I have a Roth IRA. It has a mutual fund in it (FFFFX), and simply because that's what it started out with, that's what I keep buying when I put my 5.5k in each year.

I'm 35 years old. I'm starting to wonder if I should more actively manage the IRA - or maybe move to an index fund, or my bank's fund. I'm not a professional investor. For someone like me, is it generally good advice to leave everything in a mutual fund like mine? Or might I be better off becoming more involved (diversifying; but isn't that what mutual funds already do?) or switching to an ETF?

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    I picked one particular answer as a possible duplicate, but really this is a very broad question and without being more specific about your own needs, it is hard to give anything but a generic answer. And in this case, a generic answer would be fairly opinionated as well. – Grade 'Eh' Bacon Jun 30 '17 at 14:43
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    I have no use for target date funds, nor a .77% annual expense. 10 year return 4.4%, VS SNXFX 6.77%. If you are more cautious than to be 100% stock, 80% in that fund, 20% "cash" and you'd still have beaten the target fund. No one gets rich giving away nearly 20% of their annual gains in expenses. – JTP - Apologise to Monica Jun 30 '17 at 14:59

diversifying; but isn't that what mutual funds already do?

They diversify and reduce stock-specific risk by moving from individual stocks to many stocks, but you can diversify even further by selecting different fund types (e.g. large-cal, small-cap, fixed- income (bond) funds, international, etc.). Your target-date fund probably includes a few different types already, and will automatically reallocate to less risky investments as you get close to the target date.

I would look at the fees of different types of funds, and compare them to the historical returns of those funds. You can also use things like morningstar and other ratings as guides, but they are generally very large buckets and may not be much help distinguishing between individual funds.

So to answer the question, yes you can diversify further - and probably get better returns (and lower fees) that a target-date fund. The question is - is it worth your time and effort to do so? You're obviously comfortable investing for the long-term, so you might get some benefit by spending a little time looking for different funds to increase your diversification.

Note that ETFs don't really diversify any differently than mutual funds, they are just a different mechanism to invest in funds, and allow different trading strategies (trading during the day, derivatives, selling short, etc.).


Let’s compare your target fund, FFFFX to a well-known ETF, SPY; SPDR S&P 500 ETF.

Trailing Returns (%) 
1-Year  17.50%
3-Year  7.10%
5-Year  11.28%
10-Year  4.40%

1-Year 17.44%
3-Year 10.03%
5-Year 15.28%
10-Year 6.85%

Source: Yahoo Finance

The difference in performance over a longer time-frame is significant, You can and should carefully research better funds in order to improve performance.

FULL DISCLOSURE: My own IRA is at Fidelity. Less than 10% of my IRA is in Fidelity mutual funds. None is in FFFFX.

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