Have you ever made an investment decision that you looked back on later with chagrin, or maybe even regret? Today I’m offering a look at the beginnings of our retirement investments.
The topic makes me feel a bit sheepish, ’cause we went with what seemed to make the most sense (based on modern portfolio theory). Now that our life, retirement, and financial expectations are changing, we’re reevaluating financial decisions. That includes taking a good look at our cute little target-date retirement fund.
The Beginnings of Retirement Investing
I’ve been an investor with Fidelity for over a decade. Check that, nearly two decades. I love their customer service, their website’s convenience and helpfulness, and most of all their wide range of well-performing funds.
When my husband first started his Roth IRA we had several young children. We were sleep deprived. We knew that investing for retirement was necessary, but we didn’t want the hassle of adjusting our fund picks as retirement neared.
In the interest of ease over performance we chose to put our automatically drafted contributions into a target-date fund. If you want to know more about these types of funds, including their pros and cons, Barbara Friedberg has written a great article describing their use.
Reevaluating our Investments
Now we’re reevaluating our investments. We realize that those assets could be doing better in another fund. We’re not going to sell and pay capital gains, but rather increase our portfolio a’la Mr. Ramsey.
To answer your question, no, I’m not a DaveBot. We don’t agree on everything. I just think the guy makes a lot of sense. He knows how to encourage people to act according to their heads and hearts when so many advisors leave out the behavioral component of finances.
At present my husband’s IRA (keep in mind this is only a portion of our retirement) is singularly in FFFFX, Fidelity’s Freedom Fund 2040. This is a target-date fund that slowly decreases in risk as it nears a target retirement year of 2040. I’m realizing that sticking with this fund will mean throttling down our risk prematurely, as we expect to live long past that date (forever, mwahaha!)
Considering Diversification & History
I love that by using mutual funds we’re diversifying our already basket-ed investments (401k, IRA, etc.). One could argue that the waters are getting too muddy, but I disagree. The returns are great. So what if I’m not making 20% yearly? Here’s the best part; the returns are good for the long term. We’re in this race for the long-haul, baby.
We’re also considering past history as we research prospective investments. History isn’t everything, but it’s wise to consider past returns and weigh them (or their lack) against investment objectives.
Here are the funds we’re considering adding:
- FBGRX (large growth) – Growth
- FGRIX – Growth & Income
- FDGRX – Growth (inching towards aggressive growth)
- FDEGX – Growth/aggressive
- FDCAX – aggressive research this, history puts it above S&P
- FMILX – aggressive*** crazy high returns – the cool kid at the party
- FEMKX – extremely aggressive – too crazy for us?
- FIGFX – international (conservative)
- FMCSX – growth and income? (madcap domestic) <— Ha, ha. That should say midcap. I find it hilarious!
We ended up purchasing Fidelity New Millennium Fund (FMILX) and I am sooo excited! Mutual funds are great investments. Purchasing a mutual fund doesn’t need to be a scary or intimidating process. We’re happy to add FMILX to our little portfolio. Now to sit back, relax, and check on him every few years. **You did know that funds are boys, right?? Stocks can be either gender, but funds are usually males. Just thought you’d want to know.
Have you ever heard of Fidelity New Millennium Fund? What’s your own favorite fund pick?