Lux Investing
Is Fidelity Growth & Income and Fidelity Magellan good funds to invest in 401k?
I put 3% of my check in the Fidelity Magellan fund and 3% in the Fidelity Growth & Income fund I am 30 year old
Public Comments
- Fidelity is a good, reliable company, but choosing particular funds depends on your particular situation and your risk tolerance. If you're young and have a lot of time before you retire, aggressive funds that are heavy on stocks and international stocks are more appropriate, because you can reap bigger gains over the long run, and have more time to recover from any losses. If you're older, more conserative funds that feature more bonds are more appropriate, since you're more concerned with preserving your assets than growing them. Some good reading: -The Complete Idiot's Guide to Managing Your Money -The Automatic Millionaire, by David Bach -any Suzy Orman books
- Those are both great funds, though if you are under 30, you may want to be in something with greater risk/greater growth potential, like a foreign/international stock fund. The Magellan is now closed to any new investors, so you should certainly keep contributing there as your "large company" growth mainstay, but the Growth & Income Fund holds many of the same companies, so it might be an idea to leave the accumulated balance where it is, and put a future 3% in whatever International equity options are available to you..l Especially if you are young, you should find a way to contribute more than 6% of your check to deferred comp... 15% for just the next few years would mean FAR less struggling to save when you are in your 40s, 50s, 60s etc...
- I use costs to help me determine whether or not a fund is a good choice. This is much better than past returns, which are about as useful as reading tea leaves for predicting future returns. Here is my criteria: 1) No load or deferred load 2) No 12b-1 fees 3) Annual expense ratio less than 1% for stock funds and less than 0.5% for bond funds If you are not sure of the costs, then go to www.morningstar.com and type in the fund ticker symbol to find info on it. Be sure you are looking up the correct share class. FGRIX and FMAGX should be their tickers. Now, if the costs are acceptable, then you should take a look at the assets that the fund invests in. Both of those funds you listed are actually "Large-cap blend" funds. In other words, they invest in stocks from large companies and tend hold equal amounts of growth and value stocks. Large-cap blend funds are good core funds. You will want to have a substantial amount of your portfolio in large-cap stocks. However, since they both invest in the same type of securities, you may not be getting diversification. In fact, both funds may overlap in the stocks they buy. If you invest in both, you are basically getting duplicate funds. This is not bad, per say. It's just that you are not more diversified simply because you hold two funds. Diversification only happens when you hold funds that invest in different asset classes. Do you have any bonds in your portfolio. If so you should consider them. Your stock to bond ratio is the most important decision for your asset allocation plan. For help on asset allocation, download my free book at http://www.invest-for-retirement.com and go straight to chapter 23, "Allocating Your Assets".
- Fidelity Magellan was the number 1 performing fund of it's kind for many years, but due to the number of people that invested in it, as well as other factors, they actually lost money. I think that's how it went. Many people do not know that. All in all, Fidelity is a reputable investment company with good, consistent performers. At your age, you should look towards growth and as you get older, you should focus on the growth and income, and as your get near retirement age, you focus on income. If your 401(k) plan has other options than Fidelity, I would do a mix of both. I doubt Fidelity would ever go belly-up, but people thought the same about Enron.
