Fidelity Target Date Retirement Portfolios, Will The Freedom Funds Give You Freedom?

Fidelity Freedom Funds

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This is the article displaying the portfolios of Fidelity Target Date Retirement Portfolios. They are called freedom index funds by Fidelity. Here you will find a description, performance for the portfolios as well as detailed information on how to implement them yourself.

Fidelity Target Date Retirement Portfolios, Will The Freedom Funds Give You Freedom?

Fidelity is a well know mutual fund provider. Fidelity is a privately owned company being the 4th largest in assets under management.

They offer a slew of target-date retirement funds. They have two broad categories of target-date funds. One is passive (indexed) and one is active. We focus on the passive target-date portfolios in this article.

Fidelity is featured in the book Fidelity’s World: The Secret Life and Public Power of the Mutual Fund Giant.

fidelitys-world

Description of Fidelity target-date retirement portfolios

Fidelity’s Freedom Funds are simple to compare in contrast to other target-date funds. They are also very cheap to buy as a one-fund solution.

They are slightly cheaper than a comparable Vanguard target-date retirement fund. The 2060 target-date fund from Fidelity carries a 0.12% expense ration while the comparable 2060 Vanguard target-date fund carries a 0.15% expense ratio. This comes out to a $30 difference per year per $10,000 invested.

There is one more interesting thing about the funds.

The interesting thing about the Fidelity Freedom Funds is their glide path. The funds hold off much longer with taking on bonds. This means that the funds are allocated more to stocks for longer. This should equal higher returns in the end as bonds have had a lower return historically than stocks.

This of course also adds more risk and more volatility. This should be a non-issue as they are target-date retirement funds and you shouldn’t care about them until retirement. Reality is far different, however. Many people will get queezy when they see their retirement savings dimish.

fidelity-freedom-funds-allocation

This chart is a few years old but it is a good representation of how the Fidelity Freedom Funds manages to hold off going into bonds.

Notice that their 2060 fund holds 10% in bonds? If they had even more courage they would go 100% into stocks as for each 10% allocation to bonds roughly create an approximate 0.5% drag on returns while not supplying any meaningful stability to the portfolios.

A 100% stock allocation experienced a 37.07% drawdown during 08′-09′. A 90/10% stock/bond allocation experienced a 32.83%

You can see their glide path progression here with a nice slider.

Note: Fidelity has changed the composition of their target-date funds. They no longer include for example commodities. This will be corrected in the near future.

Disclaimer: These are target-date funds. By design, their asset allocation will change over time. In general, target-date funds shift more of their assets towards bonds as you age to lower your risk. This means that the asset allocation below will have changed until we update it here at portfolioeinstein.com. This information on these funds was collected in 2018.

Performance of Fidelity target-date retirement portfolios

NameAsset class countYear to dateReturn in 201910 year returnCAGR since 1989 (%)Risk levelExpense ratio
Fidelity Freedom Index 2030 (55 year old)6-3.6923.09.05%8.4820.05%
Fidelity Freedom Index 2040 (45 year old)5-5.4725.9310.10%8.7730.06%
Fidelity Freedom Index 2050 (35 year old)5-5.4725.9310.10%8.7730.06%
Fidelity Freedom Index 2060 (25 year old and younger)5-5.4725.9310.10%8.7730.06%

Asset Allocation of Fidelity target-date retirement portfolios

Note: Please check the fund prospectus for the exact asset allocation and funds to use.

Fidelity Freedom Index 2030 (55 years old)

  • 51.46%  US Total Stock Market
  • 22.11%  International All-World ex-US
  • 24.03%  Total US Bond Market
  • 0.05%    Cash (money market fund)
  • 1.29%    Commodities
  • 1.06%    TIPS

Fidelity Freedom Index 2040 (45 years old)

  • 62.11%  US Total Stock Market
  • 26.58%  International All-World ex-US
  • 9.97%    Total US Bond Market
  • 0.02%    Cash (money market fund)
  • 1.32%    Commodities

Fidelity Freedom Index 2050 (35 years old)

  • 62.11%  US Total Stock Market
  • 26.58%  International All-World ex-US
  • 9.97%    Total US Bond Market
  • 0.02%    Cash (money market fund)
  • 1.32%    Commodities

Fidelity Freedom Index 2060 (25 years old and younger)

  • 62.11%  US Total Stock Market
  • 26.58%  International All-World ex-US
  • 9.97%    Total US Bond Market
  • 0.02%    Cash (money market fund)
  • 1.32%    Commodities

Check the best mutual funds and ETFs here.

Resources for Fidelity target-date retirement portfolios

See a comparison of target-date funds in our article What Is The Best Target Date Fund?

Learn way more about target-date funds in our article Target Date Fund Portfolios

Fidelity has a few podcasts, most provide mainly financial porn.

Conclusion

Would you consider Fidelity’s Freedom for your target-date retirement portfolio?

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