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Lefty
Explorer ○○

Why not just FBALX (Fidelity Balanced), or a similar fund?

I know Limo and others are primarily balanced/allocation funds, as am I.  I also understand that fund companies, financial advisors, and others are trying to sell their services.  But couldn't you just "keep it simple" and go with FBALX (Fidelity Balanced), or PRWCX (TRP Capital Apprec), or VWELX (Wellington), etc.?  If you are concerned about all your eggs in one basket, then split over 2-5 of them, in case of manager changes or a bad decision.  Why pay a FA 1% or more plus fund fees, when you could just put it in a couple allocation funds for half that amount?

I did a very quick and simple calculation using Fidelity Balanced, history of annual returns.  I analyzed what if you had retired in 1990, 2000, and 2008.  Beginning balance of $500,000 that was 100% in FBALX.  Initial draw was 4%, with an increase for inflation of 3% each year.  Calculated through 12/31/18.

The 1990 example would over 28 years until today, through 2 major downturns.  You would have withdrawn over $900,000!  Your balance as of 12/31/18 would be $2.4M!   The 2000 example would be $500,000 of withdrawals and an ending balance of $733,000, even with 2 bear markets right off the bat.  The 2008 example covers your first 10 years, if you had retired into the 2008 downturn.  Total withdrawals in 10 years of $256,000, and still no erosion of capital with an ending balance of $520,000!

Someone could double check for any major errors...but this is a basic 60/40-65/35 balanced fund, nothing fancy, cost of .53%.

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21 Replies
cegibbs
Participant ○

Re: Why not just FBALX (Fidelity Balanced), or a similar fund?

I agree with you and that is basically what I’ve done with my portfolio.  Slightly over 80% in T. Rowe Price Capital Appreciation.  I hold approximately 3 - 4 years worth of anticipated living expenses in T. Rowe Price Ultra Short Term Bond Fund to bridge me to SS and to prevent me from selling equities in market downturns since I’m retired and using my investments for income.  Hold 12% in Fidelity S&P500 Index in my taxable account.  T. Rowe Price Capital Appreciation is on cruise control in my portfolio. Solid fund that I don’t have to micromanage.

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DocWu
Explorer ○○○

Re: Why not just FBALX (Fidelity Balanced), or a similar fund?

Good points. Lefty. The other thing to point out is ...Stay Invested.

A $500K investment in FBALX or VWELX back in 2000 would both have peaked around $725K in Nov 2007. By Feb, 2009, they would each have lost around $300K. Although the two funds would still be worth $400K and $450K respectively, how many investors would not pull the plug after losing over a quarter million on paper. Then they miss out the current bull market, or they got back in late.

Meanwhile, who knows if it's going to end or continue. It would be a lot easier if one had stayed in, and watched his FBALX grow to almost $900K, and that's with withdrawals calculated at 4% of fund, not $20K of the original.

 

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FD1001
Valued Contributor

Re: Why not just FBALX (Fidelity Balanced), or a similar fund?

Old news, I stated many times that KISS is the best solution.  You can do it all with max 5 funds.  You can read my article hands-on how to do it (Investing and my basic system).

In short and especially for retirees 1) use indexes for stocks  2) use managed funds for bonds  3) use additional special funds.

Use SPY/VTI as you main stocks index, the SP500 gets its revenue at over 40% from abroad.  If you want to invest internationally, use abroad index like VTIAX.

For bonds use Multisector bonds funds, select 2 funds from PIMIX,JMUTX, JGIAX, VCFAX(the first 2 are pretty good). These funds are riskier than your typical higher rated bond fund like BND.

Special situations: 1) moderate allocation PRWCX, best in class for many years  2) conservative allocation VWINX/VWIAX - excellent LT fund   3) DSEEX is 2 funds within one you get the sum of SP500 + 3%, if you use this funds it's instead of SPY/VTI

You can create exactly what you want. Suppose I want 50/50...20% VTI + 10% VTIAX + 25% PIMIX + 25% JMUTX + 20% moderate allocation PRWCX (or see below).  You will have about (43-4%)/(56-57%) (stocks/bonds) but because PIMIX+JMUTX are riskier it like 50/50. 

Moderate allocation - other choices

 T. Rowe Price Personal Strategy Balanced Fund (TRPBX)

 Janus Henderson Balanced Fund Class T (JABAX)

 George Putnam Balanced Fund Class A (PGEOX)

 AllianzGI Income & Growth Fund Class A (AZNAX)

 Columbia Flexible Capital Income Fund Class A (CFIAX)

 Fidelity® Puritan®Fund (FPURX)

 Fidelity® Balanced Fund (FBALX)

VWELX 

 

 

 

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yakers
Follower ○○

Re: Why not just FBALX (Fidelity Balanced), or a similar fund?

I have VG Balanced VBIAX in my IRA, AFAIK balanced funds work better in tax advantaged accounts. For taxable they do simplify matters (which may be enough justification) but they are not as tax efficient. 

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kwk75wi
Explorer ○

Re: Why not just FBALX (Fidelity Balanced), or a similar fund?

I hold vwiax in my Roth and my rollover.

when I retire in 5 years I will likely draw about 6% from my traditional which will be approx half my invested/risky money, so my effective draw will be 3%. Even in a really tough environment, 6% draw 6% inflation 3% return, my traditional Ira will last 13+ years. That gives my Roth a long time for growth.

Anyway, I think balanced funds are a great idea. Short of swapping funds there's not much you can do to shoot yourself in the foot...like diy AA management to exploit stocks and bonds.

 

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Kenster-man
Explorer ○○

Re: Why not just FBALX (Fidelity Balanced), or a similar fund?


Lefty - since you mentioned FBALX (Fidelity Balanced) and FD mentioned some good/top options too --- just wanted to also throw out there FSDIX (Fidelity Strategic Dividend & Income Fund) as a potential option too especially if someone invests via Fidelity.  

10-yrs:

FBALX: 11.17%

FSDIX: 13.00% 

According to Fidelity - FSDIX is currently about 65% equities (including REITs).  Albeit it's somewhat more aggressive than FBALX since FSDIX will have a mix of Preferred Stock  and Convertibles.  

 

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Lefty
Explorer ○○

Re: Why not just FBALX (Fidelity Balanced), or a similar fund?

Kenster, funny you mentioned it.  I recently opened FSDIX positions in both my IRA and my brokerage, with plans to build them up.  History shows it throws off 6-7% in "income" per year.  Yes, I understand that turning off the DRIP might cause the principal to drop if the stock values don't offset.  And yes you are technically selling at a loss if that happens.  But values could grow enough to keep the principal stable.  None of us knows what the future holds, it's all a guess. Even annuities paying the same %.  There is no guarantee the insurance company or government fund will be there in 20 years.  So I will keep my control over my $$ and go this route.

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SteadyEddy
Explorer ○○

Re: Why not just FBALX (Fidelity Balanced), or a similar fund?

I have a 30/70 portfolio with the following widgets:

- Wellesley

- PIMIX

- VMVFX/VTWAX/VBTLX (min vol/total world stock/us agg bond) 30/70 mix

- VGSTX (STAR fund)

- DSEEX

No plan to engage any FAs..

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Mustang
Explorer ○○○

Re: Why not just FBALX (Fidelity Balanced), or a similar fund?

Over the years I have been more aggressive than I am now.  I've settled on American Funds Balanced Fund in our T-IRAs with a little American Funds Mutual Fund for the reasons that you mention.  I have also focused our taxable accounts on Vanguard Wellington with a little Vanguard Wellesley.   According to Morningstar all but American Funds Balanced Fund is running almost 4 points above their category.  AFBALX is only 2 points above.  Overall portfolio return is 5.38%.  At the 5-yr point, average portfolio return is 7.58% or around 2.3 points above the category average.

At this stage in my life I think picking a good moderate- or conservative-allocation fund is the best alternative.

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cegibbs
Participant ○

Re: Why not just FBALX (Fidelity Balanced), or a similar fund?

I agree with you and that is basically what I’ve done with my portfolio.  Slightly over 80% in T. Rowe Price Capital Appreciation.  I hold approximately 3.5 years worth of anticipated living expenses in T. Rowe Price Ultra Short Term Bond Fund to bridge me to SS and to prevent me from selling equities in market downturns since I’m retired and using my investments for income.  Hold 12% in Fidelity S&P500 Index in my taxable account.  T. Rowe Price Capital Appreciation is on cruise control in my portfolio. Solid fund that I don’t have to micromanage.

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yakers
Follower ○○

Re: Why not just FBALX (Fidelity Balanced), or a similar fund?

There are some good arguments about balanced funds delivering a good risk adjusted return. Others can support outperforming balanced funds or the market through their fund or stock selection. But beside the quantitative approach there are important qualitative or behavioral issues that favor balanced funds and keeping things simple. Most important my wife has little interest in things financial, every month I thrust a spreadsheet into her vision to at least be aware how much we have and where it is. Pretty much can let it run butt I have individual stocks as well as ETFs, index funds and balanced funds, I expect to simplify things as I take RMDs. My advice to her if I’m gone is put all the tax advantaged in Wellesley and all the taxable in Wellington; take the RMDs and 5% from the investment side.Should cover all known needs.

I notice I am not a sharp as when younger. Last year I made two trading mistakes, bought when I wanted to sell (I know it sounds impossible but such things happen). Nice accident is I made money on both trades. I unwound them quickly but was warned  by my broker that I was not set up to be a day trader. Balanced funds are less prone to behavioral errors.

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hondo
Explorer ○

Re: Why not just FBALX (Fidelity Balanced), or a similar fund?

Another vote for using all balanced funds.  Like others, I believe Balanced Funds work best for a great many retired folks, especially couples when one, such as my wife, is not interested in investment decisions.  We go farther by using only one investment company ((plus our credit union for CDs) in order to keep everything simple.  

We have almost everything invested in Vanguard balanced funds, both TIRA/Roth and taxable accounts.  I also keep the same allocation for both the IRAs and taxable.  Our RMDs are set up to distribute automatically and proportionally from each fund on set dates. So, if something were to happen to me, my wife would not be overwhelmed with managing our investments. They will be on auto pilot and she can enjoy the rest her years.

Just another point of view.

 

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wadevcamp
Follower ○○

Re: Why not just FBALX (Fidelity Balanced), or a similar fund?

FD, M* seems to have removed portions of their forum so the link to the article you mention is not available.  Is it available somewhere else?

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DocWu
Explorer ○○○

Re: Why not just FBALX (Fidelity Balanced), or a similar fund?

A good time to recap FBALX's 2019 and 10 year performance, along with the S&P500, plus Wellington and Wellesey. We'll probably not see double digit 10 year performance like these in the next 10 years, but who knows.

FBALX   24.35   10.01
FXAIX    31.47   13.64
VWELX  22,51    9.90
VWINX  16.39    7.98

Of course, we're past the crash of 2008-2009 and those huge negative numbers are no longer in the 10 year.

 

 

 

 

 

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Lefty
Explorer ○○

Re: Why not just FBALX (Fidelity Balanced), or a similar fund?

Hey thanks for resurrecting my old post!  The results are in line with what I was posting about.  Fidelity Balanced got us 77% of the S&P's return with about 65% of the risk (35% bonds and cash).  Similar for Wellington.  Even better for TRP Cap Appreciation.  These funds constantly rebalance, can adjust with the market, i.e. lower or increase allocations or exposure to given stocks.  And even at .60% or so, they are still cheaper than paying a financial planner, and saves you having to constantly rebalance.  Sure, you could do Index funds and constantly rebalance for a similar return.  Most people on here have enough knowledge to get good funds and do one way or another.  For someone without time/knowledge, maybe it is worth it to pay an advisor 1% to put them in low cost index funds and keep the right allocation on track, even though that actually costs more overall.

I think everyone agrees, as long as you use M* to get good funds (or trust your planner to), the most important numbers are savings rate until you retire, then withdrawal rate after.  Next in line would be allocation, to control sequence of returns risk and keep up with inflation.  You could pay a manager 1% to have 60/40 index funds, or use TRP Cap Ap at .71%  or Vanguard Balanced Index .018%, and do fine based on Bengen or Monte Carlo, provided you saved enough and don't have a crazy high withdrawal rate.  

 

Kenster-man
Explorer ○○

Re: Why not just FBALX (Fidelity Balanced), or a similar fund?


@DocWu wrote:

A good time to recap FBALX's 2019 and 10 year performance, along with the S&P500, plus Wellington and Wellesey. We'll probably not see double digit 10 year performance like these in the next 10 years, but who knows.

FBALX   24.35   10.01
FXAIX    31.47   13.64
VWELX  22,51    9.90
VWINX  16.39    7.98

Of course, we're past the crash of 2008-2009 and those huge negative numbers are no longer in the 10 year.

 


Note also that when looking at performance - I also consider the investing style.  VWELX did remarkable well the past 10 years and is Large Value leaning whereas FBALX is Large Growth leaning - so I'm not surprised FBALX slightly edged out VWELX the past 10 years.  

Just something to keep in mind but both seem good.  However, I can't read the whole M* report on FBALX but the limited glimpse info seems to indicate they're not all that fond of Management. 

  

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Lefty
Explorer ○○

Re: Why not just FBALX (Fidelity Balanced), or a similar fund?

Kenster, I saw that also...FBALX has always been 4-5*.  While it lost Ford, it still have 4 others who are 10+ year managers, it is the others who are newer (and probably learning on the job, like Fidelity seems to do).  American Balanced got a positive review from him, also growth oriented, and it has 4 people that are 10+ years and a number of other newer ones.  Wellington always gets great reviews and has Bousa long term and a couple others who are newer.  All 3 perform similarly over the years. So I don't know why the negativity.

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DocWu
Explorer ○○○

Re: Why not just FBALX (Fidelity Balanced), or a similar fund?


@Kenster-man wrote:

Just something to keep in mind but both seem good.  However, I can't read the whole M* report on FBALX but the limited glimpse info seems to indicate they're not all that fond of Management. 

  


I'll paraphrase what I read.  Won't do justice to the original.

1. Fund leader Robert Stansky has freedom to deviate +/- 10% from the 60/40 target. Currently at 67/33 which will result in higher volativity and less ballast in downturns.
2. Equity sleeve managers are rated on performance to benchmarks. Six replaced in past 5 years. Morningstar worries about process continuity with these manager changes..

So I read that the changes in staff plus the aggessive equity allocation needed to beat its peers is a caution on Morningstar's part.

 

 

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ctyankee
Participant ○

Re: Why not just FBALX (Fidelity Balanced), or a similar fund?


@Lefty wrote:

Hey thanks for resurrecting my old post!  The results are in line with what I was posting about.  Fidelity Balanced got us 77% of the S&P's return with about 65% of the risk (35% bonds and cash).  Similar for Wellington.  Even better for TRP Cap Appreciation.  These funds constantly rebalance, can adjust with the market, i.e. lower or increase allocations or exposure to given stocks.  And even at .60% or so, they are still cheaper than paying a financial planner, and saves you having to constantly rebalance.  Sure, you could do Index funds and constantly rebalance for a similar return.  Most people on here have enough knowledge to get good funds and do one way or another.  For someone without time/knowledge, maybe it is worth it to pay an advisor 1% to put them in low cost index funds and keep the right allocation on track, even though that actually costs more overall.

I think everyone agrees, as long as you use M* to get good funds (or trust your planner to), the most important numbers are savings rate until you retire, then withdrawal rate after.  Next in line would be allocation, to control sequence of returns risk and keep up with inflation.  You could pay a manager 1% to have 60/40 index funds, or use TRP Cap Ap at .71%  or Vanguard Balanced Index .018%, and do fine based on Bengen or Monte Carlo, provided you saved enough and don't have a crazy high withdrawal rate.  

 


@Lefty 

Nice going, Lefty.  You went with an uncomplicated plan that worked well.  Congrats!

ctyankee

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