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Index fund decision: Vanguard or Fidelity Target Retirement
OK, I have my SE 401(k) through Fidelity, Vanguard does not offer what I wanted. I have a Roth IRA through Vanguard and own their Target 2045 Retirement Index Fund and am very happy with that and to leave the decisions out of my hands.
I just contributed my 2006 amount to my new Fidelity 401(k) and now need to decide what to invest it in: I can invest it for no upfront fees in Fidelity's Freedom 2045 Fund (FFFGX). It has an expense ratio of ~0.70%. Alternatively, I can invest in Vanguard's Target Retirement 2045 Fund (VTIVX) which has an expense ratio of 0.21% but I must pay a $75 online processing fee. I am very new to this stuff, but the Vanguard one seems clearly better looking at the difference in expense ratios for only a $75 fee, I think I should go with that one. Just wanted to check here to make sure my thought process is sound and if anyone knows of a good reason to prefer one of these target retirement funds over the other I'd love to hear it. Thank you, DeathDonkey |
#2
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Re: Index fund decision: Vanguard or Fidelity Target Retirement
FWIW, you can surely build a comparable asset allocation with a lower expense ratio and w/ likely v. similar performance using Fidelity Funds:
[ QUOTE ] Vanguard Target Retirement 2045 Fund (VTIVX) Allocation To Underlying Funds as of 02/28/2007 Ranking By Percentage Fund Percentage 1 Vanguard Total Stock Market Index Fund 71.9% 2 Vanguard European Stock Index Fund 10.4% 3 Vanguard Total Bond Market Index Fund 10.2% 4 Vanguard Pacific Stock Index Fund 4.8% 5 Vanguard Emerging Markets Stock Index Fund 2.7% Total — 100.0% [/ QUOTE ] Fidelity has a solid Total Market Fund and International Fund. I'm sure they have a bond fund too. They don't have an Emerging Markets fund, but the 2.7% is trivial anyway. |
#3
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Re: Index fund decision: Vanguard or Fidelity Target Retirement
The Vanguard Target Retirement fund is clearly better than the Fidelity fund. The $75 may be worth it depending on your investment sum and time-frame. Jeff W brings up a good point: you may be able to duplicate the Vanguard Target Retirement Fund with Fidelity funds. Fidelity's Spartan funds are comparable to Vanguard's funds - they are also extremely cheap. In fact, FSIIX (foreign) and FSTMX (total US) are better than the corresponding Vanguard funds in tax-deferred accounts.
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Re: Index fund decision: Vanguard or Fidelity Target Retirement
so fidelity doesnt charge at all if you buy their own index funds?
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#5
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Re: Index fund decision: Vanguard or Fidelity Target Retirement
[ QUOTE ]
so fidelity doesnt charge at all if you buy their own index funds? [/ QUOTE ] This is correct. [ QUOTE ] In fact, FSIIX (foreign) and FSTMX (total US) are better than the corresponding Vanguard funds in tax-deferred accounts. [/ QUOTE ] Can you briefly explain why this is? Is it just a lower expense ratio? Jeff, thanks for the advice, I will probably do that. My concern is down the road when my Vanguard fund changes its' allocations to adjust for less risk tolerance or any decent-sized change, I'll have to either make my own investing decisions or have to find similar funds to match if I want to approximate that fund and that takes time and effort. -DeathDonkey |
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Re: Index fund decision: Vanguard or Fidelity Target Retirement
[ QUOTE ]
[ QUOTE ] In fact, FSIIX (foreign) and FSTMX (total US) are better than the corresponding Vanguard funds in tax-deferred accounts. [/ QUOTE ] Is it just a lower expense ratio? [/ QUOTE ] Yes. [ QUOTE ] Jeff, thanks for the advice, I will probably do that. My concern is down the road when my Vanguard fund changes its' allocations to adjust for less risk tolerance or any decent-sized change, I'll have to either make my own investing decisions or have to find similar funds to match if I want to approximate that fund and that takes time and effort. [/ QUOTE ] It takes time and effort but not an unseemly amount and it adds .11%+Transaction Fees to your return. In the future, I think the only thing that will change with the Vanguard fund is the percentages allocated to the funds it's invested in--not the selection of funds. Annual rebalancing should be fine. |
#7
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Re: Index fund decision: Vanguard or Fidelity Target Retirement
[ QUOTE ]
Fidelity has a solid Total Market Fund and International Fund. I'm sure they have a bond fund too. They don't have an Emerging Markets fund, but the 2.7% is trivial anyway. [/ QUOTE ] There's FEMKX, but I don't think it's an index fund. |
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