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Core fund position ideas- Fidelity

edited April 2011 in Fund Discussions

I am new to investing, having only really begun researching over the past six months, and prior to that making contributions to 401K.

I recently opened a Scottrade account where I purchase stocks and have a Fidelity account where I hold my mutual funds. I have no allegiance to either but I had the fidelity account due to a rollover 401k and was convinced by a friend that Scottrade is less risky about how they hold their/my cash. I have individual accounts at both brokerages.

One thing I do like about Scottrade compared to Fidelity, is that they allow smaller contributions to funds after the min is met.

Anyway, I intend to hold the majority of my investments in mutual funds and for now they will be held in the fidelity account. The goals of these investments are both retirement and growth. I will dedicate a portion of all assets to retirement at some point.

What are some recommendations for core position ideas, starting with Fidelity funds and then others. If other, what are the reasons to look outside fidelity in terms of a core position?

Current non-retirement fund investments approx = %50 Cash, 20% TGLDX, 13% DEFIX, 17% ARIVX

I am reading "Common Scenes on Mutual Funds" as a primer on the topic.

Thanks in advance



  • This link provide some fidelity commentary on their market insight:
  • I am curious what is more risky about cash in Fidelity vs Scottrade? What was the reason of your friend?
  • My friend didn't suggest that Scottrade was safer then Fidelity but rather, in his opinion, a safer in general because they don't invest in subprime mortgages or other collateralized debt obligations.

    I really didn't research it beyond that and the $7 trade fee. My experience with ST has been positive. They seem to be a bit quicker to settle transactions then Fidelity. However, there are things about both that I like and that's why I have the separate accounts.

  • edited April 2011
    Fidelity has $7.95 trades. A bit higher than Scottrade but very competitive. Fidelity also offers 31 no-fee ETFs that cover major asset classes.

    Having said that your friend's broad brush of Fidelity is probably unfair. Fidelity is not a single company. There is Fidelity as a brokerage, Fidelity as an asset management company, Fidelity as research services provider. Scottrade is only comparable with Fidelity in brokerage services category. And in this category, Scottrade is only comparable to Fidelity in the services they offer and what they do with the cash account (money market fund and cash sweep accounts). I personally do not see Scottrade is better than Fidelity in this respect.

    After the scare of 2008 where 1 money market fund broke the buck, the quality and duration of money market funds have been improved. Even the fund that broke the buck was able to return 97 cents on the dollar. Money market funds at major houses were not at risk. Besides, in a multi-dimensional company like Fidelity, the parent company can support the money market fund because they have multiple streams of income while a company like Scottrade does not.

    Anyhow, much bigger money losers during the financial crisis was not the money market funds but supposedly conservative ultra short bond funds (some had names like YieldPlus etc). Many funds in this category were investing in these higher yielding mortgage securities to generate dividend far above the returns possible from money market accounts and funds. In the end, those lost a lot of money. Once again, of two supposedly similar investments, one is paying much more, it must be investing much more riskier investments. This is especially true for fixed income.

    Does Fidelity offer mutual funds that invest partially in riskier assets? Most likely yes, just like many popular bond funds in the industry. In most bond funds, these assets are a tiny percentage. Junk bond funds, some mortgage bond funds are likely to invest in heavier percentages. But it is understood these funds are not cash equivalent.

    I personally do not have a problem with CDOs and Sub-prime bonds as long as the risk is properly managed and percentage invested does not cause fund to run into liquidity issues when market panics. In particular, some distressed asset hedge funds make a killing buying these on pennies on the dollar and selling much higher. It is not only what is being invested on, but at what price!

    Those sub-prime mortgage bonds in Fed balance sheet bought from Bear Sterns, AIG has been returning a good yield and Fed is most likely to be positive in the end. Even AIG wanted to buy back the book from Fed because they are a good deal now.

    Anyway, sorry about my rambling. I think if you invest in Fidelity and avoid Fidelity bond funds, you are as safe as you are investing in Scottrade (that does NOT mean you should avoid Fidelity bond funds, I'm saying this so comparison would be more apples to apples).
  • Three Fidelity funds that I've owned for a long time:

    Low-Priced Stock, managed by Joel Tillinghast, certifiably the smartest guy in the room. In most cases, the smartest guy in the stadium. Occasionally, the smartest in the state. I've never made money by betting against Mr. Tillinghast's ability. Originally a small cap fund which could only buy stocks whose shares were priced under $5, it now has a sprawling portfolio (nearly 900 names) that's about 50% US stocks, 35% international, and a bunch of cash. He still has 10% of the portfolio in microcaps, despite a $35 billion portfolio.

    Contrafund, managed by Will Danoff, an $80 billion behemoth that continues to dance with the grace of a far smaller fund. The fund holds large, high-growth companies, about 80% US and 20% international. Like Low-Priced, the portfolio is huge: about 500 names. In 20 years at the helm, Mr. D has smoked the competition and his benchmark index. The fund's burgeoning size led him from small caps to a large cap, low-turnover style. As yet, he's still making the competition look silly.

    Strategic Income, run by Joanna Bewick and Chris Sharpe, is a multi-sector bond fund. Its portfolio is unique in mixing only very high quality issues and very risky ones. It has a"neutral" allocation of 30% U.S. government debt, 40% U.S. junk bonds, 15% developed-markets sovereign debt, and 15% emerging-markets bonds. They tilt the portfolio toward quality or risk, depending on the market. They draw on a really big bond team and have generated 9% annual returns for a long time, which is great for a bond fund.

    For what it's worth,

  • edited April 2011
    I really like Fidelity Low Priced Stock fund at fidelity (FLPSX). Originally a small cap fund, this fund is now more of a global mid cap offering. Good risk/reward balance.

    I like Fidelity Growth Company fund (FDGRX). It is a closed fund however. Almost all of Fidelity closed funds re-opended in 2009 but this one remained closed. It is available through some 401k plans.

    For bonds, Fidelity Strategic Income bond fund (FSICX) as an all-around bond fund. It incorporates, government bonds, high yield, foreign developed and foreign emerging.

    Another good fund is Fidelity Real Estate Income (FRIFX) as a good REIT fund. It invests not only REIT stocks but also bonds, preferred and convertible issues. Less volatile than most REIT funds.

    Fidelity Canada (FICDX) and Fidelity Global Commodity fund (FFGCX) s are also good funds to consider.

  • Howdy,

    Here is a Fidelity Work Horse fund:
    Fid. Capital & Income, FAGIX

    Listed as, and indeed a High Yield bond; that also holds 12-20% in equity holdings, depending on market conditions. This fund, not unlike 95% of mutual funds available is subject to market downturns, too; but with the exception of June, 2008-May, 2009 we have had monies in this fund since 1981.

    The M* link here will let you review the YTD, 1, 3, 5 & 10 year total returns and I suggest that anyone compare their favorite equity fund; with the exception of narrow sector funds against this stellar return record.

    FAGIX does and has had commentary and reviews from the financial world, over the years; but is one of those funds among the many 1,000's, that in my opinion, does not receive much flag waving for its efforts.

    Take care,
  • Hi Investor, just wanted to point out that not just one fund broke the buck in 2008. The reserve fund just happened to be the one without a parent or an affiliate to bail it out. Many other organizations "made whole" their MM funds by shoveling tens and hundreds of million dollars into them. Those who follow earning reports of banks and asset managers saw those charges to income in the quarterly and annual reports.
  • FYI - Just b/c you have an account at Fidelity, doesn't mean you can only own Fidelity mutual funds. Fidelity offers mutual funds from about 240 families.
    edited April 2011
    I suppose that suggestions of non-fidelity core funds would be a good thing too. What I am trying to avoid are transaction fees and excessive expense fees.

    It seems, in many cases, that fidelity offers their own funds at lower fees, but I would invest in any well managed fund with lower fees.

    I really don't think I want to start building and contribution to my position with a fund, Fidelity or other, that Fidelity charges a transaction fee of $75, but I would like to hear what other have to think.


  • Well, nobody likes to pay excessive fees. In some cases paying a higher expense ratio for a "better" fund has paid off in the past. I would say that some load funds are good options if there isn't a better no load alternative. The bottom line still matters.

    Fidelity has over 1600 mutual funds that are no load and No-Transaction-Fee. About 215 of those are Fidelity "managed" funds.
  • I agree some funds were supported by the parent company in the form of purchasing some of the illiquid assets or basically reducing costs charged to investors to 0 (while it still cost to the company something). But when the dust settled, only funds managed by Reserve funds has broken the buck and investors in others did not have to deal with it.
  • The never ending problem is that too many "better" funds of the past did not pan out to be better funds of the future. Expenses are guaranteed. Future returns are not.
  • I agree.
  • I love NTF's for building a position or even a portfolio, but you have to ask yourself "Why are some MF's NTF and others aren't". To get on an NTF list with a brokerage the mutual fund company must pay the brokerage a fee (typically 40 basis points of the AUM through the brokerage). This fee is then passed onto the individuals through the mutual fund expense ratio. So, there is no free lunch.

    I didn't mean to highjack this thread. Here are a few suggestions for Fidelity NTF core positions:

    EXDAX - Manning & Napier Pro-Blend Cnsrv Term S
    EXWAX - Manning & Napier World Opportunities
    HIINX - Harbor International Inv CL
    ARTGX - Artisan Global Value Inv CL

    Fidelity screens for funds with NTF, lower ER, and good returns and touts them as their fund picks:

    They also list some funds lists from others (see top left section on this page):

    (looks like you have some nice positions in your non-retirement account)
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