I am 23, know nothing, and just put lots of $$ in some freedom funds

[prepare4glory]

Fidelity Freedom Funds 2030 and 2040, to be specific (and 25 and 75%, respectively).

The story is since I have money from poker and parents I can place the maximum amount I am able to of my salary into my 403(b) from work. That amount is not amazing, but it's 5 figures.

I know little to nothing about investing. My money is currently residing in a high interest savings account online until I get a better idea of what to do with it. I like using the 403(b) from work since I don't get taxed on it (I understand this part of it).

But basically, what can anyone tell me about these funds? Are there perhaps better or, at the very least, similar, funds I should consider or is this a decent way to start a retirement plan for a 23 year old?

Thanks

p4g

[gull]

Despite being uninformed, you made a better decision than most people. The Fidelity Freedom funds are much better than a savings account, but you can still do better. Vanguard's Target Retirement funds are almost the exact same but charge a significantly lower expense ratio (like .2% instead of .7% if I remember correctly).

[prepare4glory]

Hi Gull,

I guess when I say I know nothing that's the truth. But I've also been talking to my banker about this and he's the one who suggested these funds for me (fwiw, my father suggested i put lots of $ in the Fidelity Contra fund and I just checked and it was apparently so good they are not selling anymore. damn). So the credit for these funds go to him (banker). I'm glad to hear he didn't lead me stray (USBANK ftw).

I don't know what this 'expense ratio' is but I'm assuming that it corresponds to how much I'm paying the people who are doing the dirty work for me. Since I'm young and dumb I think I'm content sticking it out with the funds I have, at least for a little while, to get a feel for how this stuff works (my employer allows us unlimited movement, so if I ever want to change I have that option, which is great).

Anyway, thanks.

p4g

[Tupacia]

P4G,

My advice to you is to stick your money in an index fund (Vanguard is the best) as the vast majority of mutual funds lag the major benchmarks over a long period of time. Since your target retirement dates are far in the future, a 100% equity allocation is probably your best bet anyways so don't pay the management fees associated with the Freedom Funds when you can manually adjust your asset allocation as you see fit. Best of luck.

[gazarsgo]

the freedom funds are awful, as even the 2030-2040 funds (when I looked at them back in 2004...) have a sizeable amount of money parked in bonds and cash IIRC. It's not earth shattering but it's pretty bad to be that conservative with that long of a time line. I imagine yields have picked up since then, but...

If you're stuck with the money in a 403b you're probably limited to a very specific list of Fidelity funds. Just pick the index fund with the lowest expense ratio (look at the prospectus). If it's not diversified by asset class (large-cap/mid-cap/small-cap) I'd pick a mid-cap index fund and a small-cap index fund and split about 40/60 between the two.