Noobie Fidelity Investments question

[JudyS]

I have my and my husband's IRAs invested with Fidelity. With the recent downturn in the stock market, I figure it's time to rebalance our portfolio (or what's left of it. )

My husband and I have a whole bunch of little IRA accounts (a SEP-IRA, a couple Roth IRAs, a Rollover IRA, etc...), rather than one big one each. Some of these accounts have only one year's (about $4000) worth of contributions.

I wanted to put some of the money into Fidelity's own index funds, but these seem to have a $10k minimum buy-in cost. I can't figure out a way to combine, say, $4k from a Rollover IRA and $6k from a regular IRA to meet the $10k requirement. Is there any way to do this? I would also be happy to just buy a low-cost, no-load index fund from another brand, but I haven't found any offered at Fidelity. Fidelity seems to charge $75 to buy a Vanguard fund, which is almost 2% of one's deposit, if one has only $4k in an account to invest. When I ask Fidelity's online search facility to suggest similar, no-load funds, it comes up with things that aren't index funds at all.

Any suggestions on how to find a suitable fund? (I could just call Fidelity, but I trust the advice I get here more!) I'd prefer a broad-market or international fund to a SP500 fund.

 

[Icarus]

Though you might be able to figure out a way to combine some of them, you probably shouldn't. If you combine them you could lose some future flexibility and tax treatment. I can't elaborate on the details. Dave M probably can if he reads this.

The Roth's definitely need to stay separate.

Have you considered moving your IRAs to Vanguard?

Many funds often have lower minimums for IRA and retirement accounts. Did you check that also?

-David

 

[Tia]

You can also call Vanguard or look them up online https://personal.vanguard.com/us/home and transfer IRA's from Fidelity to Vanguard... no 2% fee this way.

........Fidelity seems to charge $75 to buy a Vanguard fund, which is almost 2% of one's deposit, if one has only $4k in an account to invest......

 

[JudyS]

Thanks for the advice! (And sorry not to reply sooner.)

I could just move everything to Vanguard, however, Fidelity has an office right near my house and I like having the option to ask questions in person. So, I'd rather keep the funds with Fidelity.

I wasn't thinking so much of actually combining the IRAs themselves, as that there might be some way for Fidelity to count the balances in several different IRA accounts towards the $10k minimum, as long as the accounts were owned by the same person. I'll probably give them a call or go ask them about this.

I did look for funds on Fidelity's site that have lower minimums, but was having trouble using their search function. (So, that's another thing I'll want to contact them about.)

 

[mamiecarter]

Right now invest carefully

Fidelity can tell you about setting up separate Roth and regular IRA accounts. There technical advice is quiet good.

However if you buy stock funds right now you are making a bet stocks will not drop more. I would wait until the economy improves and the markets stabilize. Do some reading before you invest in a fund and consider ETFs or individual stocks as opposed to mutual funds when you are ready to invest.

 

[Dave M]

One Fidelity fund you could consider is the Four-in-One Index Fund. Its assets consist of shares in four other Fidelity index funds. The target allocation is 55% in the Spartan 500 Index Fund and 15% each in Spartan Extended Market Index Fund, Spartan International Index Fund and Fidelity U.S. Bond Index Fund.

Although the normal minimum investment is $10k, it's $2,500 for retirement accounts. The expenses are low (0.23%), there is an annual $10 fee if your balance is under $10,000 and it's a no-load fund. Click on the "Fees & Features" tab at the link for much of that info.

The fund also gets four stars from Morningstar

 

[mamiecarter]

Look how fidelity mutual funds have done recently

Fidelity Stock funds lost 30 to 50 percent just like the overall market. It is like buying a timeshare from the developer to buy into a fund right now.

If you must jump into stocks right now (try not to, things will get worse. You don't need to loose more money right now.) look at Exchange traded funds that trade like stocks and have lower fees and expenses. Set up a fidelity brokerage Ira or two and you can even have Fidelity buy treasury bonds inside it. And of course stocks, bonds,ETFs and mutual funds as well.

 

[JudyS]

One Fidelity fund you could consider is the Four-in-One Index Fund. Its assets consist of shares in four other Fidelity index funds.....

Dave, that fund sounds very much like what I'm looking for! Thank you!

...if you buy stock funds right now you are making a bet stocks will not drop more....

This is definitely true -- when buying stocks, you always take a risk that the prices will drop. But, I believe in taking a "contrarian approach" -- that is, buying when prices are low. After all, the goal is to buy low and sell high. If I buy now, I've already done half of that. I figure that since Warren Buffet uses this approach, it can't be too bad of an idea!

Actually, I recently realized that I've made a major mistake in managing my and my husband's retirement accounts. We tend not to have very stable income -- my husband makes most of the household income, but he works generally on a contract basis, and some years he makes a lot more money than other years. The retirement advice I've always read is to keep gradually investing money in stocks (along with increasing amounts of bonds and money market funds as you approach retirement.) So, in years when we had decent income, we'd put some money into stocks in an IRA. In years when we had little income, though, we didn't invest because we couldn't afford to.

What I've now realized is that the years we had income have tended to be years in which the economy was doing well overall. (I sometimes think my husband's employment status would make a great "economic indicator" -- if he's got steady work, the economy's in good shape!) Since we invested during years when the economy was doing well, that generally meant the stock market was high as well, and we were buying stocks at high prices. So, the stocks we bought are now mostly worth less than when we bought them.

I now plan to take a new approach -- in years when we are doing well financially, we will put money in IRAs, but in a money market fund, not stocks. Then, we will move the money to stocks when the stock market drops. I just wish I had thought of this 10 years ago! I feel a little dumb not to have foreseen the problem of investing only in years when the economy is strong. But then again, I've never seen any investment gurus mention this problem either, so maybe I shouldn't be too hard on myself.

 

[TerriJ]

Fidelity and Vanguard are both really easy to deal with, you could leave your current account at Fidelity and move/consolidate the other IRAs with Vanguard. Their phone counselors are helpful.

 

[DonnaD]

convert IRA to roths while value is down

You might think about converting low valued IRA to Roth IRA while the values are lower, thus minimizing impact of taxes now and in the future. Taxes will go up in the future and you may net more of your retirement income in the future by shielding it with a Roth fund. We have been converting our IRA's gradually over the years so that our retirement income will have minimal taxes. Half of your social security is taxable, so if your other income is from a Roth, you may not have any tax due. We all know that our government spends our money so wisely!!
DonnaD