Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A) ❤
No. of Recommendations: 2
I am curious if others have been with Fidelity PAS longer than me or have thoughts about this subject.
Like most others here, I engage in and enjoy self-directed investing. But in an effort to correct for my own blind spots and avoid concentration risk, I have some retirement savings managed by Fidelity.
Because various factors, I have chosen the highest risk/return allocation (scale 1-10) and am coming up on a decade with them. Over that time, the fees have been approximately 1% annually and the returns have trailed SPX by between 4-5%. I have some decisions to make coming up about allocation and management, and I would still like to not be 100% self directed. I don't see how I can continue with Fidelity, though, given the fees and long-term gap between what I'd consider my target benchmark given my target risk. Over my time with them, the cumulative underperformance difference is over 100%.
Has anyone else hit this issue? What have you done? I've tried to give them a full economic cycle to be fair to them, have I not given them enough time?
No. of Recommendations: 2
I did the same thing when I retired, except with Fisher Investments instead of Fidelity. I dropped it after a few years, since they did no better and no worse than I did.
Nowadays I would not do this at all. Instead I'd go with Vanguard LifeStrategy Moderate Growth Fund (VSMGX). If I had known about these LifeStrategy funds when I retired I would not have gone with Fisher.
No. of Recommendations: 1
Can you expand a bit on the Life Strategies funds? Are they targeted funds, like the Fido 2040 (for example)?
No. of Recommendations: 2
No. of Recommendations: 1
Ah. So it is a targeted allocation fund, similar to the Fido 2035, 2040, etc, funds. Those types of funds seem to be doing well lately. I have one of those, plus a (Vanguard) S&P500.
No. of Recommendations: 2
“Because various factors, I have chosen the highest risk/return allocation (scale 1-10) and am coming up on a decade with them. Over that time, the fees have been approximately 1% annually and the returns have trailed SPX by between 4-5%.”
Probably not an appropriate benchmark. I’d guess your Fidelity portfolio includes international stocks and maybe some bonds?
Is the 1% all in, or do the underlying funds have additional fees?
As Ray says, you can get a reasonable allocation for a lot less than 1%. Lifestrategy funds are good. I used to have all my wife’s stuff in one - it keeps me from messing with it like I do with my own. But… we did move it recently to a Vanguard target date 2050 fund. Similar allocation to the Lifestrategy (10% bonds instead of 20%), slightly lower fees of 0.08% all in IIRC. A lot less than your 1% at Fido. And it is totally set and forget.
It will not shoot the lights out.
No. of Recommendations: 3
These target dates funds start out at high allocation to stocks and ramp down to more bonds and less stocks. Which is *opposite* to the studies that claim to show that it is better to ramp UP from low stock allocation to higher.
I dunno, these have always seemed to cater to people who are afraid of stocks and want the comfort of some "professional" to hand-hold their investments.
I set my grandkids accounts to half VASGX (80/20) and half VTI, for a net 90/10 asset allocation.
No. of Recommendations: 4
“I don't see how I can continue with Fidelity, though, given the fees and long-term gap between what I'd consider my target benchmark given my target risk. Over my time with them, the cumulative underperformance difference is over 100%.”
FYI, I ran the numbers as I see quarterly data from my 85yo mother’s account managed by a wealth mgt. firm who then has a 3rd party firm choose the specific funds & trades & allocation. The account has been created from our desire to be US focused and predominantly large cap focused with very mild bond exposure, as she is really focused on growing these funds for the next generation and will not need to tap into them to any significant degree.
Here is what I found 2023 thru Q3:
Wealth Mgt(WM)acct up 9.76%
S&P up 13.07%
BRK up 15.2%
5 year returns of WM-6.05% gross, yet 4.60% net of mgt fees
5 year S&P 9.92%
5 year BRK 11.7%
She is paying well into 5 figures in annual mgt. fees yearly (1.2%, I believe) and the current WM account value is over 17% less than a similar funded family account managed by me and my brother from a similar starting point over the last 8 years. I estimated 2/3 of this six figure underperformance gap is based on the WM advisor’s choice of underperforming funds and 1/3 is based on the mgt fees.
Mom truly likes the WM team but she has paid a dear price. We may present her the real data and see if she has any inclination to shift a portion of the WM funds to our self managed approach. Obviously, it is her choice. Either way, we feel better that her eyes would be wide open as to the real six figures less growth from compounded weaker fund performance + mgt fees.
No. of Recommendations: 3
These target dates funds start out at high allocation to stocks and ramp down to more bonds and less stocks. Which is *opposite* to the studies that claim to show that it is better to ramp UP from low stock allocation to higher.
Don't the studies you're thinking of show it is best to ramp down the stock allocation going into retirement, which is what the target date funds do, then ramp back up as sequence of returns risk becomes less?
Not that it matters in my wife's case. We're just using it as a way to get a high stock allocation (90/10) very cheaply (0.08%). When it starts to ramp down in the year 2035 she can move it to target date 2090 or whatever she likes.
I set my grandkids accounts to half VASGX (80/20) and half VTI, for a net 90/10 asset allocation.
That's a good solution if you want a lower international allocation. Could also use VT if you want more non-US.
No. of Recommendations: 0
Probably not an appropriate benchmark. I’d guess your Fidelity portfolio includes international stocks and maybe some bonds?Your right, it's not entirely fair as a benchmark, but I am at their maximum risk level (I probably have two or more economic cycles, in theory, before retiring) so I'd like to get something closer to what I could get with an almost zero load SPX index fund. The last 10 years have been unusual, but I am not able to easily compare returns over anything longer than that.
The ~1% is all in, to me. If the underlying funds have fees they are either built into the all-in fee or built into the underlying fund performance.
I meant to reply this thread over the weekend, but time got away from me. As it turns out Fidelity slightly outperforms
https://investor.vanguard.com/investment-products/... (Vanguard LifeStrategy Growth Fund) so I guess I have a bit more work ahead of me to figure out my best plan.
No. of Recommendations: 1
Don't the studies you're thinking of show it is best to ramp down the stock allocation going into retirement, which is what the target date funds do, then ramp back up as sequence of returns risk becomes less?
I don't know. Frankly, ramping (either way) your asset allocation never made sense to me. So I have never paid a whole lot of attention to these studies. The first I heard of rising glide path was a Kitces article in 2013, here it is almost 2024 and large institutions are still pushing declining guide path.
Ditto for sequence of returns risk, since there is nothing magic about the date you retire. EVERYday is the first day of the rest of your investment portfolio, so the SORR on the 5th year of retirement is no different than on the first day of retirement. It's just that you are 5 years closer to death.
