Self Allocated VS. Managed

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Self Allocated VS. Managed

Armand P.
New to Real Estate · San Mateo, CA · Member since 2015 · 127 posts · 12 votes

Hello-

I met with a Financial Advisor from Fidelity to go over my retirement accounts. Currently, I have a Roth IRA (that I contribute monthly) and a 401K with my current employer (company matchs up to 5%). I will be transitioning to a new company and they currently do not offer company matching. I have a few options:

1) I can leave the 401K with old employer as is and not do anything

2) I can roll it over to an IRA and have more investment options to choose from (per FA)

3) I can move it to new employer and contribute more into it each pay

Currently, I am in a self allocated portfolio which means that my $ is tied to a fund that starts off aggressive and moves towards conservative based on my expected retirement age. The FA suggested I consider having a Managed Account where account managers do the research and do a 85/15 allocation (85% equities and 15% fixed).

This is my future so I want to make sure that I am in the best position to capture the highs and minimize as much risk as possible.

If someone can provide me with insight and guidance I would greatly appreciate it.

Thanks!

Armand.

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Trevor Ewen
Rental Property Investor · Weehawken, NJ · Member since 2014 · 1k+ posts · 704 votes
10y

@Armand P.

I definitely recommend against the management option (read: High Fees). With a little education you can be up to snuff on allocation, or I would trust a Robo-advisor to do the same for cheaper.

Experts rarely (if ever) beat the index. When they do, they never do more than two years in a row. Get yourself invested in the IRA option. Choose low-cost, commission-free index funds with more than 50 million in assets.

Short primer, but I definitely recommend checking out The Index Card, A Random Walk Down Wall Street, and The Intelligent Asset Allocator (last one, if you get really into it).

Reach out if you have more specific questions. I do a lot of writing on this topic.

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  • Trevor Ewen
    Rental Property Investor · Weehawken, NJ · Member since 2014 · 1k+ posts · 704 votes
    10y

    @Armand P.

    I definitely recommend against the management option (read: High Fees). With a little education you can be up to snuff on allocation, or I would trust a Robo-advisor to do the same for cheaper.

    Experts rarely (if ever) beat the index. When they do, they never do more than two years in a row. Get yourself invested in the IRA option. Choose low-cost, commission-free index funds with more than 50 million in assets.

    Short primer, but I definitely recommend checking out The Index Card, A Random Walk Down Wall Street, and The Intelligent Asset Allocator (last one, if you get really into it).

    Reach out if you have more specific questions. I do a lot of writing on this topic.

    1Reply
  • Armand P.
    OP
    New to Real Estate · San Mateo, CA · Member since 2015 · 127 posts · 12 votes
    10y

    Hi Trevor-

    Thanks for reaching out. It seemed as through the FA was trying to get me to switch over to a management account. So, you think roll my current 401K into my existing ROTH IRA or would this be a traditional IRA and choose a low cost commission free index fund?

    Also, I will be setting up a new 401K with new employer but they wont be matching. Should I just continue making regular contributions to this once it's set up?

    Thanks again I had a gut feeling that managed account would cost more

    Armand

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  • Jeff B.
    Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
    10y

    Vanguard has many good plans including the style of diversification that changes over time as you approach retirement.  Been using it for A G E S now.

    a) get the 401k info from the new employer AND ask about Matching Funds, where they match your contributions from salary by some percentage (50% is common, IBM was 100% dollar for dollar).  The Matching Funds is VERY IMPORTANT, it's free money to grow your portfolio.

    b) then look for Vanguard in the employer's 401k plan

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  • Armand P.
    OP
    New to Real Estate · San Mateo, CA · Member since 2015 · 127 posts · 12 votes
    10y

    Hi J Bread-

    Thanks for responding. There account manager is through Fidelity and they aren't offering any matching at this time (but in the process of implementing it soon). So, what I may do is roll the old 401K plan into a IRA and pick a similar diversification that will change over time as I get closer to retirement age. Open the new 401k and pick a similar fund and put 5-10% into the new company stock as well...

    They also offer employee stock plan so I will look into that too...

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  • Armand P.
    OP
    New to Real Estate · San Mateo, CA · Member since 2015 · 127 posts · 12 votes
    10y

    Hi Trevor-

    What you think about a fund like this?

    https://fundresearch.fidelity.com/mutual-funds/summary/315793885

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  • Mindy JensenPro Member
    BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
    10y

    @Armand P., take advice from Warren Buffett, the most successful investor ever. This is what he said should be done with his $60 Billion after he passes on:

    "My advice to the trustee couldn't be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard's.) I believe the trust's long-term results from this policy will be superior to those attained by most investors — whether pension funds, institutions or individuals — who employ high-fee managers.

    [email protected]Podcast Guest on Show #261
    BiggerPockets
    1Reply
  • Armand P.
    OP
    New to Real Estate · San Mateo, CA · Member since 2015 · 127 posts · 12 votes
    10y

    Hi Mindy-

    Thank you for the advice! I enjoy reading about value investing and how he made his earnings! He is one of a kind and we all ideal to be like him.

    So, if I choose to leave my existing 401K with Fidelity I can ask to have 10% go into ST gov bonds and 90% into low cost S&P 500 index fund?

    Just to be clear I should not elect to go with the Fidelity Manager account right?

    Thank you!

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