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One Fund for A Small IRA

Mrs. Ruffles has a fairly small (<$7.5k) inherited IRA at Fido from which she has to take an even smaller RMD (at least in the years when they’re required). Except for the RMDs, it hasn’t been touched since she inherited it and is all in FMAGX (probably originally from the Peter Lynch era). I’d like to move it into one fund that won’t have such massive potential drawdowns. With this size, I don’t think it’s worth working with too many moving parts though I’ve put three years of RMD money into a cash equivalent.

I’ve been considering JABAX, BALFX, VLAAX which are all NTF at Fido. Any comments or other suggestions?

Comments

  • So you've got 3 years of RMD in cash? You can handle a little volatility then. How about going with USMV? Of course PRWCX, a real favorite around here, and with very good reason, might be a good choice if you could get into it.
  • I wanted to get into VLAAX, but was trying to do it directly with the Value Line funds. They can't see the sunshine, because their heads are stuck way up where it's impossible to view it, if you know what I mean. Through an intermediary, it might be a very different story. Their numbers over time look rather extraordinary. If you're still willing to look at some others, we also own BRUFX. And PRWCX has been mentioned. It's closed, though. Dunno how you might get in. All of the funds I've mentioned are balanced: both stocks and bonds.
  • @MrRuffles

    The first 3 funds in the below chart are from your note. I've added FBALX because of personal bias and BRUFX is added, as it was mentioned. FPURX is a decent fund, but not charted; as it and FBALX run very close over the long term. As the account is already within Fido, I would stay there for the many choices, quality service and to not add another firm to keep paperwork simple. BRUFX is fully a stand alone fund/organization and would take you away from flexibility with fund exchanges into the future.
    None of these balanced funds will keep one away from a draw down from a large market correction.
    Hopefully, the chart will provide a decent visual for your purposes.

    10 year chart for total returns, JABAX , BALFX , VLAAX , FBALX , BRUFX

    My 2 cents.
    Catch
  • Thanks all.

    BRUFX is out because of its standalone status. I have PRWCX in my IRA but there’s no way to get it in this account because of the soft close.

    @catch22 I know I can’t avoid a drawdown but I want to try and keep it manageable to one that will recover in a reasonable amount of time. While this account is a tiny portion of her portfolio, she doesn’t like seeing the balance drop precipitously. She’s happier hitting a solid double than taking a chance on striking out going for a grand slam.

    As she’s still working, she doesn’t need (or even want) the RMD (and its taxes) from this or her other much larger inherited accounts but just wants to make sure the entire nest egg stays relatively healthy until she reaches retirement.
  • You could always receive the RMD as shares “in-kind” and transfer to a taxable account. Or even just take the cash RMD and use it to purchase a tax friendly fund in said taxable account. Of course, you would have to pay the taxes from another source if you choose the in-kind method.
  • If I were making such an investment today I would choose MSFBX.
  • MrRuffles said:

    I know I can’t avoid a drawdown but I want to try and keep it manageable to one that will recover in a reasonable amount of time. While this account is a tiny portion of her portfolio, she doesn’t like seeing the balance drop precipitously. She’s happier hitting a solid double than taking a chance on striking out going for a grand slam.

    As she’s still working, she doesn’t need (or even want) the RMD (and its taxes) from this or her other much larger inherited accounts but just wants to make sure the entire nest egg stays relatively healthy until she reaches retirement.

    This helps quite a bit in understanding the situation. I gather that Mrs. Ruffles did not inherit these IRAs from Mr. Ruffles (you), so she can't roll them into her own IRAs.

    If she inherited multiple IRAs from the same person, she could combine them into a larger inherited IRA. That wouldn't solve the problem of having to take RMDs, but it could simplify and/or give her more flexibility.

    As @Graust points out, thinking in terms of investment stability, she can virtually ignore the fact that there are RMDs. RMDs are more of a tax event than a forced change of investments.

    Regarding specific investment suggestions to achieve "doubles", you've already gotten some good suggestions and I'm sure you'll get some more.

  • wxman123 said:

    If I were making such an investment today I would choose MSFBX.

    Too rich for Mrs. Ruffles’s blood - suffered a 40% drawdown in 2008-09
    msf said:


    If she inherited multiple IRAs from the same person, she could combine them into a larger inherited IRA. That wouldn't solve the problem of having to take RMDs, but it could simplify and/or give her more flexibility.

    I neglected to mention that this is a Roth IRA, while her other inherited accounts are Trad IRAs and 403(b)s. Converting the Roth IRA to a Trad IRA would have its own unwanted tax consequences.
  • edited September 2020
    PLBBX is a balanced fund with no transaction fee at Fidelity.
  • Likewise, I neglected to mention that even IRAs inherited from the same person can't be combined if they are of different types. However, there may still be a way to combine accounts (again, assuming inherited from the same person), because some of them are 403(b)s.

    Here's a 2016 article from Kitces that covers rolling over inherited 403(b)s. Take it with a grain of salt, as the more recent SECURE Act has changed some things (e.g. eliminating stretch IRAs if the original owner died after 2019, but extending the non-stretch period allowed from five years to ten years).
    https://www.kitces.com/blog/non-spouse-beneficiary-stretch-of-inherited-ira-and-401k-or-403b-employer-retirement-plans/

    One of the things Kitces points out is that one has (or had?) the option of doing a rollover Roth conversion of the 403(b). That is, rolling the inherited T-403(b) directly into an inherited Roth IRA. Of course taxes would be due upon conversion. This could provide Mrs. Ruffles a way to increase the assets in that small inherited Roth IRA, assuming both the 403b and Roth IRA were inherited from the same person.

    Of course this would not eliminate RMDs.

    Even if the 403(b)s could not be combined with existing inherited IRAs (Roth or Traditional), rolling them over could still simplify administration. OTOH, Mrs. Ruffles may have investment options in the 403(b)s that are unique to them (e.g. stable value or TREA, or R6 share class of funds, or ...).
  • TheShadow said:

    PLBBX is a balanced fund with no transaction fee at Fidelity.

    That’s one that’s slipped below my radar but the downside capture of 125 gives me pause.
  • Besides the list of good funds identified above, only other would be FBALX.
  • Is there a reason You need to move this fund to another? I show it has had a 35% return over the last year! I my opinion if it isn't broke don't fix it.
  • edited September 2020
    Gary said:

    Is there a reason You need to move this fund to another? I show it has had a 35% return over the last year! I my opinion if it isn't broke don't fix it.

    It also had a maximum drawdown of 58% in 2008-09 and took 6 years to recover. Time to take profits off the table and move it to something a bit less volatile.
  • edited September 2020
    dl

  • MrRuffles said:

    wxman123 said:

    If I were making such an investment today I would choose MSFBX.

    Too rich for Mrs. Ruffles’s blood - suffered a 40% drawdown in 2008-09

    Not according to Yahoo, MSFBX has been steady from the data I have seen.
    https://finance.yahoo.com/quote/MSFBX/performance?p=MSFBX
  • Plus I think some international exposure is warranted at this time.............
  • wxman123 said:

    MrRuffles said:

    wxman123 said:

    If I were making such an investment today I would choose MSFBX.

    Too rich for Mrs. Ruffles’s blood - suffered a 40% drawdown in 2008-09

    Not according to Yahoo, MSFBX has been steady from the data I have seen.
    https://finance.yahoo.com/quote/MSFBX/performance?p=MSFBX
    MSFBX, how could I resist?:-)
    Look instead at 2007-2008

    Yahoo:
    https://finance.yahoo.com/quote/MSFBX/history?period1=1197244800&period2=1227225600&interval=1d&filter=history&frequency=1d

    M* chart

  • VLAAX has good recent performance and is catching the attention of many. I want to point out this fund holds a weight of 47 in the growth arena per M* which is much higher than an avg 50/70 fund with a yield much lower 0.38% than an average balanced fund. The P/B is also indicating higher than avg at 4.09. Not saying you should buy it and not saying you should not buy it. I am suggesting you understand what you own.
  • wxman123 said:

    MrRuffles said:

    wxman123 said:

    If I were making such an investment today I would choose MSFBX.

    Too rich for Mrs. Ruffles’s blood - suffered a 40% drawdown in 2008-09

    Not according to Yahoo, MSFBX has been steady from the data I have seen.
    https://finance.yahoo.com/quote/MSFBX/performance?p=MSFBX
    Got the data straight from the MFO Premium Profile. No need to go outside the family.
    wxman123 said:

    Plus I think some international exposure is warranted at this time.............

    Nice idea but not really necessary as she has a good chunk of international in her other accounts.

  • My choices for ONE fund for small IRA.

    GAVAX
    HSTRX
    PRWCX/RPGAX/TMSRX

    I own all of them for TRP funds for my MIL.

    I do own smattering of VLAAX which I plan to add to after taking tax losses in other funds, however it would not be my 1 fund. When I imagine 1 fund I cannot think "long term". I have to think year over year and the TRP funds are as aggressive as I would get.
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