Tackling the IRA

I finally sat down to allocate my Fidelity IRA balance. What a headache.

I knew I wanted to mimic my 401(k) allocation, which is pretty basic: 40% U.S. stock market index, 30% international stock index, 30% bond index.

In my 401(k) accounts, this has always been very easy to create. The provider generally only offers one or two choices available in each category, so I grab the one with the lowest fees (hence my allegiance to index funds). But with my IRA, I apparently had the whole universe of stocks, funds and exotic investment critters available to choose from. Aiee! Decision paralysis!

As a starting point, I typed "best index funds" into Google -- and the first result was a link back to my own company's site, for a list Money magazine apparently compiles annually of recommended mutual funds. Which is exactly the kind of thing I was after, hooray!

First step: Try to figure out what fees Fidelity is going to charge me for my purchases. Digging around in the "help" section on their "trade mutual funds" page, I found this in the FAQ:

Fidelity will charge a short-term redemption fee if you buy a non–Fidelity fund and sell it within 180 days. This would be in addition to any fees charged by the fund itself.

That was the only thing listed in their "fees" section aside from some boilerplate about purchase, expense and redemption fees, so I figured I was pretty much in the clear. I typed in a purchase order for a batch of VTSMX, Vanguard Total Stock Market Index.

.... and then hit a warning that this purchase would incur a $75 fee. Grump. Fidelity offered an alternative: check out their list of no-fee "similar" investments. I clicked to see that, and got a screenfull of 100+ funds that aren't at all the same as what I wanted. No index funds, many with higher management fees -- I bailed.

Back to the list. Also recommended by Money was FSTMX, Fidelity Spartan Total Market Index. That had a $10,000 minimum investment, which was a few hundred dollars more than investing exactly 40% of my portfolio would call for.

Still, I figured Fidelity probably wouldn't charge me fees for investing in their own funds and decided to take the plunge. So I filled out the clickieboxes and successfully put in my order. One purchase down, two to go.

Next, for my international index-fund order, we come to the story of "Stacy learns what the hell an ETF is." Tune in tomorrow ...