| Fidelity Money Market account offers new options |
Fidelity Money Market Account
The options include index and actively managed funds, but the actively managed funds are not individual funds. They are portfolios of funds that contain so many funds — up to 19 in some cases — that they could end up performing a lot like index funds. Or worse when you take into account their higher fees.
For better or worse, many of Fidelity’s best-known funds — Magellan, Contrafund, Low-Priced Stock, Diversified International — are not in the plan. It does contain some fine actively managed funds, but you won’t be able to buy them individually.
The index funds will cost investors 0.5 percent a year, or $50 on a $10,000 investment. That’s lower than the old TIAA-CREF funds and lower than most index funds offered by rival 529 plans.
The actively managed funds (excluding the money market fund) will cost 0.87 to 1.09 percent a year. That’s higher than the old TIAA-CREF funds.
A fund’s performance is calculated after these fees have been deducted. But the fees are worth knowing because over a long period they can affect performance.
The new Fidelity options fall into three categories:
– Two age-based options: These portfolios start off aggressive (invested mostly in stocks) and gradually become more conservative (moving more into bonds and money market funds) as the child gets closer to college age.
One age-based option invests in a group of index funds, the other invests in a collection of actively managed funds.
– Six static options. Fidelity offers three portfolios that do not change over time. One remains 100 percent in stocks, one remains 70 percent in stocks and 30 percent bonds and the third remains 100 percent in bonds and other fixed-income investments.
Each static option comes in an indexed-version and an actively managed variety, for a total of six static options.
– Individual funds. Fidelity offers six individual funds: the Spartan 500 index fund, a total market index fund, an international-stock index fund, an intermediate-term Treasury bond fund and a stock fund with social criteria.
| " | The new Fidelity options fall into three categories: Two age-based options, Six static options, Individual funds |
