I think it would be easier than what you have right now. But is it the best long term solution?Okay, so I was just looking at my Fidelity account, and if I'm understanding this correctly, it appears that the small amount of money in my account that isn't invested in FXAIX automatically gets put into a SPAXX money market account that currently has a rate of 5.10 percent. I never noticed that until now because I barely have any extra cash in my account that isn't invested in FXAIX. So if SPAXX is currently earning me 5.10 percent, which is about the same rate as all of my high yield savings accounts, then should I just go ahead and close out all of my bank accounts and consolidate all of that money into my Fidelity account, which would still earn me 5.10% with SPAXX, in addition to my primary investment with FXAIX? So I would have 50% FXAIX and 50% SPAXX, rather than having 3 additional banks. Would that be easier than what I'm currently doing?
A portfolio that is about 50% stocks should be expected to lose 25% of its value in a very bad market downturn like we had in 2007 - 2009. In that scenario (worse than most market downturns) your $1million would drop to about $750k and could stay there awhile. In a less terrible market downturn, it would still be expected to drop to about $800k for some months. Those are the risks you are looking at right now.
Is that a risk you are willing to take? Do you believe you could tolerate that much loss for a few years (not a few weeks or months like the COVID crash)? Do you think, even if you could gut it out for a couple of years, you would be comfortable waiting out the bad time?
If the answer is "no" to any of those questions, then consider if a 50:50 portfolio may be too risky for you.
With your strong desire in earlier posts to be 'risk free", I do have to wonder if 50:50 may be more than you will be comfortable with when times get bad. I'm thinking that something like 20% stocks to 30% stocks might be a better place to be. Also, with your low rate of spending, you don't need to be at 50:50 in my opinion. There is no reason to take risk you don't need to take if it will cause you to be uncomfortable.
You might ask "why not go all bonds/money market"? A portfolio with a small amount of stocks should have greater returns than a portfolio that is all bonds....and it also has less risk!
We don't know anything about your income at this point, but chances are you are in a very low bracket or do not even have to file taxes. For that reason, my suggestion is that you use one simple fund for all your money - a Fidelity Target Income fund made up of index funds. I don't usually suggest target date funds for a taxable account (an ordinary account that is not an IRA) because they are not very tax efficient, but it seems that may not apply to you.
FIKFX Fidelity Freedom Index Income Fund has about 20% stocks (some in foreign stocks) and 80% bonds.
What might be a better idea is to pick the fund that has about 30% or 35% stocks now and it will migrate to 20% stocks over the next several years. FLIFX Fidelity Freedom® Index 2015 Fund Investor Class currently has about 35% stocks and is migrating to a lower stock allocation every year.
From what you have told us, I believe you will be more comfortable choosing one of these rather than staying at 50% stocks.
What do you think?
Statistics: Posted by retiredjg — Thu Aug 08, 2024 12:53 pm