Vanguard Information Technology ETF: What You Need To Know

Vanguard Information Technology Funds

Did you know that there is an institutionalized fund in the country that seeks to track the market index of the information technology sector? One of the greatly renowned funds is the Vanguard Information Technology Fund.  Because of its various holdings and services in the market, its low-cost ratios, and resilience whenever the market takes a hit, this ETF is something that you would want to consider buying and engaging your assets with.

But what is this infotech ETF, and how can this help you as an investor? Read on to find out.

Vanguard Information Technology ETF

Vanguard information technology ETF (also known as VGT ETF or sometimes VITAX ) is one of the most renowned funds that are passively exchanged and passively traded in the market. You can also buy and sell these shares just like individual stocks. The VGT is one that tracks the information and performance of the technology sector, whose holdings give weight to the market cap. This means the bigger the company in the sector, the bigger the percentage allocated to the fund.

The technology sector is one that covers a wide array of companies, including tech-forward service companies, chipmakers, e-payment processing industries, as well as software and hardware companies.

Also, the VGT is a fund that gives opportunities to investors in getting exposed to the largest tech companies in the sector–so if you would want to have a diversified financial-tech portfolio, Vanguard will work best for you.

Why do You Need to Invest in Vanguard Information Technology ETF?

What makes the Vanguard Information Technology Index Fund interesting is that the assets that it holds include stocks that belong to highly-concentrated tech areas inside and outside of the United States. 

They hold tech stocks for small and large companies, but the large ones provide the highest returns and best performances. They also track company indexes that work around the industries of tech-based services and products, as well as tech-based research and development industries.

Vanguard considers the Info Tech Index Fund as one that’s aggressive, and would work well for those investors with a rather high-risk tolerance. The high risks would pose a mixture of both growth and decline on its share prices, which is why it is a good choice if you think that long-term investment is something that would interest you.

One more thing that you would need to know is that Vanguard’s funds are known to have low-cost indexes, amidst a wide selection of both exchange-traded funds as well as mutual funds.

What else are the reasons why we should place our investment in this VGT Index Fund? There are four main reasons:

1) Investment Strategy

An investment strategy is key when it comes to making sure we spend less on overhead expenses, with the most efficient yields and gains at the same time. This Vanguard Info Tech Fund is one that tracks performances and invests on all of the assets included in the stocks that comprise the benchmark index.

Because of the tracked stocks in this index, it serves as a good investment strategy for those who are looking for more extensive exposure in the Information technology sector in and out of the United States.

2) Role in Portfolio

Because of being exposed to a wide array of financial portfolios in the market, Vanguard Technology ETF becomes something highly supplementary to parts of the stock allocation for the investor portfolio. Again, the more exposure to the technology sector, the better the funds’ role becomes for your financial portfolio.

3) Easy Management

Even if this technology ETF is considered to be one that’s aggressive and poses a higher risk for investors, the fund is also considered as one that’s relatively easy to manage. With a low cost and expense ratio, investors are given the opportunity to manage their funds accounts for themselves.

4) Top Performance

Vanguard  Information Technology ETF VGT is also considered to be the prime performer in the market, after having yielded 34.72% of returns just last year. Furthermore, it also yielded a remarkable 23.6$% of returns over the past three years, and 23.56% throughout the past five years. Decade-wise, the fund performed with a yield of 18.95%, given the ten-year data.

As provided by U.S., the following table shows the performance of the Vanguard fund:

1 month3 month6 month1 year
MSCI ACWI NR USD12.336.0622.2915.01
Rank in Category69886559
Category (ST)14.819.8334.9549.78
+/- Category (ST)-2.31-7.64-5.98-6.32
+/- MSCI ACWI NR USD0.17-3.876.6828.45
Updated 11/30/20

Things to Consider when Investing in Vanguard Information Technology ETF

 1. Costs and Fees

One thing that you should consider is that there are mutual fund charges as well as expense costs that may hit investors who are in possession of mutual funds. It should be understood that when you run a mutual fund, it will always include operational costs–which include transaction costs, fees for investment advising, as well as expenses on distribution and marketing ventures. Various funds make investors pay for such overhead expense ratio 0 in a wide array of ways. Let’s take a look at a couple of fees:

  • Maximum Sales Fees

The initial sales fees incurred by investors are usually those that are being paid to brokers in the form of a commission. On the other hand, deferred fees are charges incurred when investors choose to redeem their shares from the market.

  • Maximum Fees

Maximum fees are those being charged to fund holders every year (which you could think of just like some sort of annual membership fee).

  • Actual Fees

Vanguard has a very low net expense ratio of 0.1%, where the average expense ratio in the market is at a staggering 1.26%.

Management fees for the fund are pegged at 0.09% amidst the category average of 0.78%.

  • Total Cost Projections

Total cost projections are those that predict how much you, as an investor, can expect to spend in expenses/sales-related charges and fees.

  • Minimum cost on investments

When opening an account for investing, some funds would require a minimum cost on investments, which serves as an initial and principal payment to the fund.

2. Risk Considerations

The next crucial thing that you should consider when engaging your assets in the stocks is the risk. In the context of the Vanguard fund, you should know that it focuses primarily in the information technology sector. Therefore, if there are funds out there that give focus on other equity sectors outside their domain which is on information technology, then it is prone to risk that’s particular to that particular investment.

Investors, in turn, will experience higher volatility because of the lack of diversification caused by the issues impacting the specific sector. Consequently, the impacted sector will manifest into poor performance

  • Volatility Measurements

Volatility measurements are those that serve as a mirror towards risk and uncertainty on the value of the underlying securities involved.

Vanguard’s information technology fund has a standard deviation of 21.108 this year, which shows how varied the returns of the fund are, relative to its average performance over time. Therefore, the higher the returns of the fund, the greater the standard deviation it will gain.

Furthermore, the Sharpe Ratio of the Vanguard Information Technology Fund ETF is pegged at 1.04. The Sharpe Ratio is used in measuring how much risk can an investor expect to take when calculating investment returns.

Lastly, the Mean of the Vanguard Information Technology is set at 1.964 this year. The mean is a metric that makes us understand how well the Vanguard fund performed given data on annualized returns.

  • Modern Portfolio Theory Statistics

Theory statistics are important in understanding the competitiveness of a fund. With modern portfolio theory statistics, comparisons can be made in checking excess returns of the funds vis-a-vis the performance of a benchmark index. Data for this metric are in reference to three years of data on monthly returns.

There are three measures to identify such data: the R-squared, the beta, and the alpha.

What you Need to Remember

One interesting fact: the previous years have been very beneficial to most of the tech-concentrated financial portfolios. Just last year, the Vanguard Information Technology ETF has successfully gained a 48.8% dividend yield. This overpassed the S&P 500 returns on net assets, with only 28.9% that year. 

The Vanguard Information Technology ETF is a cap-weighted financial portfolio as well, despite its median market cap that is topping one hundred seventy billion dollars, which is the 10 largest holdings account, taking up 57% of the financial portfolio.

You also need to remember that Microsoft and Apple Inc are the top two amongst the top 10 holdings in the ETF industry net assets. Because of this, they both serve as the United States’ most valuable publicly listed companies. These companies hold more than 33% of the investments and the ETF portfolio.

Aside from Apple, and Microsoft, you should know that Visa Inc and Mastercard also fall under the next two of the largest holdings in the market. They are benchmarks that the Vanguard ETF is also tracking, as they are heavily involved in electronic payment processing, software development, among others.

Even if Vanguard ETF is an aggressive fund, you won’t have to account for the fall or the rise of the outstanding shares because it works very similarly to how we perceive open-ended mutual funds. The cash balance expands and contracts organically so you wouldn’t have to make active trades all the time, as opposed to a traditional index fund. Plus, the Vanguard ETF has a 5% portfolio turnover rate.


The Vanguard ETF is one that gives investors the best of both worlds. They offer investors a wide array of proven and strong technology-based stocks in the market with very low expense cost ratios. 

The Vanguard ETF will be volatile if the stock market goes through a crisis, and the downfall can suffice if investors trade out of tech stocks. Regardless of all these considerations, if you track the performance of the fund, you will realize that at the end of the day the Vanguard Information Technology ETF is beneficial to the average investor and is worth the buy. 

Given the costs, the exposure, and the opportunities, in the long run, this ETF will totally help boost your asset class, as well as your portfolio.

If you need more information on investing and anything financial-related, let Investoralist help you out! Investoralist is a site that can help you understand, engage, and get empowered on everything related to your finances.

Vanguard Roth IRA: Is It the Best Roth for You?

Vanguard Roth IRA

Retirement isn’t an easy matter for people without prior planning. As you age, you may wonder if you have done enough to your savings plans for peaceful retirement! A terrible fact is most American to-be-retirees are not saving enough and could have work harder and longer to have a decent life in retirement.

The Roth IRA offers one of the solutions to this problem. 

Why Vanguard Roth IRA? 

First, let’s talk about a traditional IRA and a Roth IRA, and you may have heard the differences: A traditional IRA is a tax-deductible plan, you can make deductions about your contributions in your tax return. A Roth IRA is not tax-deductible for contributions but tax-exempt at retirement.

Tax treatments make the principal difference for these retirement plan participants. If you choose Roth IRA, Vanguard accounts offer many benefits other institutions do not provide. 

They include low-cost funds and a wide selection of funds, and so on. Vanguard IRAs have more than 200 funds to choose from, and they are noted for offering low-cost funds in retirement plans.

Whether you are a general or annuity plan participant, you had better consult your tax or investment advisors, or retirement plan sponsors consultants as your first plan for the long-term. The nature of your retirement plan involves investment risks, tax aspects, and other life planning goals. As an investor for your retirement plan, you should talk to your close family member regarding joint plans with you like college savings or other specific life-goal settings.

Significant Benefits of a Roth IRA

Some attractive incentives are drawing people to Vanguard Roth IRAs; they are following but not least of all:

1. Low Costs

It is a truth Vanguard provides low-cost funds in the mutual fund industry. Their average fund fees are 0.1% compared to general funds of 1.5% on average. The benefits are enormous when you are talking about the snowball effects of cost savings by 1.4% expenses. One more thing to note is the low-cost policy also applies to actively managed investments and exchange-traded funds(ETF) besides index funds.

2. Wide Selection of Funds

You can benefit from the vast range of mutual funds within the Vanguard fund family. Just imagine there are more than 3,100 mutual funds for you to choose from, and more than that, costs for the exchange-traded funds are mostly commission-zero on Vanguard Roth IRAs. But you should note you may pay commission for Vanguard funds at other brokers’ accounts.

3. Tax-Free Growth

Unlike traditional IRAs, Roth IRAs grow your assets free of tax. Furthermore, as contributions belong to income after tax, they will not be subject to capital gains and dividend or income tax in the future. That will benefit plan investors and plan participants. Future tax is a strange thing. Besides helping to spiral the asset base, your family members can benefit from an inheritance gift. You should consult your estate lawyer before investing in this plan.

4. Tax-free withdrawals in Retirement

What makes investors or retirees popular is you can withdraw the money free if you meet some criteria like a 5-year rule. According to Internal Revenue Service, provided you are 59 ½ years old and own your Roth IRA for five taxable years after your first contribution, you can withdraw your money from whichever Roth IRA account there is (if any).  

5. Flexible Withdrawals

More than that, retirement plan participants can even withdraw contributions anytime without tax if certain conditions are met. That said, if people can take the money out of their Roth IRA accounts under the conditions: 1. Buying of a first home, 2. Disabled, 3. Dead, 4. Paying certain medical expenses unreimbursed or due to loss of jobs. 5. Paying children higher education expenses. 6. Paying childbirth or adoption expenses.

What are the Pitfalls of a Vanguard Roth IRA

  • Trading Costs

Though most of the trading commission for Vanguard’s funds are low to zero, you may have to pay a commission fee of up to $20 if you buy funds at other brokers other than Vanguard’s. If you intend to frequent trading of your brokerage assets in your Roth IRA account, you may incur a high cost and subsequently hurt your returns. I would suggest you use a buy-and-hold strategy to grow your investments.

  • Fund Minimums

You will find Vanguard brokerage services offers Roth IRA service, but you may be disappointed they impose a minimum investment of at least $1,000. At the same time, other brokers do not have this requirement for retirement plans. It increases the hurdle for people to open a retirement account if they want to directly invest in Vanguard’s mutual funds.

Some Powerful Vanguard Mutual Funds for Your Roth IRA 

When you think of Vanguard funds, you think of low-cost funds and a wide range of choices. However, there are three special funds you should take note of:

1. Vanguard Total Bond Market Index Fund(VBMFX)

The fund invests mainly in the US bond market. The holdings for the bonds are investment-grade and spread across different maturities. The investment goal is to provide a steady income and low volatility for fund investors. Furthermore, the tax for interest payments is also deferred in Roth IRAs.

The yield for the fund is currently 2.63%. It holds more than 8,500 funds in the portfolio with almost $200 billion in assets under management as of October 2018. More than 60% of bonds come from US Government, and the remaining go to corporate sectors of primarily finance and industries. The average maturity is 8.6 years, and the expense ratio is 0.15% low. The required minimum investment is $3,000.

2. The Vanguard Total Stock Market Index Fund(VTSMX)

As the name implies, the fund invests in the US equity market with high volatility. Major long-term investors hold heavy in their portfolios. They offer long-term growth by asset appreciation. The assets under management are more than US750 billion with well-diversified securities of 3,680. The major sectors are technology, finance, healthcare.

3. The Vanguard REIT Index Fund(VGSIX)

The investments of the fund hold real estate projects. It can diversify the risk of owning stocks and bonds. The fund buys office buildings and hotels, and malls for rental income and price appreciations. Besides, it has 31.5% of its portfolio in specialized REITs(Real Estate Investment Trust), of which 14.80% is retail REITs, and 13.5% is residential REITs.

As of Oct 2018, the fund holds 184 stocks and has 59.4 billion under asset management. The unadjusted yield is 4.16%.

Are there other options?

Except for Vanguard funds, there are alternatives available for Roth IRA investors. Through the following plan, participants can change their preferences when they change their goals. Remember to talk to your financial or retirement advisors for opinions suitable for your purposes.

  • Brokers

You can choose traditional or online brokers to open a Roth IRA. Just pay a visit to their stores or official websites for personal investors. It takes not a long time to open an account. Some advantages with a broker account are 1. They have no management fee. 2. However, you have to pay a fee similar to an expense ratio when you buy a mutual fund. 3. You may have to pay a commission whenever you buy or sell an investment though the trend is going towards zero one.

  • Robo-Advisors

A new trend: Robo-advisors help you invest! It’s also called digital advisors. You pay a fee, and a Robo-advisor picks the stocks and bonds for you. If you like things other than human advisors to manage your portfolios, you may give it a try!

  • Banks

A traditional way for people to go is to open a Roth IRA with a bank. There are some pros and cons about bank IRA. CDs( Certificate of Deposits) are offered to their clients for principal investments tools if you have an IRA with them. 

The point is if you have a mid to a long time to retire, you may miss chances for growing your nest eggs as CD yields are much lower than stocks and bonds. 

You should consider the time when planning to invest for your retirement. Though higher volatility, stocks and bonds are ideal candidates for long-term investment tools to grow your assets. 

If you are just several years into retirement, safe and low-yield CDs may be an appropriate option.

Frequently Asked Questions About Roth IRAs

How do I open a Roth IRA?

Opening an IRA is quick and easy. Get some personal information ready like contact number, address, social security number. Choose your provider and select types of investment tools suitable for your unique situations. You can pay visits to providers’ websites to see their latest offers.

How much do I need to open a Vanguard Roth IRA?

Vanguard itself does not require a minimum to open an account. However, the mutual fund you intend to buy may demand a minimum. It depends on individual funds’ minimum criteria. 

Can I open a Roth IRA with Vanguard?

Yes, but you should note income limits and contribution limits are available for tax purposes. You should review the information and consult with your consultants before opening an IRA and invest.

Who has the best IRA?

Every IRA provider has its unique offers and features. Combining the factors mentioned earlier with your circumstances, you can find your suitable IRA. Remember to discuss with your advisors!

Is a Vanguard Roth IRA free?

It is up to the investment tools you plan to adopt. Investors may bear some costs like stock trading fees and mutual fund expenses. Besides, Vanguard will charge $20 for the annual subscription fee if you don’t register for an e-mail statement.

Final Words

A Vanguard Roth IRA is more than just a retirement planning tool for you as an investor. Through their wide range of fund choices and low-cost features, you can grow your asset base for different purposes like education and other life goals.

More than that, you enjoy tax-free growth and flexible treatments at withdrawals from your Roth IRA. You should remember the nature of a Roth IRA: long-term savings account and tax-efficient investments. A participant should consider the two factors in planning their financial future. 

If you make frequent trades in your IRA, you will incur higher expenses due to the selling and buying of assets. Costs related to early withdrawals and tax issues may reduce your returns in a compounding way. The best strategy is buy-and-hold for your investments. Therefore, apart from discussing it with your professionals, you need to research more finance and investment resources. 

Investoralist provides in-depth analysis and detail regarding Roth IRA and other related retirement products for readers to have a clear picture of personal financial planning. Subscribe to the newsletter for more information.  

Roth IRA Fidelity Review: Best Retirement Account for Several Reasons

Roth IRA Fidelity Review

Whether you want to grow your savings or diversify your investment portfolio, a Roth IRA is a great choice that comes with long term tax benefits. Roth IRA is overall the best retirement plan available today that offers tax-free income.


  • There are no minimums or account fees to open a Roth Fidelity IRA account
  • It offers a large variety of investments choices
  • Trades are commission-free
  • High potential for tax-free withdrawals and growth upon meeting the set conditions
  • Free investment tools such as calculators, apps, and software
  • Extensive information and research data available for investors
  • Some mutual funds have no expense ratio


  • Some mutual funds are high cost and attract high transaction fees
  • The robo-advisor service charges a higher-than-average annual advisory fee for balances over $50,000 compared to other competitors
  • Fidelity Roth IRA does not provide access to cryptocurrencies, futures, forex, and other riskier assets
  • You have to invest for at least 5 years initially before making any withdrawal

Fidelity Roth IRA is an excellent choice for beginner investors or anyone looking for their first Roth IRA. It offers one of the best self-directed investment platforms, with a wide variety of investment options, and minimal trading fees. 


From tax advantages, maximum contribution, and fees, here are some details that can convince you to consider a Roth IRA. 

Tax advantages: The concept behind Roth IRA is that you make contributions to this account with after-tax money. Once you turn 59½ and have been in a Roth IRA plan for five years, all distributions taken from the plan are tax-free. You can withdraw your contributions without incurring any tax or penalty expenses at any time. 

Maximum contribution: $6,000 ($7,000 if age 50 or older)

Income requirements: In 2021, the upper limits for investing are $125,000 for a single person or $198,000 for married people filing jointly.

Minimum investment: There is no minimum to open the account

Investment options: Fidelity Roth IRA is great for independent investors who want to access a wide range of investments. With Fidelity, you get access to trading stocks, bonds, options, and a vast choice of ETFs. You also get access to great mutual funds both from Fidelity and non-Fidelity.

Support & guidance: When it comes to investing, you are responsible for choosing and managing your investments. Great thing is that you can access all the tools and information that the platform provides.

For the Fidelity Roth IRA, investments are managed for you, using your goals and risk tolerance set in your digital account. You still get to access Fidelity’s information repository, as well as a Fidelity advisor whenever it’s necessary.

Fees: There is no opening cost, closing cost, or annual fee, and offers $0 commission 

Why choose Fidelity Roth IRA?

Beginner-friendly: Fidelity has invested heavily in the platform’s infrastructure to make it easy for customers to find tools and features. Fidelity provides access to a well-developed information section, which builds the confidence of customers who are new to investing.

The platform also makes investing easy through user-friendly layouts for making orders.

No minimum or recurring fees: Fidelity Roth IRA does not charge for account opening or annual fees. The account also offers low transaction fees using an order-routing technology that reduces transaction costs by seeking out price improvement.

Extensive and complete trading tools and resources as a full-service broker: Fidelity Roth IRA offers investors abundant online help and a well-versed chatbot that can respond to any customer queries.

One of the best commission structures at $4.95/trade: Fidelity Roth IRA offers one of the lowest fee structures in trading, at only $4.95 per trade for ETFs, options, and stocks. They also have many commission-free mutual funds to invest in.

Flexible investment types: Fidelity allows you to trade in virtually any type of investment available on Roth IRA.

No expense ratio for mutual funds: 4 of the mutual funds that Fidelity offers have no expense ratio. This means that you can invest in these mutual funds and manage them in your account at zero fees.

Local branches availability: Fidelity has over 140 branches in major cities across the country in case you need hands-on customer service.

Where Fidelity falls short 

Higher fees for some of the mutual funds: Of all the mutual funds available for investing in Fidelity Roth IRA, only 4 of these funds have zero-commissions. However, all other mutual funds attract a $49.95 fee per trade.

Higher pricing with robo advisor competitors: To access robo-advisor services, you pay a 0.035% per annum management fee and the minimum initial investment has to be $5,000 

With Fidelity Roth IRA, you don’t have access to options such as Forex, Crypto, and other riskier assets

Fidelity vs other investment firms


  • Unique feature: Availability of extensive information and resources to learn to trade
  • Commission: 0%
  • Best For: Beginners interested in different investing options

Charles Schwab

  • Unique feature: Access to a robo advising services at no extra management fee
  •  Commission: 0%
  •  Best for: Beginner and advanced traders seeking for no-minimum index funds

TD Ameritrade

  •  Unique feature: Offers a combination of platforms that allows both beginners and experienced traders to access their investments
  • Commission: 0%
  • Best for: Active investing and trading


  • Unique feature: Traders have access to automated investing and managed portfolios through robo advising
  • Commission: 0.25%
  • Best for: automated investments that balance a portfolio over time


  • Unique feature: Easy investing experience offered through mobile and web platforms.
  • Commission: 0%
  • Best for: Active investing

Best Roth IRA IN 2021

Fidelity Roth IRA tops the list of best Roth IRAs in 2021 for several reasons. The account offers commission-free trading for stocks, ETFs, and more than 3,400 commission-free mutual funds.

In addition to offering the best trading platform with lots of information and research on investments, investors can access a tool suite of calculators and software to help in improving their investments and achieve their retirement goals. These tools include the Fidelity Spire app and Retirement Score Calculator.

When investing in Fidelity Roth IRA, mutual funds are obviously the best investment option to take. One of Fidelity’s solid mutual funds is the Fidelity 500 Index Fund (NASDAQMUTFUND: FUSEX) which has one of the lowest expense ratios of 0.010%.

Individual stocks are the second-best Roth IRA investment. However, it’s necessary that you go for those with high growth potential, even though they may not work out as you expect. 

Other things you need to know

Is Fidelity good for Roth IRA?

The Fidelity Roth IRA ranks as the best for various reasons. First, Fidelity Roth IRA accounts have no minimum account balance or any recurring account fees. The account also offers more than 3,400 mutual funds that attract zero transaction fees and commission-free trade on ETFs and stocks. 

How much does Fidelity charge for Roth IRA?

Fidelity Roth IRA has no opening cost, closing cost or annual fee. In addition, there are no commissions for online stocks, ETFs, and options trades.

How is a Roth IRA different from traditional IRA?

A Roth IRA and Traditional IRA are both great accounts to consider for retirement investing. However, there are key differences between these two accounts that are notable.

While Roth IRA allows you to make after-tax contributions, you can make pre-tax contributions with a traditional IRA.

A Roth IRA is suitable for an investor who expects to be in a higher tax bracket at the time they start making their withdrawals. On the other hand, a traditional IRA is great for an individual who expects to remain in the same tax bracket when starting to make the withdrawals.

The only downside to a Roth IRA is that, unlike in traditional IRAs, there is a cap to the maximum contribution amount allowed.

Does Fidelity Roth IRA payout interest rates?

Fidelity Roth IRA does not pay out any interest as it is not like other traditional savings accounts that are set up in the banks. Fidelity Roth IRA is a type of investment account that holds assets and earns returns depending on how the assets perform.

Who is eligible to contribute to a Roth IRA?

For you to contribute to Roth IRA, you must have earned income. If you are married, you can make spousal contributions even if your spouse does not have earned income.

However, you cannot contribute to a Roth IRA if your income exceeds $140,000. For people under 49 years or younger, you can only contribute up to $6,000. For people above 50 years, the limit to your contributions is $7,000.

What is a Roth Conversion?

A Roth conversion involves making a withdrawal on your 401(k) and traditional IRA and converting it into a Roth. Ordinary income taxes are incurred on the withdrawal amount, but you do not incur early withdrawal penalties.

Roth conversion works for investors who want their income to grow tax-free. 

Anyone can convert their IRA assets to a Roth IRA, regardless of income or marital status.

How much should you consider converting? 

With a conversion, you pay income taxes on the conversion amount. That’s why when determining how much to convert, you have to consider how much money you have saved in non-retirement funds to pay the taxes. Fidelity also suggests converting over a number of years in amounts that will keep your income from the conversion within your current federal tax bracket or within your desired bracket. 


If you are just starting to plan out your retirement plan, Fidelity’s Roth IRA is the best choice for you: it does not have a minimum deposit account and it does not require account opening or maintenance fee. 

Fidelity Roth IRA investment account offers you a unique opportunity to invest in a wide variety of Fidelity investments and manage them all on your own. With the ability to invest in multiple trading options and accrue tax-free income, Fidelity Roth IRA is a great way to invest in your retirement while avoiding high tax liability that other investment options present to traders.

To learn more about financial planning, retirement plans, and a wide range of investment products, subscribe to our newsletter.

Index Funds for Dummies: Beginner’s Guide

Index Funds

Investing can be a daunting task! If you are annoyed by daily market ups and downs as a beginner, I will show you how to make index fund investing successful.

Index fund investing is a suitable fit for dummies or newbies. It provides a hassle-free solution for you to focus more on other essential things in your life. 

In the following, I will explain what you should know about index funds: 

  • the nature and mechanism of index funds
  • the pros and cons of index fund investing
  • how to identify and choose a good index fund; d. finally, I will show you where to find sources on index fund investing.

What is an Index Fund?

An index fund is a pool of funds to build a portfolio of assets by mimicking market indexes’ composition. Let’s take an example of some well-known indexes like the S&P 500 index and Nasdaq composite index.

A manager of an index fund regularly buys and adjusts stocks based on the components of an index, e.g., the S&P 500, according to the combinations of securities in the index.

It is an easy, passive, and no-brainer investment tool for a newbie investor without requiring too many deliberations. In other words: if you invest in the S&P 500 index fund, you have already invested in the most giant 500 corporations in the US. Just imagine how comprehensive your investing plan is!

Major types of indexes for index funds

The famous investing guru, Mr. Warren Buffett, encourages people to invest in index funds regularly and claims it is a safe bet for most people. The late John Bogle, the founder of Vanguard funds – one of the largest index funds in the US, says index fund investing is the most transparent to investors. 

Currently, there are various sorts of index funds available for investors. They include:

  • Nasdaq Composite made up of 3000 stocks listed on the Nasdaq exchange.
  • Dow Jones Industrial Average (DJIA), consisting of the 30 largest blue-chip companies.
  • Bond index: Bloomberg Barclays US Aggregate Bond index.
  • Russell 2000, comprised of US small-cap companies.
  • S&P 500, the largest 500 US companies, is listed on the New York Stock Exchange.
  • MSCI EAFE, consisting of foreign stocks from Europe, Australasia, and the Far East
  • Wilshire 5000 Total Market Index, the largest U.S. equities index

The investment scopes of index funds can even cover more like specialized industries, currencies, and commodities, but they are riskier for non-experts.

Are Index Funds ideal for dummies?

Index funds are a member of a family of mutual funds. They belong to passively managed pools of investments in the indexes and broadly represent movements of market changes. 

As a result of this, index funds have become popular among the general public. They are in use widely for different goals in sorts of stages in life, including:

  1. Retirement: you can buy it through your 401(K) or individual retirement account. You don’t always need to watch your portfolio because market changes reflect your portfolio’s.
  2. Education: shares of index funds are available for sale from mutual fund companies; therefore, you can buy them for your children’s education expenses.
  3. Wealth accumulation: If you want to save for future use or rainy days, you may consider buying index funds through a brokerage house.

Index funds are an easy-go managed tool for beginners if you are just a newbie or dummy in aiming for long-term investing.

How does the Index Fund Work?

As you know, an index fund is a pool of investments made by modeling on the securities of an index like the S&P 500 index. When you buy an index fund’s shares, you acquire all the stock holdings based on the index’s securities proportionally. 

Moreover, you can also purchase the funds share(e.g., SPY, QQQ) in business hours if listed on the stock market(New York Stock Exchange). 

Like a stockholder, you will get the dividends, interests, and capital gains regularly when the stocks or bonds pay. Even if the shares of an index fund are not listed on the stock exchange, you still can buy the securities based on the last working day’s price.

How to weigh index funds

As different combination methods calculate market indexes, index fund managers have to adjust the portfolios regularly and match an index’s weighting according to changes. The calculation methods of index mainly consist of 3 widely used sorts:

  • Price-weight index: This index takes the prices of the securities it holds into consideration. Securities of higher prices have a higher weight in the index. Dow Jones Industrial Average(DJIA) is the price-weight index. As the components’ prices determine an index’s weight, managers have to adjust the portfolios’ pricing to match the index weight accordingly.
  • Market-cap weight index: Each security’s market capitalization determines the weight of the index. Standard & Poor’s 500 index(S&P500). An asset’s high market cap has more impacts on the index, so has a market-cap weighted index fund. Managers have to adjust the changes in market cap changes in line with the index.
  • Equal weight index: It consists of equal proportions of securities in the index. S&P equal weight index(EWI) is one of the indexes. Managers do not change their portfolios frequently as the weighting is the same no matter the prices and market capitalization changes.

To recap, more rebalancing of portfolios is necessary for price-weight indexes, and vice-versa, least is for equal weight indexes.

Is an index fund investing passive investments?

Yes, it is! The actively managed fund has a goal of outranking the index; therefore, managers have to find market opportunities and determine strategies to manage their portfolios like buying, selling, and even hedging. 

However, it may incur more risks and expenses. In the long term, the strategy may not outperform the passively managed ones.

What are the Advantages of Index Funds

  • Long Term Performance: According to SPIVA statistics and Reports(SPIVA), almost 70% OF US large-cap companies cannot beat S&P Dow Jones Indices over the past five years until the end of December 2019. Even only one-third of mid-cap companies beat Standard & Poor’s 500(S&P 500) in one year. 

If we look further, only 13% of actively managed funds outperform the S&P Midcap 400 growth index over the ten years, according to investor’s business dailies. Advocates argue that few people can beat benchmark indexes; most of the wins are probably due to costs and lucks. Index funds invest based on the market indexes; therefore, they can generate better returns.

  • Lower costs: Index funds incur fewer costs than actively managed funds: 

1. Operating costs: trading costs are less because fewer trading activities occur, research and analysis(R&D) are almost zero as the components of index funds are in line with indexes.

2. Taxes: taxes related to trading and capital gains are less than actively managed funds. 3. Administration cost: Actively managed funds hold a larger staff than index funds and consume more expenses. They charge 0.75% to 1% more than index funds typically.

  • Transparency: Index fund components are reflective of that of the benchmark index. Expense allocations are clear and straightforward, and investment strategies are passive by copying the index ones. It is easy to understand how index funds work and what the fees are all about. If a beginner or dummy is mindful of complicated investing, he will most likely like the mechanism of index fund investing.
  • Diversification: Most index funds invest in major US indexes. The Dow Jones Industrial Average(DJIA) indexes and Standard & Poor’s 500(S&P 500) cover mainly blue-chip companies and various economic sectors and are nearly representative of the US economy. If you invest in the indexes, you invest in almost all sorts of sectors of the economy. 

The benefits: by investing in cross-section investing, you can reduce the risks of investing in only one industry and one company. That means: if you only invest in one sector or one company like textile manufacturing, you may suffer the loss as to the decline of the apparel industry, etc. 

In other words, you may not lose your bets by only investing if it suffers from a loss like Enron or Worldcom. Diversification means more protection to the index fund investors, especially to the new investors.

What are the Disadvantages of Index Funds

  • Lack of flexibility: As the name implies, index funds cannot invest more than it allows beyond the securities specified. Investors may miss other opportunities for returns. 

Moreover, managers have little discretion to change the portfolio’s combination by mimicking the index, which may lead to a loss of chances of profiting from the proportions of climbing stocks. 

For example, Tesla(TSLA) was recently added to the Standard & Poor’s 500; what if the security had been added to the index one year earlier or managers could buy the stock at will without any restrictions. The consequence: the returns for the index fund might become a different one!

  • Rarely outperform the index: Index funds are designed to model a benchmark index, so the intention is not to exceed an index’s returns.

If the market crashes, managers of the index funds can do little to stop them except sticking to an index’s components. They cannot sell to prevent the loss and buy more than specified to increase profit if the market climbs again. 

Moreover, index fund investors earn fewer returns than an original index delivers after paying expenses. However moderate the costs (depends on individual funds), the returns from index funds are mildly smaller than the market, and may contradict what ambitious and young investors intend to do!

  • Tracking error: Except for the above restrictions, index fund performance may vary from one to one even though all invest in the same index. 

The performance of respective managers is primarily attributed to the benchmark called tracking error. Managers have their discretion as to when to invest and create different prices for a stock. Consequently, a large index fund has more advantages of getting a favorable price for a stock than a smaller one. 

According to the benchmark index, a fund manager with a large cash flow may have a hard time converting the cash position into stock positions. Finally, not every index fund has the same tax position. It may likely affect an index fund’s performance! The benchmark error for passive index fund managers is a plus and minus 0.5%.

  • Management differences: There are no clear regulations for “index fund.” As the term index fund becomes more popular, index fund companies have their interpretations on naming and investing in an index fund regarding expenses and even portfolio combinations. 

Some index funds may seek active investment strategies to achieve returns above the index. This may increase the risks and easily confuse investors, especially beginners, under the umbrella of the name “index fund.”

How Should I Choose an Index Fund?

  • Risk tolerance: According to Investopedia, risk tolerance is a measure of the extent of investment loss an investor is willing to put up in the process of investing. 

Before investing, a financial planner will give investors options on what they can endure if their holdings crash, e.g., 25% or more: 

1. Sell all the holdings

2. Sell part of the holdings

3. Hold

The first one is conservative, then moderate; the final, aggressive. Risk tolerance differs on age, income, and attitude. A young investor may have high-risk tolerance with market swings relative to an aged one because he believes there is enough time to recover the loss. 

A high-income earner may endure more risks because he can earn it back in the future. An aggressive investor is more likely to bear more loss than a conservative one.

  • Fees: Charge fees by index fund companies varies to some extent. The annual expense ratio generally is 0.09% for stock Index funds and 0.07% for bond index funds.

An investor should look at the expense in detail; it affects the returns in the future. As to more charges, the longer one invests in index funds, the compounding effects of fees on returns will grow larger.

  • Time horizon: No wealth is created without time! Investing horizon makes a significant impact on everything about returns. The more time we let investments grow, the more returns we accumulate. Therefore, a reasonable investing period should be set up beforehand!

An investor should talk to his financial advisor before making any decision as to his investing goals. Besides, a financial advisor should regularly review changes related to risk tolerance. Investors should have their portfolios reviewed every half a year at least.

  • Index fund operating strategies: An investor should review the index fund operating policies before investing in an index fund. As said, some funds may allow managers to lend securities or cash to increase profits. 

The practice seems to increase the returns but also raise the risks to investors as well. A conservative investor should avoid this kind of index fund with this trading policy.

5 ways to identify a good index fund

  • A good index is transparent: A good index should consist of 2 significant factors: 

1. The purpose of the index.For example, the Standard & Poor’s 500 index is designed to measure the US’s top 500 companies’ performance and a capitalization-weighted index. Of those, most market-cap companies have a major impact on the combination of the index.

2. It should have breadth. Russell 3000 index consists of 3000 publicly listed companies in the US and covers almost 98% of the publicly traded market. Therefore, whether new or experienced, investors should clearly understand the indexes they will invest.

  • There is minimal turnover: As an investor, Imagine you encounter an ever-changing index and are aware it frequently changes components. 

As a result, the manager has to frequently rebalance the portfolio in line with the changes and increase the administrative and trading costs. 

Furthermore, the credibility of the index may be in question due to this inconsistency. It may become difficult for investors to track and follow. A trustworthy and highly authoritative index should include a stable and steady combination of components.

  • The index is logical: Better know-how helps you make better decisions! 

Let’s take an example–the stocks in the Standard & Poor’s 500 index are selected based on eight criteria: market capitalization; liquidity; domicile status; public float; global industry classification and standard of the industries in the economy of the US; financial viability; length of public trading time and exchange. The index is calculated based on a market capitalization method. 

The calculation is open and logically understandable. You may suffer a considerable loss if you make a wrongful decision based on misinformation and unclear grounds offered by an index fund.

  • The index is relevant to the real world: Investing is all about “invest for growth.” Growth is for the economy, industry, and enterprises. 

Think if you intend to invest in MARS, you may not currently see the growth potential because a method for index calculation is hardly justified and unpracticable. However, you are to feel confident in investing in companies contributing to industry and economic growth. 

That said, a reliable index must comprise:1. productive companies for real growth for investors; and 2. long-term nature for wealth accumulation. Indexes like DJIA, S&P 500, and Russell 3000 meet the above criteria.

Are Index Funds A Good Investment?

Markets are full of unknown factors! Whether you are an experienced investor or a dummy beginner, you may sometimes be caught up by sudden unexpected events within. 

There are some occasions when you may have to react panicky or hilarious even though you think you are well prepared. These kinds of Irrational behaviors can dominate your mindset and cause major loss to your investments.

Index funds provide a platform for new or experienced investors to follow and benefit from the corporation’s growth. The advantages are:

  1. you don’t need special knowledge to participate in the game
  2. You can participate in a wide range of investment tools and diversify the risks\
  3. As most investors cannot beat the market, index fund investors will let investors gain the rewards handsomely if you choose to invest in index funds wisely( I will tell you later in the following).
  4. Due to its low cost, simple mechanism, and transparency, index funds are appropriate tools for general investors, especially investing beginners.
  5. Finally, they are ideal vehicles for long term investors planning for children’s education, retirement, traveling, raining days purposes.

If you have a long-term investment concept, you should consider the benefits index funds will bring. Good preparations are the first step towards your financial goals. 


Various kinds of index funds can make you dizzy as you have to spend a lot of time combing through the racks standing inside the fund houses. So, information gathering is the first-go task. 

Financial intelligence sources like TV: Bloomberg, Reuters; financial newspaper, e.g., Wall Street Journal, Financial Times; online magazines like Investoralist; Barron’s. They provide information and analysis relating to the index funds industry. 

Besides, Investoralist also provides in-depth knowledge and comparisons, so investing dummies and experienced investors should benefit before any happy investing!

How To Buy Bonds: The Ultimate Beginner’s Guide

Buy Bonds Online

Bonds are one of two primary and popular investment tools besides stocks for wealth accumulation. The bond investment gives a stable income – regular fixed income and coupon interest over a certain period. Moreover, it is a low volatile kind of investment as quality bonds have fewer price fluctuations than stocks.

If you think investing in bonds like investing in stocks: buy a stock, fold your handstand, sit and wait for the price to appreciate, you may make some serious mistakes! Unlike stocks, bond investing requires entirely another approach when you plan to include it in your portfolio.

What are bonds?

A bond is a promise to repay the principal and interest owed to bondholders. It is a loan made to a government agency, e.g., treasury department, a municipal government, or a commercial corporation, in return for interest payments and principal at the end of a loan period. 

Let’s say if you invest in savings bonds or buy Treasury bonds both issued by US Government, you lend money to the government for use and receive interest regularly as and principal subsequently. Such financial institutions like insurance companies or corporations like General Electric, Ford Motors may issue short to long-term bonds for operating and cash flows. They offer bond investors good opportunities.

Buying bonds: where to begin?

Unlike stock investing, most bonds are denominated in $1,000 increments and not listed in public markets. An investor may have to buy over-the-counter and find it no more convenient than the open market. It may increase the difficulties in building their investment or retirement portfolios like 401k plans. However, there are several ways to access and make bond buying easy:

  • Online brokerages and traditional brokers

Except for traditional brokers, now you can buy bonds online through online brokerages; most major brokerages offer online access to investors to buy individual bonds. A brokerage will provide you with two kinds of quotes: an offer from a seller and an initial offering from an investment bank. 

An investor may buy bonds at a discount off face value from investment banks. The other comes from existing bondholders who intend to sell. If a buyer accepts the bid price, he can buy it through the broker. Investors can all buy bonds online.

A company or government agency may issue multiple kinds of bonds available in the market. You should distinguish the differences among bonds, and I will suggest you consult your financial consultant before dropping money on one!

  • Exchange-traded funds(ETF)

It is a kind of pooled fund investment and belongs to one member of the mutual funds family. As the name implies, it buys a lot of bonds in his portfolio. When you subscribe to a unit, you own a proportion of all the bonds held in a fund and get all the dividends and interest payments.

You will have several advantages in investing in exchange-traded funds:

  1. A bond fund diversifies and reduces risks by owning different kinds of bonds but still provides a stable income stream to fund holders.
  2. One of the benefits of investing in ETF is you can buy a large denomination of bonds with a small amount of money.
  • Direct investment in the US Government

Another attractive way for investors to buy bonds online is directly investing in US treasury securities. You do not need to pay commission or expenses for the government. Using TreasuryDirect makes investors zero-cost and easy in portfolio building.

What to watch for when you buy bonds?

Bond investing is a do-your-homework job. You should do it in a step by step process. Three points to consider if you plan to buy bonds:

   1. Can the borrower pay his bonds?

The most important question you have to ask yourself is the creditworthiness of the bond issuer. It is all about the issuer’s commitments and ability to pay on time. Three principal three rating agencies are responsible for assessing a company’s pros and cons. 

A credit rating will be assigned to a bond once an agency completes the assessment. An investment grade “AAA” is a statement a bond can give an investor the maximum quality assurance of its financial strength and commitments. But you have to note that the “investment grade” bond pays the least interest, like US treasury bonds.

There are three major popular bond types in the market:

  • Corporate bonds

As a rule of thumb, a quick way to see if a company can pay its debt is to look at its past payment history. They provide a reliable reference to how it is willing to pay in the future. 

A company’s financial statements are an excellent start to track its payment history. You can access the vast information through the US Securities and Exchange Commission website or the company’s site as well.

Another point to note is you can evaluate a company’s ability to pay the debt. By examining the financial statements, you can use a company’s operating income (a more reliable indicator to assess its financial strength), divided by interest expense, to look up a figure. You will find out an average number by calculating over 5 to 10 years (combine all those figures, then divided by years).

What do the numbers mean?

  1. 4 or higher: A company has the most robust financial strength to pay up the debt.
  2. 2.5 to 4: It is at the lower end of financial commitment and ability.
  3. 1 to 2.5: A company may have some capability to repay a debt.
  4. Below 1: A company may find it difficult to pay.

It is not a golden rule but, combined with analysis of relevant financial data, gives a clear picture of its fundamentals and outlook.

  • Government bonds

Government bonds are different from corporate bonds because they are commercial entities and don’t need to prove their capability. However, the bonds they issue, especially the federal government, are rated “AAA” as the safest one globally. The federal government’s bonds pay the least interest among all bonds. People view the interest rates as “the risk-free rate.”

  • Municipal bonds

The bonds issued by municipals or local governments are entirely different pictures from the federal government. They have individual financial and fiscal policies, and you should look at their delinquency and default history before making any decisions. Bond investors should refer to the Electronic Municipal Market Access(EMMA) site for local government bonds information. They may reveal more about the current and past rating history.

   2. When is the right time to buy bonds?

The general trend: bond prices go in a countercyclical manner. When the interest rates are up(mostly the economy is upping), bond prices will go down. However, when the interest rates go down(the economy cools down), the prices will go up.

The recent trends of interest rates since the 1980s are going down though we see some small ups in the midst. Therefore, it is not wise to time the market if you intend to include bonds as your long-term savings or retirement plans.

Some investors use the “laddering” strategy to protect their investments: reinvesting the proceeds from the maturing bonds into new bonds. It may reduce the interest rate risk but possibly at the expense of lower yield. You should consult a financial advisor before doing it.

  3. Which bonds are right for my portfolio?

As said earlier, there are all kinds of bonds for investors, so how should we choose? It depends on an investor’s criteria like risk tolerance, tax brackets, and income requirements. Let’s see the characteristics of the major types of bonds:

  • Federal Government Bonds: They are investment-grade bonds and sell for discounts to investors. On expiration, bondholders redeem the bonds at face value.
  • Municipal bonds: Issued by local and state governments, they are tax-exempt bonds and best suitable for high tax income earners.
  • Investment-grade corporate bonds: The bonds are quality bonds of “AAA” ratings. The creditworthiness is excellent. They pay more interest than the treasury bonds.
  • High-yield bonds: The interest paid is much higher than other grades of bonds, but investors should be aware of the default’s risk.

A well-balanced portfolio of bonds should cover all types of bonds. It comprises of 

different maturities, so it reduces interest rate risk and principal repayment risk. You should also adopt the “laddering strategies” to maintain the proportions of bond allocations.

You may notice investing in bonds requires an initial large sum of capital for the $1,000 increments as necessary. Investors may find it challenging to keep a balanced portfolio as large capital outlays are required for multiple bond purchases.

Exchange-traded funds of all types of fixed income securities or bonds are the right way out! When you hold a stake in them, you own a part of all the bonds they hold. Besides, you should choose low-cost funds as it may reduce your return.            

What do you need to know before buying bonds?

Doing homework is a requisite before you throw your money into it. Take the following steps and see what you will have from them:

  • Always do your research.

Bond investing is, in fact, a loan business. A debtor is committed to paying back money owed to a creditor at a specified time. As a creditor, you have to know the terms and conditions of a loan contract before sending the money to a borrowing company’s account.

As mentioned earlier, you should consider interest rates, maturities, default risk, and, lastly, the creditworthiness of your debtor.

  • Stay away from the junk bonds!

If you are eyeing for high yields offered by junk bonds, you will likely make serious mistakes. I am talking about a long-term investment! Imagine how serious it might be when your savings or retirement account is holding a portion of the junk fund. They may spoil your dreams at any time when they default.

  • Look into the cost of your investment.

You are now fully aware bond investing is a long-term investment. Bond’s interest provides a regular and stable income stream to bondholders. But the cost is a primary factor in investing decisions. You should choose the lowest-cost bond providers. TreasuryDirect offers zero commission and is the best way to buy treasury bonds.

However, investors may be frustrated by the large capital outlay of bond denominations(mostly in $1,000 increments). Bond funds provide investors with access to an extensive array of bonds with a moderate amount of money. But you should clarify the cost of investing in funds. Don’t let cost outrun your investment returns!


You have nowadays more ways of investing in bonds:

  1. Online brokerages,
  2. Bonds funds,
  3. Invest through TreasuryDirect.

While it is easier than ever to invest, you should do thorough research and look away from junk bonds and high-cost bond investments. It is not necessary to time the market if you hold for long-term. 

Of those mentioned, research is the most time-consuming task among others. A timely and trustworthy analysis is essential to your judgment. Investoralist provides relevant information regarding bond investing.

Get full access to firsthand research by bond experts; subscribe to our newsletter today!

10 Best Fidelity Low Risk Funds for Retirement

Fidelity Low Risk Funds

With over 70 years of experience in managing investor’s money and over $2.1 trillion mutual funds assets under management, Fidelity plays a pivotal role in helping individuals access investment opportunities in domestic and international money market funds. Fidelity bonds are a great way of managing volatility as they will reduce risk in times such as a recession or during market panics.

What is a Fidelity Bond?

Fidelity Investments commonly referred to as Fidelity is a financial services company based in Boston, Massachusetts. Fidelity is among the top global asset management companies in the world, known for its specialty in no-load actively managed mutual funds. They also offer Individual Retirement Accounts (IRAs), and 401(k) retirement plans. Fidelity funds cover all mutual fund asset classes, from domestic to specialized sectors.

3 Categories of Fidelity Funds

Fidelity offers a wide variety of high-quality mutual funds to invest in, and you can divide them into the following 3 categories to understand them easily.

They are: Best Balanced Funds, Best Index Funds, and Actively-Managed Funds.

Fidelity Actively-Managed Funds

These are funds that allow a portfolio manager the discretion to buy and sell investors stocks. This category of Fidelity Funds is actively managed to help in managing a relative index.  

Best Index Funds

This category includes the cheapest index funds that are available in the market. There are more than 30 index funds in this category among which the Fidelity 500 Index Fund (FXAIX) and is one of the best.

Balanced Funds

These are a type of Fidelity Funds that invest in a balance of cash, bonds, and stocks, hence the name “balanced”. Funds in this category are a smart investment option for investors looking to invest in only one fund or those who are looking for a solid investment as a foundation for their investing.

10 Best Fidelity Low-Risk Funds for Retirees

  1. Fidelity OTC Portfolio (FOCPX)

Fidelity OTC Portfolio is a mutual fund that seeks capital appreciation. Investing in FOCPX involves putting over 80% of assets into securities that principally traded in the OTC (over the counter) or Nasdaq composite market. 

OTC markets have many small and medium-sized companies, a factor which indicates that these markets have an opportunity for growth. This explains why the returns from investments in FOCPX are relatively high. However, FOCPX also gets a low-risk investment rating of above-average because OTC markets have lesser regulation and transparency. 

While FOCPX is a high performer to investors, the fund is not as diversified compared to other index funds. The top 10 holdings in FOCPX amount to over 45% of the whole portfolio and 38% of the whole fund is in the technology sector. The fund is also relatively expensive at a 0.8% expense ratio, which can impact long-term returns.

  1. Fidelity BlueChip Growth Fund (FBGRX)

Blue-chip companies with a high potential for growth are a hard find for investors. The Fidelity BlueChip Growth Fund (FBGRX) targets the large S&P 500 companies such as Dow Jones and others.

The management uses these criteria to offer only companies that indicate a growth potential that is above-average. FBGRX heavily inclines in information technology, which makes up 38% of the whole portfolio, and 25% of the portfolio is consumer discretionary. The expense ratio is also high standing at 0.8% and the ten-year average annual returns stand at 18.76%

  1. Fidelity Nasdaq Composite Index Fund (FNCMX)

Unlike FOCPX that aims to beat the Nasdaq Composite Index, FNCMX is one of the best retirement funds that just aims to track the index performance. 

Although regarded as a pricey fund due to the 0.3% expense ratio, FNCMX is comparatively affordable for investors looking to invest in Nasdaq. Out of more than 3,000 stocks in the benchmark index, the fund holds 2,089 stocks.

Due to its passivity, the fund cannot take advantage of active bets through paring back sector exposure as FOCPX now does.

The fund is therefore 41% more inclined toward technology, with its top 10 holdings making up 45% of the portfolio. The FNCMX trades names such as Microsoft, Apple, Amazon, Facebook, and Alphabet.

  1. Fidelity Contrafund (FCNTX)

FCNTX is a fund that invests in companies that are considered to be undervalued, compared to their growth or revenue prospects.

FCNTX is the largest fund under active management, which has suffered a drop in rankings from no. 95 to no. 209. Despite the drop in rank, and a score of 5.3 out of 10, the Morning Star still sees the value in this fund- hence its silver rating due to its effective approach and successful track record. The fund has a net expense ratio of 0.85% and 15.57% 10-year average annual returns.

  1. Fidelity 500 Index Fund (FXAIX)

The FXAIX is offered in more than half of all Fidelity Fund’s 401(k) plans on the Fidelity platform. 

Being one of the best performing and lowest cost retirement funds on Fidelity, the 10-year average annual returns are 13.97%, with a net expense ratio of 0.015%. FXAIX is the lowest-cost mutual fund that tracks the S&P 500.

FXAIX has a gold badge from Morning Star and since it replicates the S&P 500, it’s a great option for index investors and investors looking for exposure.

  1. Fidelity Total Market Index Fund (FSKAX)

The Fidelity Total Market Index Fund provides more exposure to the U.S stock market that is broader than S&P funds but for the same price.

FSKAX has nearly 3,500 holdings and goes far beyond the S&P 500 list. FSKAX limits companies on its holdings to those with more than $10 billion market value, making it a large-cap fund.

None of the FSKAX holdings make up more than 5% of the overall portfolio, which prevents overconcentration. 

The fund is a great option for exposure to a broad stock market, and at index fund pricing. The 10-year average annual returns are 13.68% and the net expense ratio is 0.015%. 

  1. Fidelity Worldwide Fund (FWWFX)

FWWFX is the best performing Fidelity fund that goes beyond the US. However, 60% of its portfolio is US companies — meaning that FWWFX is not one of the most exposed worldwide funds.

FWWFX gives you exposure to more than 11 countries and does well in keeping the stock weight below 5%. With a 10-year average annual return of 12.% and a 0.99% net expense ratio, FWWFX is quite on the pricey edge for an index fund. Still, its cost is below the category average and the performance is above average.

  1. Fidelity Extended Market Index Fund (FSMAX)

FSMAX is a popular fund in the Fidelity 401(k) plans that provide small-cap and medium-cap exposure, which is in low supply among other top-performing Fidelity funds.

FSMAX is benchmarked to the Dow Jones U.S Completion Total Market Index, and this excludes the S&P 500. This makes SFMAX a complementary investment to S&P500 and other large-cap index funds.

It’s highly diversified with over 3,100 holdings, with the top 10 holdings accounting for only 7% of the portfolio. The fund is also attractive to investors as its net expense ratio has dropped from 0.045% to 0.035%.

The ten-year average annual returns are 12.32% and are considered as an above-average in the U.S mid-cap blend category.

  1. Fidelity Puritan Fund (FPURX)

As one of the oldest funds in the market, the FPURX is a relaxed approach to retirement investing. FPURX, which was founded in 1947, invests 40% of its portfolio in debt investments and other fixed-income securities such as bonds. These investments mainly include mortgage pass-through securities and investment-grade credit.

Owing to the relaxed and conservative investment, the returns are also conservative at around 10% ten-year average annual returns. The net expense ratio stands at 0.53% with an above-average risk that falls under the Morning Star’s 50%-70% equity category on allocation.

  1. Fidelity Zero Expense Ratio Index Funds

The Fidelity Zero Expense Ratio Index Funds are a line up of zero minimum, zero expense index mutual funds.

They include the Fidelity Zero International Index Funds (FZILX), Fidelity Zero Total Market Index Fund (FZROX), Fidelity Zero Extended Market Index (FZIPX), and the Fidelity Zero Large Cap Index Fund (FNILX).

These are nascent funds debuted in 2018 by Fidelity, and they don’t have a performance track record like other funds included in this list. While they may take a while to be included in the 401(k) plans, they are a great retirement investment option as they have no investment minimum or expense ratio to worry about.

Things You Need to Consider Before Buying Fidelity Bonds

  1. Have a well-thought-out investing and trading plan

The best way to start investing in Fidelity bonds is by having a long term plan on how you will invest. For a comprehensive investing plan, here are some of the things you should consider:

  • Investing objectives
  • Ability to tolerate risk
  • Time horizons
  • Taxes

These four factors will help you find the types of assets to acquire on your portfolio and the strategy you will employ to accomplish your investment goals. Ensure that your planning also features other unique circumstances that apply to your investing needs. Professional and financial assistance at this stage is important and necessary.

Consider if you want active trading, and how much of your portfolio will you be trading. Professionals advise against the active trading of most of the stocks. However, ensure that you first build a portfolio that is diversified, and which aligns with your risk constraints and investing objectives.

Portfolio diversity means having an asset mix in bonds, stocks, and other investments. Diversification helps in managing your risk.

  1. Research Your Ideas Fully and Employ Trading Best Practices

Researching your ideas is important especially if you plan on actively trading part of your portfolio. Here are some of the things to consider when doing your research:

  • Finding new ideas– there are plenty of ways to come up with investing ideas. One of the best places to start is with what you already know. Then you can use the knowledge you have to identify the stocks that you can analyze and study to consider if you want to own them.
  • Start with the basics– the basic factors of an investment opportunity often give a clue as to the performance of the investment over a period. For example, earnings are a basic indicator of how a stock has and will perform over time. Even with short term fluctuations, how the stocks perform will depend on the company’s ability to generate earnings.
  • Understand the technical aspects– Fundamental analysis is helpful in directing whether you buy or sell. Technical analysis shows you “why” you need to buy or sell, and at what price. Technical analysis includes using data to create charts that help you in spotting trends and patterns that will help you with your decision. 
  1. Plan for a trade

After doing your basic research, fundamental analysis, and identifying an opportunity, the next step will be choosing a strategy.

Whether it’s selling or buying mutual funds, stocks, bonds, ETFs, or considering advanced buying and selling options, a strategy is necessary.

Back screeners and backtesting software will help you find flaws and you can use this to have an idea of the risks that will come with a particular trading strategy or idea. Testing both short term and long term strategies may also be necessary.

Just as there are risks involved in every investment opportunity, all trading strategies have a risk that you should know beforehand.

Entry and exit trading strategies are an important tool in succeeding in all your trades. An entry strategy, for example, can help you handle volatility in case things change in between the time you decide to trade.

An exit strategy can also help you make the right move. Emotions can stand in the way of information-driven, dispassionate decisions. Have a plan for when things go right, and when things go wrong. Know your time horizons and your risk tolerance threshold.

  1. Placing a trade

After doing your research and choosing a strategy for your investment option, the next step is to execute the trade. 

At this stage, be sure to look for a broker that has the trading capabilities that you need, they use the best execution and offer a trading platform that you are happy using. 

When making a trade, consider the type of order that you want to use, and use the bid-ask report, commissions, and fund fees to manage the overall trading costs. Be aware of the various trading characteristics that come with each of the investment options you go for.

Fidelity’s ETF services recommend the following 3 best practices; noting the bid-ask spreads, using limit orders, and avoiding trading near the market opens and closes.

  1. Monitor your positions and adjust them as needed

Fidelity recommends that you check your portfolio mix at least once a year, or in times when your financial circumstances change significantly. For short-term trades, monitor your positions more closely, with regards to your time horizons. There is a wide range of monitoring options online and through mobile apps and alerts. Monitoring your investments should be part of your plan.

Here are some things to consider when monitoring your positions:

  • Risk and return- Plan for each trade before you make it. The plan should include your required return for holding the investment. Ensure that you know what you own by researching thoroughly. Also, ensure that you monitor how well an investment is aligned with your objectives. Set alerts on factors such as news or analyst rating changes that could affect your investment. 
  • Portfolio impact- it’s also important for you to assess how a single trade can affect your overall objectives. If you have a desired asset allocation, ensure that you understand how any trading decision will affect your whole portfolio. Make use of online monitoring of your portfolio to help in evaluating your investments.
  • Tax situation- With time, the value of your investments change and so do the tax implications. One of the most important tax consequences that investors should know about is the short-term capital gains, that attract higher tax compared to long-term capital gains. There are also strategies to harvest tax, which involves managing your portfolio by offsetting your gains with losses.

Is Buying Fidelity Bonds Right For You?

Fidelity bonds are a great strategy to help you in balancing your portfolio and reducing risks through acquiring equities in your asset mix. Fixed-income assets help in ensuring that your portfolio generates income, and also lowers volatility. Mutual funds also come in handy to enhance portfolio diversification and lower the investor’s risks.

The only downside to buying Fidelity bonds are the risks related to interest, credit, and principal. Bond prices decline when interest rates rise and a drop in interest rates results in an increase in the bond price. In addition, bonds are rated by a third party agency which determines the creditworthiness of an issuer. The credit risk for funds that invest in below-investment-grade quality bonds tends to be higher.


Fidelity bonds are an efficient investing strategy compared to other strategies such as buying individual securities. Bonds funds invest in many types of securities and they allow for the buying and selling, depending on the conditions of the market. 

Fidelity bonds can help you in diversifying your portfolio as you can own individual bonds with varying maturities. Fidelity bonds are also managed professionally by analysts who have the experience and technology needed to research and make profitable investment decisions. Their liquidity allows you to trade the shares each day, and you have the convenience of reinvesting your dividends or make an addition to your investments any time.
The Investoralist is here to help you make the right investment decisions by providing up-to-date information on investment trends that will help you make smart investment decisions. Visit the site to learn more.

Schwab Total Stock Market ETF: low-cost fund with no investment minimum

schwab total stock market etf

Charles Schwab Corporation is one of the top financial institutions in the US. It has over 45 years of experience in investment services for clients. Its ETF funds are notable for low costs and zero minimum requirements. You could miss more of the benefits if you plan to invest in ETFs and look another way than the fund Schwab total stock market ETF.

Total Stock Market Index Fund(SWTSX)

Charles Schwab Total Market Index Fund(SWTSX) is an exchange-traded fund that tracks the entire US stock market’s total return. It invests according to the Dow Jones US stock market index.

The Dow Jones US Stock Market Index

Also called the US Dow Jones Index, it is a market capitalization-weighted index. The stocks with the largest market value measure up the most proportions of the index. It covers 95% of the US stock market and calculates the total return of the stocks covered with reinvestments of dividends and interests.

Currently, it tracks 3,778 stocks in the US market as of December 31, 2020. They are the most liquid stocks traded on the exchanges. Foreign companies and exchange-traded funds are not inclusive. The index provides a useful indicator of US market trends and company performances. 

Details of Schwab Total Stock Market ETF

  • Type: US stock market ETF
  • Symbol: SWTSX
  • Low Net Expense Ratio: 0.03%
  • Investment Objective: The fund’s goal is to track the entire US stock market’s return, as measured by the Dow Jones US Total Market Index.
  • Highlights: a. A straightforward, low-cost fund with no minimum investment. b. The fund can serve as part of the core of a diversified portfolio. c. Simple access to the entire US market in one fund. d. The index is designed to provide a comprehensive measure of large-cap, mid-cap, and small-cap US equity securities.
  • Assets Under Management: US13.7billion as of December 31, 2020.
  • Return for Dec 31, 2020: 20.71%
  • One-year Turnover rate: 3.79% It is the cost of change of portfolio holdings in a year. The higher the percentage, the higher fees the fund incurs! 
  • Minimum Initial Investment: None

Schwab Total Market Index Fund

  1. Low-cost fund without minimum 

Whether you are newbies or experienced investors, the fund is a fit for all as there is no minimum investment requirement and the expense ratio is only 0.03% low.

  1. Diversification

If you plan to hedge your portfolios against risks, the fund is a protection against other risky assets in your investment planning.

  1. Simple access to the US market

It is one click to the whole US market and almost all sectors and large-cap, mid-cap, and small-cap companies.

  1. Sectors invested

The fund covers major industries all across the US. As of December 31,2020, among them are information technology(27.10%), healthcare(13.90%), customary discretionary(12.40%), financials(10.90%), commercial services(9.90%), industrials(9.20%). They consist of more than 40% of the total portfolio of the fund.

  1. Enterprises invested

It invests mainly in primary blue-chip enterprises. The major companies include Apple Inc., Microsoft Corporation,, Facebook class A, Tesla Inc., Alphabet Inc. class A & C, Berkshire Hathaway class B, Johnson & Johnson, JP Morgan Chase & Co. They take up more than 20 percent of the total portfolio.

  1. Firearm holdings

A point you should note is Charles Schwab has a transparent policy regarding investing policy. It will disclose some securities that may cause harm to society. The Schwab Total Stock Market ETF reveals only a 0.03% stake of the fund in firearms companies as of March 31, 2020. It offers conscious investors their open and transparent approach to investing.

About Charles Schwab Corporation

The Charles Schwab Corporation is a member of Standard & Poor’s 500 Index with more than US100 billion market value. Its business scope covers investing, banking, and consulting services. Charles Schwab has assets under management for over US500 billion as of June 30, 2020, since it first set up the mutual fund and ETF business. 

Objective: Charles Schwab helps investors better manage their mutual funds and reduce the costs of buying mutual funds by setting up the Schwab Mutual Fund OneSource@ and making investing easier and low-cost. Furthermore, Charles Schwab makes Exchange-Traded funds(ETF) accessible to all by investing in all market ETFs commission-free. That makes investors save more in return to earn more. Schwab total stock market fund series, including ETFs, nowadays have become popular among investors.

Management style: ETFs are passively managed funds based against a stock market index like Standard & Poor’s 500(S & P 500) or Dow Jones Industrial Average(DJIA). It saves investors time to pick stocks and manage their portfolios by mimicking the stocks of market indexes. Charles Schwab goes a further step; it offers Schwab Intelligent Portfoliotm service, an online investment advisory service assisting the management of their portfolios. The fascinating thing is it is free for its clients.

Commission: Of course, we know the trend is for zero-commission; Charles Schwab also offers commission-free for stocks, ETFs, and options trades. Moreover, it uses an order strategy called the Schwab Order Execution Advantagetm to improve clients’ order quality. Through their unique system, clients get better price quotes and faster execution speed.

Robo-advising service: The company offers Schwab Intelligent Portfoliostm, to help manage clients’ portfolios by building, monitoring, and rebalancing assets automatically. The fantastic thing is it is free from advisory fees, account service fees, and commission. You should discuss this with your consultant. 

Useful investment tool: What makes Charles Schwab outstanding is its research. Besides their professional research on equities, bonds, and funds, they have rate stocks and mutual funds based on their rating system. Charles Schwab offers a useful investment tool called “Screen List” reviewed by experts and released quarterly. The tool lets you pre-screen the ETFs and mutual funds well picked by professionals according to categories like big-cap, mid-cap companies.

Apart from that, you can get quotes and fund prices and market updates, and even create watch lists from Google Assistant and Amazon’s Alexa!

To Sum Up

The Schwab Total Stock Market ETF offers many benefits to all walks of investors with its low-cost expenses, no minimum investment requirements. You can access a wide span of industrial sectors and invest in major corporations in the US economy with this fund. It plays a safe bet against risks within your portfolio. Investors are accessible to Charles’s transparent approach to investing.

Finally, you should cross-examine more analysis and information before making a judgment. Besides talking to your financial advisor, you should seek more knowledge from sources like investoralist. An online magazine provides valuable investing information you should not miss; subscribe now to receive updates! 

Bond-rating scale: what is it, and how does it work?

Bond Rating Scale

Bond-rating helps investors assess a bond issuer’s financial strength to repay the debt on time. Bond-rating agencies set up rating scales to evaluate bond issuers’ creditworthiness. Understanding the credit ratings is essential to bond investors, whether institutional or individual investors, help in investment decisions.

This article will discuss what bond rating is; how bonds are rated; then, we will elaborate on the current leading 3 rating agencies and their rating systems. Finally, we also mention the implications of different bond ratings, outstanding bond ratings, and BBB ratings.

Essentials of bond ratings

What is a bond rating?

A bond rating is to evaluate a commercial corporation’s or a government agency’s creditworthiness. Contrary to an individual’s credit score, the rating agencies publish the institutions’ rating scores. Investors make investment decisions based on the financial strength and their probability of repaying the debt.

  • A bond rating process involves three major parties. 1.A bond issuer plans to raise the money. 2. A rating agency assesses the bond issuer’s default risk and cash flow risk. 3. Bond investors buy the bonds and loan the money.
  • There are two types of bond issuers: 1. Government agencies, e.g., local governments, central banks and treasury departments, etc. 2. Private Institutions, e.g., public-listed companies. They need additional capital for operating and cash flow needs. Enterprises need financing or refinancing for their projects.
  • Rating agencies: Three primary agencies occupy more than 95 percent of the credit rating market. They are Standard & Poor’s, Moody’s, and Fitch. They are all paid agencies to assess bond issuer’s credit quality.
  • Bond investors consist of 1. Institutional ones: they are bond funds, insurance companies, banks, sovereign wealth funds and corporations, and retirement funds, etc. They invest in bonds to maintain a regular and steady income for fund owners. 2.) Individual bond investors: they invest in bonds for personal wealth and income accumulation.

What factors affect bond ratings

Internal factors

  1. Creditworthiness: Like a credit bureau, a credit agency evaluates a corporation’s ability to pay back the debt. If an institution is not likely to pay back principals and interests on time, it may have a higher default risk like Finnie Mae and Freddie Mae during the financial crisis in 2008. A corporation may have difficulty in cash flow payments due to deteriorating business situations.
  2. Capital structure: A bond issuer may have complicated capital systems, and it can cause a company to repay even if it has healthy business growth. So a company can set up orders and priorities to pay back creditor’s loans. As a result, investors of lower priorities may have a higher default risk of principal or interest payments or both!
  3. A bond issuer’s competitiveness: If a corporation has edges in business competitions and the capability to increase profit among competitors, it can make bondholders more assured of its ability to pay back principal and interest.
  4. Financial health: A company’s financial position reflects its financial strength and commitment. Of these is a company’s balance sheets, which provide more financial information for investors.

External factors

  1. Microeconomic: Changes in industry and government regulations may have an impact on a company’s competitiveness. For example, more and more consumers are using more online shopping. As a consequence, online companies find bond issues easier than mall operating companies.
  2. Unpredictable events in the future: Unexpected events like earthquakes, pandemics, and floods cause unforeseen damages in principal and interest payments. It is beyond a corporation’s financial commitments.
  3. Third-party risks: Rating agencies consider third-party’s ability to guarantee bond issuer payments. The financially stronger the guarantor, the more secure the commitments become. 

How are bonds rated?

A bond rating is a grade assigned to a bond. The rating defines the borrowing corporation’s financial strength and willingness to repay the debt.

Generally, most bonds are rated by the three rating agencies: Standard & Poor’s, Moody’s & Fitch. They all have their rating systems in place. However, they have clear definitions for grading bonds. 

In terms of investment grades, bonds are all classified into three types:

  1. Investment-grade;
  2. Non-investment grade;
  3. Not-rated. 

According to the US Securities and Exchange Commission, investment-grade bonds have a lower risk of default and a higher likelihood of paying on time, so they have a higher rating. However, non-investment grade bonds, also called high-yield or speculative bonds, are the reverse, so they pay a higher interest. Not-rated bonds are bonds not rated by agencies; they are more likely to default than speculative bonds.

Besides, bond ratings range from the highest quality to the default class. The latter pays the highest rate of interest, with the former the least.

The three rating agencies

  • S&P Global Bond Ratings: it is one of three rating agencies recognized by the Securities and Commission and the oldest. It rates numerous government and corporate bonds and structured finance entities and securities. One of its main jobs is to assess a bond’s default risk. The following table lists the features of their grading system:
InvestmentExtremely strong capacity to meet financial obligations.AAA
InvestmentVery strong capacity to meet financial obligations.AA
InvestmentStrong capacity to meet financial obligations, but somewhat susceptible to adverse economic conditions and changes in circumstances.A
InvestmentAdequate capacity to meet financial commitments, but more subject to adverse economic conditions.BBB
SpeculativeLess vulnerable in the near-term but faces major ongoing uncertainties to adverse business, financial and economic conditions.BB
SpeculativeMore vulnerable to adverse business, financial, and economic conditions but currently has the capacity to meet financial commitments.B
SpeculativeCurrently vulnerable and dependent on favorable business, financial and economic conditions to meet financial commitments.CCC
SpeculativeHighly vulnerable; default has not yet occurred but is expected to be a virtual certainty.CC
SpeculativeCurrently highly vulnerable to non-payment, and ultimate recovery is expected to be lower than that of higher-rated obligations.C
SpeculativePayment on a financial commitment or breach of an imputed promise; also used when a bankruptcy petition has been filed, or similar action is taken.D
N/AThe security was not rated.
  • Moody’s Investors Service Bond Ratings: It deals with evaluating projected loss in case of default. The rating services cover financial, non-financial institutions; sovereignty; structured financial transactions, infrastructure, and project financing.
InvestmentObligations of the highest quality, with minimal risk.Aaa
InvestmentObligations of high quality, with very low credit risk.Aa(1,2,3)
InvestmentObligations of upper-medium-grade, with low credit risk.A(1,2,3)
InvestmentObligations of moderate credit risk that may possess speculative characteristics.Baa(1,2,3)
SpeculativeObligations with speculative elements that are subject to substantial credit risk.Ba(1,2,3)
SpeculativeObligations are considered speculative that are subject to high credit risk.B(1,2,3)
SpeculativeObligations of poor standing and are subject to very high credit risk.Caa(1,2,3)
SpeculativeHighly speculative obligations that are likely in, or very near, default, with some prospect of recovery in principal and interest.Ca
SpeculativeLowest-rate class of obligations that are typically in default, with little prospect of recovery of principal and interest.C
#the numbers in the bracket indicate the obligations to pay from 1-strongest, 2-stronger, 3-strong.
  • Fitch Ratings: It is the smallest of the three. Like S&P’s, it rates the probability of default. It also covers sovereigns, financial institutions, corporate finance, Islamic finance, structure finance, and global infrastructure.
InvestmentExtremely strong capacity to meet financial obligations.AAA
InvestmentVery strong capacity to meet financial obligations.AA
InvestmentStrong capacity to meet financial obligations, but somewhat susceptible to adverse economic conditions and changes in circumstances.A
InvestmentAdequate capacity to meet financial commitments, but more subject to adverse economic conditions.BBB
SpeculativeLess vulnerable in the near-term but faces significant ongoing uncertainties to adverse business, financial and economic conditions.BB
SpeculativeMore vulnerable to adverse business, financial, and economic conditions but currently has the capacity to meet financial commitments.B
SpeculativeCurrently vulnerable and dependent on favorable business, financial and economic conditions to meet financial commitments.CCC
SpeculativeHighly vulnerable; default has not yet occurred but is expected to be a virtual certainty.CC
SpeculativeCurrently highly vulnerable to non-payment, and ultimate recovery is expected to be lower than that of higher-rated obligations.C
SpeculativePayment on a financial commitment or breach of an imputed promise; also used when a bankruptcy petition has been filed, or similar action is taken.D
SpeculativeThe security was not rated.NR

Investment-grade vs. Junk Bonds

Bond-rating agencies assess bonds per bond quality and stability. Besides, the rating process involves expectations and outlook. These factors undoubtedly influence an investor’s attitude towards bond investment. 

Investment-grade bonds are rated quality-grade as they provide stable cash flows and are viewed as safe investments. However, the rates of interest are relatively low. They range from “AAA” with the most robust financial strength to “BBB” grading with the least.

Bond not belonging to the bonds as mentioned above are non-investment grades or “not-rated.” They are high-yield or junk bonds with attractive rates of interest. Investors interested in these bond investments should beware of bond issuers’ financial aspects and business circumstance changes.

Generally, junk bonds are divided into two major categories:

  • Fallen Angels: The bond issuer’s rating has lowered from “investment” grade to “non-investment or junk” status.
  • Rising Stars: The status of “non-investment” is promoted to “investment” or higher “non-investment” grades.


If you intend to invest in bonds, you should use a bond rating scale provided by a rating agency to assess your potential bond issuer and bond’s quality. More than that, you should look beyond the rate of interest as a bond’s viability is determined by multiple factors. 

An investor should note the implications of “investment” and “speculative” or not-rated graded bonds. The three rating agencies provide reliable information needed to assist investors in doing the jobs. 

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How To Invest In Vanguard Mutual Funds

vanguard mutual funds

You may not know Vanguard is one of the largest asset management companies in the world. It now has about US6.2 trillion under management as of January 31. 2020. However, you must know more and more people invest in Vanguard for personal and institutional planning like retirement, education or wealth accumulation, and other goal-setting planning.

More and more investors pick Vanguard mutual funds as their tools for financial aims because it offers a series of benefits in investment returns and choices. You may be overwhelmed by its variety of funds. In the following, I will tell you how to invest in their funds!

Vanguard Mutual Funds: An overview

You must be overwhelmed by its 425 traditional funds. Vanguarduard has a long history of investing experience dating back to 1929. Of these, ETFs are members of the mutual fund family. The management styles and returns are similar for both types of funds; nevertheless, investors should note their differences. Let’s take a look at them:

  • Vanguard funds generally have lower-cost structures in their products; ETFs are suitable for tax-concerned investors. As a result of their nature, ETFs tend to be tax-friendly for high-income investors.
  • Mutual funds have only one price at the end of a trading day, while, like stocks, ETFs can be traded all of a day. That means, like stocks, there are multiple prices available to investors during business hours.
  • ETFs have lower cost-expense ratios than mutual funds. Mutual funds tend to have higher management costs and trading activities. 
  • Mutual funds require higher minimum investments than ETFs.
  • Finally, mutual funds are fit for investors active in fund allocations, but ETFs are suitable for people to hold long-term and make low-cost regular investments.

What are Vanguard Mutual Funds?

As you are aware, mutual funds hold a large number of securities in their portfolios. When you buy a stake in a mutual fund, you own a part of the securities. Moreover, Vanguard offers three significant shares to investors: Institutional Shares, Admiral Shares, and Investor Shares.

Expense ratios and minimum investment amount are the principal factors in the classes of shares. Institutional shares have the least expense ratios but the highest investment amounts, while Investor shares have the highest expense ratios and lowest minimum required investment amounts. Admiral shares are in the middle.

Vanguard increases redemption fees for its funds to discourage short-term speculations but doesn’t charge front-end and back-end commissions. Investors should benefit from the fee structures if they have long-term financial goals. However, investors should note many Vanguard ETFs are available on stock brokerages, so they need to pay commissions for ETF investment products.

The benefits are twofold: Funds own the company; therefore, Vanguard’s profit goes back to fund investors because they are the shareholders. That means if you invest in Vanguard funds, you are technically an owner of the company, and you will benefit from the invested fund’s share of Vanguard’s profits.

How does Vanguard Mutual Funds Work?

Unlike other fund houses, Vanguard isn’t owned by a group of outsiders. What is unique for Vanguard is the fund investors own the company. What does it mean? No other interest except for fund investors’ is the primary focus! 

No matter the funds: mutual funds, ETFs, Vanguard 500 index funds, or select funds, they serve only one: fund investors. In other words, Vanguard managers will use investment strategies for the benefits of the same boss: fund investors and Vanguard. Apart from the fund investment service, they also offer financial consulting and other professional services, and they count towards the company’s profits! Don’t you see it is a unique company!

Types of Vanguard Asset Classes

Vanguard runs a wide array of mutual funds domestically and internationally. Investors can choose asset classes from large-to-small caps, bond funds, domestic asset classes, and international ones, even from developed to emerging markets. Vanguard uses the following asset class to invest:

  • Money market funds: Short-term investments like certificates of deposits, bank deposits are issued by the US federal government, state and local governments, and banks. They are the most liquid investments but offer the lowest returns.
  • Bonds funds: Blue-chip companies issue investment-grade bonds. They offer steady income streams, and the yield is higher than the money market funds. The bonds can be a supplement to some high-risk investments for stable investments.
  • Stock funds: By Investing domestically and overseas, stocks are the highest risk investments. They offer the opportunity for optimal capital gains. The investing scope covers all across industries, companies of all sizes, stages, and all markets. 
  • Target date funds: It is a mix of stocks, bonds, and other securities. The portfolio combination may change according to personality and real-life situations. Some combinations may change from reducing stock holdings to increase bond holdings. Vanguard offers different percentage combinations of target-date funds to cater to investors of different stages in life. I suggest you should consult a financial advisor or investment professional before you make an investing decision.  

What sets Vanguard Mutual Funds Apart?

  • Low expense ratios: Contrary to traditional fund houses, Vanguard is owned by mutual fund investors. That said, investors owned the company. That may explain why the low cost and expense ratios are unique characteristics of Vanguard.
    Don’t ignore this: If you use the compound effect to calculate the cost savings, the savings can be substantial. I want to tell you the truth: in 2019, the average expense ratio for Vanguard mutual funds is 0.1%, while the average ratio for other mutual funds is 0.57% – a difference of 82% in costs!
  • Focus on the long-term: Vanguard management pledges value and long-term investing as principal approaches to investment strategies. According to official website, by December 31, 2020, their funds’ performances outrank their peers by 70%; 78%; 81% over three, five, ten years, respectively! What fantastic achievements!
    Long-term vision and value-based strategies are what make successes in performance. Management implements the approaches to fund investing and advising businesses in dealing with clients or portfolio buildups.

How to Buy Vanguard Mutual Funds

1. Open an account with Vanguard.

  1. It takes a short time to open a brokerage account with Vanguard online. You must choose what type of account to invest in. There are ordinary taxable investment accounts, 401(K), individual retirement accounts, or 529 college savings accounts. By linking your bank account or another investment account for roll-over with your Vanguard account, you can immediately buy fund shares.

2. Buy Vanguard Mutual Funds in your Retirement Plans

  1. Once you have an account with Vanguard, you can trade their fund shares online. Let me remind you: your goals should be compatible with the fund house. When your account is a retirement plan, you should adopt a buy-and-hold approach to maximize the advantages offered by Vanguard. Even if it is a taxable investment account, I suggest you use a mid-to long term strategy. Consulting a financial advisor is the first step to investing.

3. Open an Online Brokerage Account

  1. Technology brings us convenience. You can now open an individual online brokerage account without going to brick and mortar store. You can buy or sell stocks, bonds, mutual funds, and exchange-traded funds online. However, this type of account is taxable. It means all the capital gains and dividends, and bond interests are taxable to the government. Finally, brokerage like TD Ameritrade, Fidelity, Charles Schwab, and E*Trade may charge against some trades; however, the current trend is zero commission. Do some investigations before making any decision!

Best Vanguard Funds to Buy and Hold

You intend to invest in Vanguard, take a look at the following five funds seriously:

1. Vanguard Total Stock Market Index Fund Investor Shares (Ticker: VTSMX)

  1. The fund is a candidate for the sake of the portfolio buildup process. It covers stocks and bonds domestically and internationally. The benchmark index is CRSP US Total Market Index. It has access to blue-chip tech companies, like Amazon, Apple. The expense ratio is 0.14%, and the turnover rate is 4%. However, the past 10-yearly return is 13.60%.

2. Vanguard Dividend Growth Fund (VDIGX)

  1. It provides a steady income stream to fund investors. By investing in companies with significant dividend growth, it has a trailing 13.15% return over the past ten years. The investees are all quality stocks like Coca-Cola. The expense ratio is 0.27%

3. Vanguard 500 Index Fund Admiral Shares (VFIAX)

  1. Another excellent fund for a buy-and-hold strategy like Vanguard’s total stock market index fund investor shares(VTSMX) focuses on growth. Surprisingly, the expense ratio is just 0.04%. However, it has a trailing 10-year average return of 13.95%. It is a top performer for Vanguard!

4. Vanguard Total International Stock ETF (VXUS)

  1. As the name implies, the index fund invests in international stock markets. Big names like Nestle and Alibaba are members of its portfolio. It tracks the FTSE Global All Cap ex US Index benchmark with an expense ratio of 0.08%. A fund fits for tax-efficient or long-term investors as well.

5. Vanguard US Growth Fund Admiral Shares (VWUAX)

  1. This fund is growth-oriented and capitalizes on large-cap companies like Apple, Netflix. Capital appreciation is its primary growth objective. You will be impressed with the low expense ratio of 0.28%. But the past 10-year return is 17.88% so far!

To Sum Up

To invest in Vanguard mutual funds, you have three ways to do so:

  1. The most convenient is to open a retirement account with Vanguard on their website;
  2. You should begin investing in their mutual funds in your account and save for the future;
  3. You may choose to open a taxable account with major brokerages like TD Ameritrade, Fidelity.

You should keep in mind investing involves multiple risks, including the possible loss. I suggest you talk to investment professionals to understand your risk profiles and make some tests before making final decisions. Information gathering is essential before investing in your financial life, and you should look for trustworthy resources like investoralist. It provides a lot of professional analysis regarding financial planning and investing tips that save you time planning and investing. 

For your future, subscribe to Investoralist today! Happy investing!

You may not know Vanguard is one of the largest asset management companies in the world. It now has about US6.2 trillion under management as of January 31. 2020. However, you must know more and more people invest in Vanguard for personal and institutional planning like retirement, education or wealth accumulation, and other goal-setting planning.

More and more investors pick Vanguard mutual funds as their tools for financial aims because it offers a series of benefits in investment returns and choices. You may be overwhelmed by its variety of funds. In the following, I will tell you how to invest in their funds!

Top 4 Best Fidelity Funds for International Investing

Top 4 best fidelity international funds

What are International Funds

International funds are mutual funds that allow for investing in companies from anywhere in the world except an investor’s country of residence. Also referred to as foreign funds, international funds are different from global funds. Global funds invest in companies from any country globally, including the country of residence. In summary, the top 4 best fidelity funds include:
  1. Fidelity international index fund
  2. Fidelity emerging markets index funds
  3. Fidelity total international index fund
  4. Fidelity zero international index fund
International funds allow investors to potentially own shares from multiple foreign companies and are a lucrative way of attracting higher returns from a diverse class of assets. With international funds, you can target frontier, developing, and mature market investments. These international funds also target specific markets that have a potential for growth. These markets range from government and corporate bonds to niche growth sectors. As a result of rapid growth in emerging markets, international funds have been a lucrative investment for the last two decades. They have also helped in hedging investors against the fall in the value of the dollar.

Advantages and Risks of Investing in an International Fund

1. Diversification

International funds typically involve the owning of multiple individual stocks across different industries, and in multiple countries. Through international funds, investors are therefore able to access multiple diversification cushions which include: industrial sector, currency, and geographical diversity. The diversification helps to protect the entire portfolio from factors such as poor performance of a particular stock or regional political instability.

2. Professional Management

International funds are managed by professional portfolio managers and analysts who have the expertise needed to research and analyze market information and companies. They are therefore a lucrative investment for small investors who would not typically have access to the expertise,  global reach, and technology needed to access to invest internationally.

3. Capital Appreciation and Income

With access to emerging and frontier markets, International funds can potentially offer better capital appreciation compared to domestic funds. They also expose an investor to a broad category of income sources, compared to investing in US stocks only. However, the high potential for capital appreciation also attracts high risk due to instability in these markets.

4. Convenience and Liquidity

International funds investments allow you to automatically reinvest your income from capital gain distributions and dividends. You can also increase your investments at any time and buy or sell your fund shares at the net asset value of the day’s closing.

Risks Involved In International Stock Funds

Similar to other investments, international funds carry risks; most of which are specific to international markets. These risks include currency risks, and risks to changes in the economic, political, and regulatory conditions. These risks are often amplified in developing countries, whose economies and markets are under lesser regulations. The investments in these countries are therefore prone to volatility.

1. Economic Risk

This risk arises from the economic conditions of a country. In a country whose economy is weak, It’s likely that the investing environment is unreliable, compared to a country with a stronger economy.

2. Political Risk

The political climate of a country can influence the economy, and investors are exposed to losses in case of political instability. Often,  this risk is used as an indicator of the ability of a country to create an enabling environment for outside investments. Even in a country where the economic risk is low, an unfriendly political environment is unfavorable to international investments.

3. Currency Exchange 

The exchange rate of a country’s currency against the US dollar poses a risk to international investments. Wide fluctuations in the exchange rate impact the Dollar value attached to an investment, in spite of a constant security price. However, currency fluctuations can also favor an investor when the returns on stocks increase as a result of a decline in dollar value, compared to other currencies.

4. Less Information

When investing in international funds, financial analysts may not have a wide knowledge-base concerning international markets and stocks. This poses a great risk to investing in international funds as the buying decision may be based on incomplete information.

5. Reduced Liquidity

Some markets have a lower frequency in trading securities. This is a risk to international funds as the buying and selling of some securities is difficult. This can have an unpredictable effect on the losses or profit made if you are forced to liquidate your stocks.

Brief Background of Fidelity Investments

Fidelity Investments is an American multinational corporation that was started in 1946 as a mutual fund company. Fidelity is one of the largest asset managing corporations in the world, with a combined total customer asset value of over $8.8 Trillion and managing assets of over $3.3 Trillion as of June 2020. Fidelity offers a wide variety of services that include wealth management, fund distribution, investment advice, life insurance, securities execution, and clearance, as well as retirement services. Fidelity helps different types of investors in managing equity and balancing mutual funds.

Top 4 Best Fidelity International Funds

1. Fidelity International Index Fund

Fidelity International Index Fund offers a diversified international portfolio at a very low cost to investors. This type of fund does not venture into emerging markets, returns are influenced by lower volatility. Fidelity International Index Fund tracks the performance of the EAFE index (Europe, Australasia, Far East Index). The fund employs sampling techniques to deliver investment results that match the underlying index. The European stocks have a 61% allocation while Japanese equities share 25% of the funds’ assets. With this fund, investors get exposure to industrial and financial stocks, with 14.19% and 15.72% allocations respectively. The top 10 holdings of the International Index Fund account for only 12.55% of the funds’ assets. The only downside to this fund is that you cannot access emerging markets and small-cap international stocks.

2. Fidelity Emerging Markets Index Funds

The objective of the Fidelity Emerging Markets Index Funds is to provide investment results that match the total returns of stocks in emerging markets. Stocks in emerging markets are prone to volatility and are vulnerable to significant declines possibly because of adverse developments from multiple factors such as issuer, economic, political, market, and regulatory factors. These risks tend to be higher in emerging markets where instability is rife in multiple dimensions. Fidelity Emerging Markets Index Funds employ a strategy of investing 80% of assets that are in the MSCI Emerging Markets Index, and depository receipts that represent securities included in the index. To attempt replicating returns of the MSCI Emerging Markets Index, these funds use a sampling technique that considers the following factors: industry exposure, capitalization, earnings growth, country weightings, price/book ratio, dividend yield, and the effect of foreign taxes.

3. Fidelity Total International Index Fund

The objective of this fund is to provide investment outcomes that match the total return of emerging and developed foreign stock markets. The fund invests 80% of the assets in securities that are included in the MSCI ACWI ex USA Investable Market Index, as well as depository receipts that represent securities included in the index. The MSCI ACWI ex USA Investable Market Index is an index weighted by market capitalization and is designed to measure the investable equity market performance for global investors of large, mid, and small-cap stocks in the developed and emerging markets. This fund has already accumulated USD1.9 billion in assets under management since its inception in 2016. This fund offers the highest exposure to international stocks in small-cap and large-cap markets as well as developed and emerging markets.

4. Fidelity Zero International Index Fund

The Fidelity Zero International Index Fund attempts to provide investment results that correspond to the total return of emerging and developed foreign markets. This fund pays costs incurred during transactions such as commissions in the buying and selling of securities or during portfolio turnover. A higher portfolio turnover, therefore, implies a higher transaction cost, which may attract higher taxes if the fund shares are held in a taxable account. Fidelity Zero International Index Fund employs an investment strategy of investing at least 80% of assets in securities from the Fidelity Global ex-US Index and depository receipts which represent securities included in the index. These funds also employ sampling techniques to attempt the replication of the returns of the Fidelity Global ex-US Index. The technique is influenced by factors such as capitalization, dividend yields, industry exposures, price/book ratio, country weightings, earnings growth,  price/earnings ratio, and foreign tax effects. Some of the investment risks to contend with when investing in Fidelity Zero International Funds include;
  • The volatility of the stock market
  • Passive management risks
  • Correlation to index
  • Issuer-specific changes
  • Foreign and emerging market risk
  • Securities lending risk

What is the Best International Mutual Fund?

The best international index fund is the Fidelity International Index Fund. As of now, the fund manages assets worth $25.5 billion, with a net asset value of $39.08 and a net expense ratio of  0.035%. This fund tracks the performance of a broad index of the MSCI (Europe, Australasia, and Far East Index). The fund ranks as the best international fund due to its large and diversified exposure of investor assets to stocks, and at a very low cost. The risks in investments are also reduced as the fund leaves out equities from emerging markets, which suffer low volatility.

What is the Safest Fidelity Fund?

Fidelity offers a wide variety of safe and high-quality mutual funds. However, the Fidelity Zero International Index Fund is one of the safest funds to invest in. This fund has a 0% expense ratio, and it aims to mirror the total return of emerging and developed markets. The fund, which is relatively new to the market shows promise to investors who want to get exposed to both developed and emerging markets.


Understanding international funds and how they work is crucial in helping investors know the best way of investing. International funds are often buy-and-hold long term investments and therefore need you to be fully aware of the benefits and risks, to ensure that you get maximum returns on your investments. Fidelity funds offer a wide range of international funds investing options that optimize returns while balancing costs for the investors. They also offer mutual fund investment options that are transparent, cost-effective, and able to hold against competitor funds. The Investoralist is here to help you understand investing, expose you to different types of investments, and compare different options for smarter financial decision making. Learn more about us.