consolidating my investments into Fidelity and Vanguard - what to do with that solo 401k

As I've mentioned earlier, I've begun shifting the bulk of my investments to Vanguard in pursuit of low cost index fund options.

Unfortunately, Vanguard doesn't offer a solo 401k (aka individual 401k). Fidelity does, though it's called a Keogh by them.

I successfully rolled over our individual 401ks (my wife's and my own) to Fidelity. It happened much faster than the moves to Vanguard - I think we were delayed by end of year retirement account set-up activities.

I was very unhappy with the $50 fee per rolled account Schwab charged me. I wonder if there's a way to ask them to take it back. Felt like a kick in the pants on the way out!

I still have minor accounts at schwab - non-retirement trading accounts, the amounts are small. I'm delaying transferring them for several reasons:

1. Vanguard is expensive as a brokerage with higher fees than Fidelity and Schwab.
2. I need to age the holdings before selling them or else my capital gainst will count as regular income (taxed at the regular rate).
3. I'm wondering if Shanda (SNDA) will continue it's recovery - up 100% from it's low, but still down 30% from it's purchase by me.

The money I rolled over from Schwab was placed in Fidelity's Four-in-One (FFNOX) fund. The idea being that the bulk of my holdings would be placed in self-managed retirement or balanced funds until after our relocation, at which time, we would resume the investment planning with our financial advisor.

FFNOX is an interesting fund. Historically it's slightly exceeded the s&p 500 by 0.6% to 2% when examining trailing returns. The fund is a balanced combination of the following low cost index funds:

55% Fidelity Spartan 500 (s&p 500)

16% Fidelity Spartan International Index (EFA)

15% Fidelity Spartan Extended Mkt Index (not s&p 500)

14% Fidelity U.S. Bond Index

The exact percentages are not where my target asset allocation is, but it will keep me in the approximate direction.

I was very tempted to load up on international index, international small cap, and domestic small cap value and a REIT index, but the fidelity family products do not include much of what I was interested in. I'll have to steer as much of the diversification investment into Vanguard to compensate. I've already pushed my 401k investments toward small cap value (not indexed), international and bonds. I may move in a similar direction with my wife's 401k, which is now predominantly invested in Barclay's 2030 life cycle fund.

How easy things would be if we could do in-service transfers into our private IRAs from our corporate 401ks!! As things are, my portfolio is pretty far from the target. The equity to bond allocation isn't that bad, but large to small and market to growth ratios need alot of help. As things are, I just have to bite my lip until we start-up again with the investment advisor in July or so.

The Schwab to Fidelity rollover took about two weeks or so. Much faster than the move to Vanguard.

This week I'll focus on rolling one of my son's retirement account from Schwab to Vanguard (where he has other retirement accounts). That will eliminate all but our trading accounts at Schwab. We also have trading accounts at First Trade, but can't move them until the assets hit the 1 year mark - due to capital gains - we've had significant gains there.

Regards, makingourway

Kudos to the lazy portfolio (aka Modern Portfolio Theory)

Paul Farrell has written a wonderful article discussing the immense success many published Lazy Man's portfolio's have had compared to their market indeces. You can find the article here at Market Watch.

Farrell compares quite a few of the simple passive investment portfolios recommended by some of the most well known advocates of MPT. In virtually all cases the portfolios have beaten the S&P 500 over the prior 5 year period. Virtually all also beat the s&p 500 index for the three year period and half beat the one year index.

I strongly recommend the article. It's a great glimpse into the power and benefit of a passive indexing strategy using MPT.

A few quick comments on the article:

1. The S&P 500, although well known is an inappropriate comparitor - most of the portfolios are diversfied outside of the s&p 500 - it's comparing apples and oranges.
2. Some of the portfolios selected from different writers are hardly their high performing portfolios (Bernstein is a good example).
3. One year returns, although interesting, are especially meaningless when analyzing index investing strategies. 30 year regressions would be much more interesting and include more varied markets.

Anyway, try the articles, it's a great way to examine the actual undertakings of low cost index based strategies using MPT (modern portfolio theory).

Regards, makingourway

fidelity or 401kbrokers for our individual 401ks?

Based on an interesting post from My Personal Finance Blog discussing setting-up his individual 401ks.

I actually decided in the opposite direction: against going with 401kbrokers and instead going with Fidelity.

Although 401kbrokers does allow borrowing against a 401k account, I have a separate cash reserve, so that is not a significant requirement for me.

What is interesting is that I can invest in the various fidelity index funds, some spartan, mutual funds have expense ratios as lows as 0.08%. That sure beats whatever 401kbrokers offers, even if you can use Vanguard mutual funds - after all, they tack on 0.25% admnistrative fee.

Somehow I have a visceral dislike for any kind of aum based admninisrative fee.

Also, there's less institutional risk - Fidelity has been around alot longer than 401kbrokers.

Regards,
makingourway