarding fees. I did check with my plan manager and no they don't waive the fees in our plan. Fidelity plans seem to have a typical expense ration of 1.2 to 1.4%.
There's often a 3% initial sales fee, and 0.75% redemption fee and a 0.3% management fee. Deferred, Admin and 12b-1 are typically 0%. The managers seem to have been managing that fund for typically 1 to 2 years.

I'm assuming that the expense ratio is a summary figure and that the other fees aren't in addtion to the expense ratio.

Thx, for your help.

Dr. C

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Author: mphipps Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17467 of 76406
Subject: Re: My Pick of 403b Fidelity Funds Date: 1/6/2000 9:58 PM
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Dr C Writes:I think that yes, it probably does make sense, especially right now with the market no longer rip roaring into infinity and beyond to put the whole $3K in FUSEX index and then split future salary deposits between FUSEX, One Tech Fund and One "Other" Fund that's invested different to Tech Fund.

mphipps writes: The interesting thing about dollar cost averaging is that is doesn't care which way the market is going. Sometimes the more time I spend looking at my investments the more times a mess up. So I would do what you have suggested. And in six momths you probably will have more assets in tech than if you moved all in today. And you will be happier. By having only 20% in tech a 20% drop in tech only means 4% drop in portfolio. Everything has a critic and dollar cost averaging has one. It says that dollar cost averaging is more expensive because stocks stay higher for longer than they stay lower. So by combining dollar cost averaging with asset allocation you can average this problem out.

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