View Full Version : Fidelity managers

12-15-2004, 07:36 PM
I was looking over Fidelity site and saw that if you can come up with a min investment of 50K they will manage it for you for something like 1.1%.

For someone pretty much totally clueless about investing would this be a good thing? What kind of returns I'll be looking at if I choose the more aggressive approach.

Let's say I'm 30 and trust them with 50K for 10 years. What about 20 years.

Any ideas??

12-15-2004, 09:52 PM
I can't really say whether that would be a good deal, by my inclination is no. There have to be equally good money mangement firms that are cheaper.

As far as returns...

Not near enough information, and ten years is too short to predict accurately. If you are talking about an actively managed aggressive equity fund, it could be anywhere from up 15-20% a year to losing money.

I you pick something like a S&P index fund, with less risk, I would say that you could count on anywhere from 4-13% a year for the next ten years (huge range) and maybe 8-11 % a year for the next 20. Aubtract a resonable inflation rate to get a real return and all bets are off in the case of a major historical event, such as a nuclear war.

Anyway, these are just arbitrary guesses. Returns change if you add things other than stocks into the mix.

12-16-2004, 11:51 AM
Let's say I buy S&P index for 50K and forget about it for 20years. Assuming 7% return. What would I be looking at after 20years.

Will this work something like an IRA??

12-16-2004, 11:53 AM
What do they mean by manage? You need to describe what they claim they will do for you. If they mean they are going to select mutual funds for you then our fee is 1% + mutual fund expenses. If that is what they are suggesting:
1) Shop around with places like vanguard, legg mason, ect.
2) Consider subscribing to a newsletter. Hulbert financial reviews newsletters, it may be available at better libraries for free. Both Bobbrinker.com and 'no-load fund-X' have in the past done well with mutual funds. I think they charge $200/yr.

12-16-2004, 12:00 PM
7% for 20 years is 4 times the original amount. If you invest in an index you will not be forced to pay much capital gains taxes as index funds do not buy and sell very often. If you sell the fund you will have cap gains, and have to pay taxes. There will be taxes on the dividends, they S&P pays about 2% dividend. The IRA will not sheild you much since you will not be paying much anyway.

The problem with the S&P is it is not diversified. I personally would suggest you find some bond fund investments like those from PIMCO and Vanguard. Talk to their sales people and see what suits you.

12-16-2004, 01:08 PM
"What do they mean by manage? You need to describe what they claim they will do for you. If they mean they are going to select mutual funds for you then"

Yes from what I understood that's what they would be doing.

12-16-2004, 11:37 PM
I got a sales pitch from a Legg Mason rep. For Millon $ plus accounts, for about 1% they offered

1) They were willing to refund all 12(b)-1 expenses.

2) Mutual funds have differnet classes of shares, each with differnent expenses. Legg Mason was going to put me in the shares with the least expenses, "institutional shares".

3) For ethical reasons they would not put me in any Legg Mason funds.

They also had some fancy porfolio allocation method which they were more than willing to discuss in all the gory details.

Those 3 points seem standard for all high net worth clients Ask the the Fidelity if they will do the same for your 50K.

Ask them how they are going to pick the funds. What have they recommend for current clients. Feel free to post their reponse.

If you think you can follow the newsletters bobbrinker.com and http://www.fundx.com/, or both. Note that Brinker in particular switches in and out alot, so you will have to keep up with it. Note that those two newletters are reviewed by Hulbert. They all give specific recommendations, and some reasoning for those recomendations, you have to 'pull the trigger' and make the purchases/sales.

To avoid all advisor expenses you might also consider something simple like:
50% Vanguard total market index, 50% (Pimco total return or vanguard treasury inflation protected). You could toss in vanguard energy or vanguard precious metals too. Or even some of the Pimco international bond funds.

You could also just go with cash but diversify your cash into foreign currencies at www.everbank.com. (http://www.everbank.com.) If you want to stay with cash tosssing some into the inflation protected securities and maybe precious metals might also be good.