Need Help--Fidelity Puritan or Mimic With Index Funds

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choral54
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Need Help--Fidelity Puritan or Mimic With Index Funds

Post by choral54 »

I have some money to invest in my brokerage account and it will be to the tune of $375,000. My advisor at Fidelity suggested I put my money into either Fidelity Balanced or Fidelity Puritan. About a year ago, someone on the forum suggest maybe doing a 30% Growth Index, 30% Total Stock Index, and 40% Total Bond Index. Would you still recommend doing this balance for my brokerage account?

I am going to be taking a 403 (b) and investing in their fixed account guaranteed 2.5% to take the place of my outside Money Market which is paying .9%. I will be putting my mutual fund money in the 403(b) into my brokerage account for a type of sideways move.

Any suggestions would be appreciated before I pull the trigger and do the move!
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David Jay
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Re: Need Help--Fidelity Puritan or Mimic With Index Funds

Post by David Jay »

Why would you want to copy the Puritan fund when it has drastically underperformed a Total Market fund over the last 10 years?

Image
If you had put $10,000 into each 10 years ago, you would have $30,000 in Puritan and $40,000 in Total Market.
Last edited by David Jay on Wed Jun 23, 2021 11:35 am, edited 1 time in total.
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Stargazer65
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Re: Need Help--Fidelity Puritan or Mimic With Index Funds

Post by Stargazer65 »

I would think you should just pick 2 or 3 total stock and bond index funds in the Asset Allocation you want. You could save half a percent on expense ratios with no extra work.
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David Jay
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Re: Need Help--Fidelity Puritan or Mimic With Index Funds

Post by David Jay »

choral54 wrote: Wed Jun 23, 2021 10:27 am I have some money to invest in my brokerage account and it will be to the tune of $375,000.
Is this in a taxable account?
choral54 wrote: Wed Jun 23, 2021 10:27 am I am going to be taking a 403 (b) and investing in their fixed account guaranteed 2.5% to take the place of my outside Money Market which is paying .9%. I will be putting my mutual fund money in the 403(b) into my brokerage account for a type of sideways move.
This sounds like a good strategy for your fixed income.
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
scguy613
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Re: Need Help--Fidelity Puritan or Mimic With Index Funds

Post by scguy613 »

David Jay wrote: Wed Jun 23, 2021 11:09 am Why would you want to copy the Puritan fund when it has drastically underperformed a Total Market fund over the last 10 years?

Image
If you had put $10,000 into each 10 years ago, you would have $30,000 in Puritan and $40,000 in Total Market.
The Puritan fund contains 25-30% bonds, so should be expected to have lower returns than total stock market. If the OP wants bonds included, I would do total stock market + a total bond market fund mix.
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David Jay
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Re: Need Help--Fidelity Puritan or Mimic With Index Funds

Post by David Jay »

scguy613 wrote: Wed Jun 23, 2021 11:43 amThe Puritan fund contains 25-30% bonds, so should be expected to have lower returns than total stock market. If the OP wants bonds included, I would do total stock market + a total bond market fund mix.
It now appears that they want to put fixed income in their 403b, which I think is a good plan.

Choral54: this is the reason why posting your overall portfolio is useful, so we can understand all the inter-working parts: viewtopic.php?f=1&t=6212
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
ROIGuy
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Re: Need Help--Fidelity Puritan or Mimic With Index Funds

Post by ROIGuy »

David Jay wrote: Wed Jun 23, 2021 11:09 am Why would you want to copy the Puritan fund when it has drastically underperformed a Total Market fund over the last 10 years?

Image
If you had put $10,000 into each 10 years ago, you would have $30,000 in Puritan and $40,000 in Total Market.
That's comparing a 100% stock fund to the Puritan which is about 30% bond. It's naturally going to underperform the total stock market fund.
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retiredjg
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Re: Need Help--Fidelity Puritan or Mimic With Index Funds

Post by retiredjg »

The Puritan fund is actively managed (not a great choice for a taxable account), it is tilted strongly toward growth stocks (chasing market performance that will eventually go away) and a good deal of the bond in the fund are junk bonds. Add to that the high expense ratio.

I suggest you build your entire portfolio, not just this one account, around the basic Boglehead 3 fund portfolio (all the US stocks, all the foreign stocks, and intermediate term bond funds, tax-exempt if your tax bracket is higher). This would be lower cost, higher quality (in the bonds anyway) and more tax-efficient when held in a taxable account.

I looked over your older posts and you have asked similar questions several times in the past. However, you have never really provided enough information for people to actually help you make these decisions.

If you want good suggestions, you need to tell us more about your situation. I know that can be a big task, but people here can help you do this if you want.
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grabiner
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Re: Need Help--Fidelity Puritan or Mimic With Index Funds

Post by grabiner »

retiredjg wrote: Wed Jun 23, 2021 12:10 pm I suggest you build your entire portfolio, not just this one account, around the basic Boglehead 3 fund portfolio (all the US stocks, all the foreign stocks, and intermediate term bond funds, tax-exempt if your tax bracket is higher). This would be lower cost, higher quality (in the bonds anyway) and more tax-efficient when held in a taxable account.
The stable value fund in your 403(b) is a good substitute for a bond fund.

But for the taxable account, you want to minimize costs, both those paid by the fund and those you pay to the IRS. If the account stays at FIdelity, this means you should use stock ETFs; an all-in-one fund such as the Fidelity Freedon Index funds will have a higher tax cost.
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retiredjg
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Re: Need Help--Fidelity Puritan or Mimic With Index Funds

Post by retiredjg »

grabiner wrote: Wed Jun 23, 2021 7:10 pm
retiredjg wrote: Wed Jun 23, 2021 12:10 pm I suggest you build your entire portfolio, not just this one account, around the basic Boglehead 3 fund portfolio (all the US stocks, all the foreign stocks, and intermediate term bond funds, tax-exempt if your tax bracket is higher). This would be lower cost, higher quality (in the bonds anyway) and more tax-efficient when held in a taxable account.
The stable value fund in your 403(b) is a good substitute for a bond fund.
I agree. If you keep your 403b, the stable value fund is a good choice.
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choral54
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Re: Need Help--Fidelity Puritan or Mimic With Index Funds

Post by choral54 »

I have determined that I will use a 70/30 allocation in a taxable account to replace what I have invested in my current 403 (b) account Is it better to just hold onto cash for the bond portion or is it wiser to purchase the Vanguard Total Bond Index Fund? The current numbers do not look good for return and at least I am in the positive territory with the cash at .9% in a money market. I realize I am losing money due to inflation or does anyone have another solution for the 30%? I have never understood bond funds that well.
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choral54
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Re: Need Help--Fidelity Puritan or Mimic With Index Funds

Post by choral54 »

Also would I be O.K. with a two fund approach? Not sure I want the international part of a three fund approach.
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choral54
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Re: Need Help--Fidelity Puritan or Mimic With Index Funds

Post by choral54 »

I guess I could use 30% of it in the fixed account at Voya paying 2.5% instead of the Total Bond Index. Thoughts???
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Re: Need Help--Fidelity Puritan or Mimic With Index Funds

Post by tibbitts »

The closest product from Vanguard is probably Wellington, which obviously is extremely popular with Bogleheads. Since we're comparing the performance of a 100% equity index fund to Puritan and asking "why Puritan?", it would only be fair to compare Puritan since inception to Wellington (so, the 1940s) and ask: why Wellington? Certainly Puritan has had quite a run.
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retiredjg
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Re: Need Help--Fidelity Puritan or Mimic With Index Funds

Post by retiredjg »

choral54 wrote: Fri Jun 25, 2021 7:13 pm I guess I could use 30% of it in the fixed account at Voya paying 2.5% instead of the Total Bond Index. Thoughts???
Either is a good choice. Or use half and half if you can't decide.
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Re: Need Help--Fidelity Puritan or Mimic With Index Funds

Post by sycamore »

David Jay wrote: Wed Jun 23, 2021 11:49 am
scguy613 wrote: Wed Jun 23, 2021 11:43 amThe Puritan fund contains 25-30% bonds, so should be expected to have lower returns than total stock market. If the OP wants bonds included, I would do total stock market + a total bond market fund mix.
It now appears that they want to put fixed income in their 403b, which I think is a good plan.

Choral54: this is the reason why posting your overall portfolio is useful, so we can understand all the inter-working parts: viewtopic.php?f=1&t=6212
Good suggestion above.

OP, if you'll post your info as described in the Asking Portfolio Questions thread, we can suggest better ideas and also explanations for why you might want to use them. Things like your tax bracket, desired asset allocation, existing stock & bond holdings all make a difference.
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Re: Need Help--Fidelity Puritan or Mimic With Index Funds

Post by ruralavalon »

choral54 wrote: Fri Jun 25, 2021 7:10 pm I have determined that I will use a 70/30 allocation in a taxable account to replace what I have invested in my current 403 (b) account Is it better to just hold onto cash for the bond portion or is it wiser to purchase the Vanguard Total Bond Index Fund? The current numbers do not look good for return and at least I am in the positive territory with the cash at .9% in a money market. I realize I am losing money due to inflation or does anyone have another solution for the 30%? I have never understood bond funds that well.

choral54 wrote: Wed Jun 23, 2021 10:27 am I have some money to invest in my brokerage account and it will be to the tune of $375,000. My advisor at Fidelity suggested I put my money into either Fidelity Balanced or Fidelity Puritan. About a year ago, someone on the forum suggest maybe doing a 30% Growth Index, 30% Total Stock Index, and 40% Total Bond Index. Would you still recommend doing this balance for my brokerage account?
So this is a taxable account.

What is your tax bracket, both federal and state?

Fidelity Balanced (FBALX) and Fidelity Puritan (FPURX) both contain a bond allocation and so are not very tax-efficient.

In a taxable brokerage account it is generally best to use only very tax-efficient stock index funds. Wiki article "Tax-efficient Fund Placement", link.

In a taxable brokerage account at Fidelity I often suggest:
1) Vanguard Total Stock Market ETF (VTI) or iShares Core S&P Total US Stock Market ETF (ITOT); and
2) Vanguard Total International Stock ETF (VXUS) or iShares Core MSCI Total International Stock ETF (IXUS).


choral54 wrote: Wed Jun 23, 2021 10:27 amI am going to be taking a 403 (b) and investing in their fixed account guaranteed 2.5% to take the place of my outside Money Market which is paying .9%. I will be putting my mutual fund money in the 403(b) into my brokerage account for a type of sideways move.
choral54 wrote: Fri Jun 25, 2021 7:13 pm I guess I could use 30% of it in the fixed account at Voya paying 2.5% instead of the Total Bond Index. Thoughts???
The Stable Value Fund in your employer's 403b plan is a good choice for your fixed income allocation in my opinion.

Why will you "be putting my mutual fund money in the 403(b) into my brokerage account for a type of sideways move"?

Moving money out of a 403b to a taxable brokerage account costs you in income taxes, and also a 10% penalty if less than 59.5 years of age.

What stock funds are offered in your employer's 403b plan? Please give fund names, tickers and expense ratios. (If good funds with reasonable expense ratios are offered, it may be best to leave your money in the 403b.)

Are you still with that employer? What is your age? (You might be eligible to do a rollover to an IRA.)

What are the relative sizes of your accounts? In other words what percentage of the total portfolio is in each account?

Please simply add new information to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.

Please use this format: Asking Portfolio Questions.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Topic Author
choral54
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Re: Need Help--Fidelity Puritan or Mimic With Index Funds

Post by choral54 »

I work as a substitute teacher. I will be transferring my Vanguard 403 (b) money over to my Voya fixed account 403 (b). My Vanguard 403 (b) is presently invested in the market. In order to stay invested in the market I will take some of my CD money and invest it in the market through a brokerage account. I'm trying to take advantage of the 2.5% fixed account as I can not get that kind of rate on my current CD's or money markets.
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