Fidelity 401k Basics

Financial Planning - Financial planning in general. (Moderated) 

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Subject Author Date Fidelity 401k Basics teaks 01-31-2007  Re: Fidelity 401k Basics joetaxpayer 01-31-2007  Re: Fidelity 401k Basics Dave Dodson 01-31-2007  Re: Fidelity 401k Basics wyu 01-31-2007  Re: Fidelity 401k Basics PeterL 01-31-2007
Posted by teaks on January 31, 2007, 5:03 am Hello everyone, First of all, thank you to everyone who commented in my 'Fresh College Grad' post - I found it very helpful! I have another question I want to ask since I'm just diving into the real world - and my company's 401k plan. My company goes through Fidelity and I am attempting to take my first stab at asset allocation. I'm somewhat confused by the various types of funds - large/mid/small cap. Also, I've read a lot about index funds and I noticed that I can select a 'Spartan US Equity Index Fund.' The management fee is 0.07% and the expense ratio is 0.10%. Can someone shed some light on what these numbers imply? There are also new Fidelity FreedomXX funds which I believe are managed by Fidelity based on your expected retirement rate - any suggestions on whether to go with one of these or to manage my own allocation? Currently, this is what I'm thinking for allocation, any comments? LARGE CAP - Spartan US EQ INDEX: 50% MID CAP - FKLN SMMIDCAP GRTH A: 20% SMALL CAP - RS PARTNERS A: 10% INTERNATIONAL - FID DIVERSIFIED INTL: 20% Thank you in advance. Posted by joetaxpayer on January 31, 2007, 11:10 am teaks wrote: > I've read a lot about index > funds and I noticed that I can select a 'Spartan US Equity Index > Fund.' The management fee is 0.07% and the expense ratio is 0.10%. > Can someone shed some light on what these numbers imply? It is the 'overhead' or expense of that fund. Some funds are higher, as high as 2% or more. That's more than 12 times the cost of the fund you're looking at. I wrote about the high costs of 401(k) accounts this month, http://www.joetaxpayer.com/401rip.html mostly to make the point that at some expense level, unmatched money is better off in a non-401 account. You are nowhere near that for the fund you mentioned, but be careful as the other funds likely have different costs. JOE Posted by Dave Dodson on January 31, 2007, 11:45 am >> Currently, this is what I'm thinking for allocation, any comments? > LARGE CAP - Spartan US EQ INDEX: 50% > MID CAP - FKLN SMMIDCAP GRTH A: 20% > SMALL CAP - RS PARTNERS A: 10% > INTERNATIONAL - FID DIVERSIFIED INTL: 20% I see that two of your selections are A-class shares (That's what the A near the end of the line indicates). Normally, those shares would be sold with a load (sales charge). For example, the Franklin fund has a load of 5.75%. Different share classes have different load structures. Frequently, loads are eliminated for 401(k) accounts, but this is something that you need to check on. What are the other fund choices in your 401(k) plan? Dave Posted by on January 31, 2007, 12:23 pm Ah. You've opened up some indepth subjects now. Your previous topic was much easier to answer with "invest every dime you have!" Now you're asking about fund choices (index versus managed) and asset allocation. I could tell you % is your ideal choice/portfolio but it's different for everybody. Here's just some reading for you to get you started on the subject and let you slowly feel out what your choices should be: http://www.coffeehouseinvestor.com/Principles.htm http://www.moneychimp.com/articles/index_funds/why_index.htm http://www.fundadvice.com/articles/buy-hold/fine-tuning-your-asset-allocation.html And when you're reading to go into the deep end: http://www.ifa.com/12steps/ > My company goes through Fidelity and I am attempting to take my first > stab at asset allocation. I'm somewhat confused by the various types > of funds - large/mid/small cap. Also, I've read a lot about index Posted by PeterL on January 31, 2007, 12:42 pm > Hello everyone, > > First of all, thank you to everyone who commented in my 'Fresh College > Grad' post - I found it very helpful! I have another question I want > to ask since I'm just diving into the real world - and my company's > 401k plan. > > My company goes through Fidelity and I am attempting to take my first > stab at asset allocation. I'm somewhat confused by the various types > of funds - large/mid/small cap. Also, I've read a lot about index > funds and I noticed that I can select a 'Spartan US Equity Index > Fund.' The management fee is 0.07% and the expense ratio is 0.10%. > Can someone shed some light on what these numbers imply? There are > also new Fidelity FreedomXX funds which I believe are managed by > Fidelity based on your expected retirement rate - any suggestions on > whether to go with one of these or to manage my own allocation? > > Currently, this is what I'm thinking for allocation, any comments? > LARGE CAP - Spartan US EQ INDEX: 50% > MID CAP - FKLN SMMIDCAP GRTH A: 20% > SMALL CAP - RS PARTNERS A: 10% > INTERNATIONAL - FID DIVERSIFIED INTL: 20% > > Thank you in advance. 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