Wednesday, April 16, 2008

Fidelity Freedom Fund 2025 now in my Roth IRA

As I discussed previously I went ahead and committed my 2007 Roth IRA contribution to buy a position in the Fidelity Freedom Fund 2025 (FFTWX), a so-called "life-cycle target-date fund" on the presumption that I will be retiring roughly around 2025. Silly me, I expected that the order would execute first thing Monday morning. Not exactly. You can tell that I do not do much investing in mutual funds. Only when I thought about the process in the middle of the morning did I remember back four or five years ago to the "market timing" and "late trading" mutual fund scandals and how mutual funds actually trade. You place an order during the day (or any time after the previous market close) and the order sits there until the next NAV (Net Asset Value) calculation which occurs sometime after the stock market closes at 4:00 p.m. (on normal days.) Within a few hours (or so) of the market close your order will be filled at the new NAV price. The "Late Trading" scandal was that mutual funds were allowing hedge funds to place orders after 4:00 p.m., until about 4:30 p.m. after post-market news (e.g., earnings reports like that from Intel today) would come out, but at the market-close NAV price. The mutual fund would then kick the fees from the hedge funds up to the parent company that managed the fund.

I did confirm that since I am over 50 years old, the 2008 Roth IRA contribution limit will be $6,000. I will make that contribution as soon as I am confident that my 2008 income will not exceed the Roth IRA eligibility limit.

And tomorrow I'll go ahead and trasfer the remains of my old UBS Roth IRA to Fidelity. It is a rather small account and currently 100% cash after my old Geodyne limited partnership recently liquidated. I'll put that cash into the Fidelity Freedom Fund 2025 (FFTWX) as well.

It is nice knowing that at least this one corner of my financial life can now run on auto-pilot.

-- Jack Krupansky

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