FDRXX

[Guest jalkelly]

I have just begun to save for retirement. I am going to be 26 next month so from what I have read I should be investing agressively now, is this thinking acurate? Fidelity basically asked me 5 questions to determine what fund was right for me and I responded that my risk tolerance was high, and that I could take some big swings.

I just recently decided that I should start a roth IRA. My companys 401(k) is through Fidelity so naturally I decided to turn to them. The IRA that I have already set up invests in FDRXX. A quick google search provided me with a link to their prospectus:

http://www.fasttrack.net/ProspectusPageDis...?Sym=FDRXX&

Now to me it might as well be in Japanese, however a few things stuck out; such as the returns over the last 10 years. The average return is 3.7% a year. Now that doesn't sound too hot to me. Is this fund one that I should be investing in at this time? Any quick thoughts you have on Fidelity IRA's as well as this specific fund would be greatly appreciated.

Thanks!

[Guest Guest99]

FDRXX is not a bad choice, but to tell you the truth, My advice is to go through one of Fidelity's Freedom Funds, which calculates the number of investment years before you retire.

You have time on your side. You’re a young guy. You can afford the luxury of being aggressive, and at your age, you should. The great thing about Fidelity's Freedom Funds is that as you get closer to your retiring age, the funds become less aggressive. Also, you don’t have to monitor them as close…

Just my 2-cents.. Good luck to you.

[John G]

Actually, FDRXX is in my opinion a bad choice for you.

This is a simple money market account - you are getting a low interest rate. This is not a bond or stock fund. It basically has IOUs. As such, your expected returns are barely above the rate of inflation. So, put your money in now and you have about the same buying power down the road. Very safe.... until you consider the corrosive effects of inflation. This fund choice is not likely to support your long retirement goals because of its meager returns.

It is hard to figure how Fidelity could point you to this account given you have many decades of investing ahead of you and you said you had some tolerance for risk. Perhaps this choice was forced because you did not meet the minimum begining contribution for some funds. If you have a reasonable tolerance for risk and if you understand that equities (aka stocks) go up and down but over the long haul tend to perform better than simple IOUs... then you should switch funds.

Fidelity has hundreds of funds. You are looking for probably just 1 for now. When you assets grow beyond perhaps 10,000 you might want to find a second choice. Note, some folks choose a general purpose fund and may stick with it even when their assets are in six or seven figures because the fund itself is diversified. I would stay away from the narrowly cast Fidelity funds - sector funds (like metals or health care) or narrow geographic funds (like those that just focus on Canada or Japan).

"You're in charge, so the choice is yours".

Here are three examples of Fidelity funds. They represent a 60%, 85% and nearly 100% commitment to stocks. Each have been in the top 1/4 of their catagory in performance and have below average annual expenses. They have $2,500 minimums for retirement accounts. No recommendation here, these are just examples.

Fidelity Balanced (FBLAX):

always at least 60% stock, currently 65% stock, 35% bond

0.61% annual expenses

90% USA based investments

3200 holdings (top ten account for 13% of fund)

Fidelity Four in One (FFNOX):

This fund is comprised of four Fidelity Fund - 55% Spartan 500, 15% Intenational, 15% Mid/small size companies and 15% bonds.

annual expenses of 0.23%

Fidelity Disciplined Equity (FDEQX):

This fund has 99% of its holdings in equities.

About 93% are domestic companies (USA based)

annual expenses of 0.93%

Just 100 companies so this is a concentrated fund, top 10 holdings equal 32% of total assets.

Remember, "you're in charge" and you need to dedicate a 1 or 2 hours each month to learning more about investing and monitoring your assets. A subscription to Money or Kiplinger Financial magazines is a good start on your education.

While the prospecti are mandated by SEC and definitive explainations of all things Fund, you should spend more time on line looking at the fund summaries Fidelity provides. Some folks call these Report Cards. Yahoo Finance and Morningstar are other sources of fund data.

Fidelity Freedom Funds are part of the recent wave of "Target" funds developed by the industry to address the concerns of novice investors. They are mostly gimics, and frankly, to the extent that they encourage novices to not think about what they are doing... well that's a dis-service to the customer. Anything that puts you on autopilot (mixing the balance between equities and bonds) is making assumptions about what is best for you. I content that you should be doing that thinking. You can search the word "Target" on this message board and read other comments about these funds.

[masteff]

I'm w/ John that FDRXX is a bad choice in general for you. The only condition I'd make on that opinion is that we don't know what your other investments are. So if you have lots of aggressive investments in your 401(k), then a little bit of money in a cash option is not as bad as otherwise.

Since you have a Fidelity 401(k), you should look on NetBenefits under Tools and Learning. Explore what they have to offer as far as education and tools. There's also good stuff on fidelity.com.

At 26, you have 40-60 years before you'll need this money to live on (some earlier, some later; you don't just suddenly spend it all at once, but over the whole of your retirement). And as both posters have said, w/ more time, you can be more aggressive overall because in general you can expect short term downturns will be erased by long term performance.

At the very least, I'd point you towards an S&P500 index fund long before I'd suggest a cash fund like FDRXX. But I'd rather see you research some other funds that are more aggressive. At first glance, John's mentioned Fidelity Four in One bears looking at (I personally like it's higher international exposure).

Hmm... as a Fidelity 401(k) account holder, you can also call them and get extra help in selecting a fund. Call your plan's 800 number for Fidelity, after logging in, push zero for a phone rep, tell the phone rep that you'd like to speak to an investment specialist. They will transfer you to a specialist who can do 2 things, 1) review your choices in your 401(k) and 2) help you select a fund for your IRAs (both roth and regular) that will work in balance w/ your 401(k) investments. (If your IRAs aren't w/ Fidelity, I suggest you look at it because you can generally get waived annual fees by being a 401(k) account holder w/ them; ask Fidelity for more info if needed.)

[JanetM]

Who is their right mind would stick a 26 year old in a cash fund. If you are an investing phobic follow JohnGs advice and and go to other Fidelity fund.

[Guest jalkelly]

Thanks to all who took the time to reply, I really appreciate your advice. I am definitely going to take an active approach in educating myself; John G I already ordered a subscription to Kiplinger. This forum has provided me a wealth of information so far. I am looking forward to being able to feel comfortable making these decisions myself, but until then I am glad to know that you all are here for support.

Keep up the great work!

[John G]

Post again if you have more questions.

There are plenty of "forums" on the web... although the quality varies considerably. On the low end of the quality range is Yahooland. Higher up on the quality ladder is www.valueforum.com (VF). I participate in this forum with about 1400 total members. It is probably best for someone with a medium to high level of investment experience. Its a fee based message board - what you get is a well organized a disciplined discussion group. Because of the fee system and internal policing by members, touting, bragging, vulgarity, insults, and vapid posts are all but eliminated. Members include professionals, former executives, retires, a couple of hedge fund players, and plenty of streetwise investors. This group does not cover medicine, computers, technology or communications very well. Rather the focus is more on natural resources, dividend paying stocks, global companies, shipping and to some extent momentum/sector investing.

There are other sites like silicon investor, investor village, etc. I would not be surprised if almost every sector has some message board for investors if you look hard enough.