My employer matches 100% of up to 4% of my gross salary. I want to contribute at least what is matched. I'm 23 and have a gross salary of $70k, and I know very little about this. I was hoping someone could help me with choosing my funds for my 401k. From what I've gathered googling, I should stay away from bonds and money market at my age but will list them anyways.

Here are my options:


  • Fidelity Advisor Government Income T
  • Fidelity Advisor Intermediate Bond T


  • Fidelity Advisor Balanced T
  • Fidelity Advisor Dividend Growth T
  • Fidelity Advisor Equity Growth T
  • Fidelity Advisor Equity Income T
  • Fidelity Advisor Freedom 2005 T through
    Fidelity Advisor Freedom 2050 T (in 5 year increments)
  • Fidelity Advisor Freedom Income T
  • Fidelity Advisor Growth Opportunities T
  • Fidelity Advisor Mid Cap Ii T
  • Fidelity Advisor Overseas T
  • Fidelity Advisor Small Cap T
  • Fidelity Advisor Strategic Income T

Money Market

  • Fidelity Prime Fund; Daily Money Class

Moderator's Note: I don't think answers to this question should make Patrick's choice directly for him. What factors should he consider to help him select his own funds?

  • 4
    Just wanted to say that I definitely agree with "Moderator's Note: I don't think answers to this question should make Patrick's choice directly for him."
    – Alex B
    Commented Jul 26, 2011 at 15:44

3 Answers 3


Having worked for a financial company for years, my advice is to stay away from all the "Freedom Funds" offered. They're a new way for Fidelity to justify charging a higher management fee on those particular funds. That extra 1% or so a year is great for making the company money; it will kill your rate of return over the next 25+ years you're putting money into your retirement account. All these funds do is change the percentage of your funds in stocks vs. more fixed investments (bonds, etc.) so you have a higher percentage in stocks while you're young and slowly move the percentage more towards fixed as you get older. If you take a few hours every 5 years to re-balance your portfolio and just slowly shift more money towards fixed investments, you'll achieve the same thing WITHOUT the extra annual fee.

So how much difference are we talking here? Let's do a quick example. Based on your salary of $70k and a 4% match by your company, you'll have $5,600 a year to put in your 401(k) (your 4% plus matched 4%). I'll also assume an 8% annual return for both funds. Here is what that 1% extra service charge will cost you:

Fund with a 1% service charge: Annual Fee Paid Year 1 - $60.00 Annual Fee Paid Year 25 (assuming 8% growth in assets) - $301.00 Total Fees Year 1 through 25: $3,782

Fund with a 2% service charge: Annual Fee Paid Year 1 - $121.00 Annual Fee Paid Year 25 (assuming 8% growth in assets) - $472.00 Total Fees Year 1 through 25: $6,489

That's a total of $2,707 in extra fees over 25 years on just the investment you make this year! Next year if you invest the same amount in your 401k that will be another $2,707 paid over 25 years to the management company. This pattern repeats EACH year you pay the higher management fee. Trust me, if you invest that money in stock instead of paying it as fees, you'll have a whole lot more money saved when it's time to retire.

My advice, pick a percentage you're comfortable with in stocks at your age, maybe 85 - 90%, and pick the stock funds with the lowest management fees (the remaining 10 - 15% should go into a fixed fund). Make sure you pick at least some of your stock money, I do 20 - 25%, and select a diverse (lots of different countries) international fund.

For any retirement money you plan to save above the 4% getting matched by your company, set up a Roth IRA. That will give you the freedom to invest in any stocks or funds you want. Find some low-cost index funds (such as VTI for stocks, and BND for bonds) and put your money in those. Invest the same amount every month, automatically, and your cost average will work itself out through up markets and down.

Good luck!


Most people advocate a passively managed, low fee mutual fund that simply aims to track a given benchmark (say S&P 500). Few funds can beat the S&P consistently, so investors are often better served finding a no load passive fund. First thing I would do is ask your benefits rep why you don't have an option to invest in a Fidelity passive index fund like Spartan 500.

Ideally young people would be heavy in equities and slowly divest for less risky stuff as retirement comes closer, and rebalance the portfolio regularly when market swings put you off risk targets. Few people know how to do this and actually do so. So there are mutual funds that do it for you, for a fee. These in are called "lifecycle" funds (The Freedom funds here).

I hesitate to recommend them because they're still fairly new. If you take a look at underlying assets, these things generally just reinvest in the broker's other funds, which themselves have expenses & fees. And there's all kinds personal situations that might lead to you place a portion with a different investment.

  • I personally stay away from the lifecycle funds because a 0.3-1% additional expense is too much to pay for what amounts to a near-automatic rebalance that I could do myself.
    – jprete
    Commented Jul 22, 2011 at 1:24
  • 1
    If you are new to investing and not sure how to begin, the Freedom funds make sense as a "default" choice. Not saying you should stick with them for ~50 years, but until you learn about investing strategies, at least your money is invested and doing something. Commented Jul 22, 2011 at 14:10
  • 2
    +1 - Spartan has a .10% expense ratio. Even if the 401(k) had a bit extra on top, this is the way to go. Stay tuned for 4/1/12. Ironically, the joke will be on all of us when the rules requiring 401(k) administrators to disclose their fees. I dare say that the "giant sucking sound" you hear this decade with be employees abandoning their 401(k) deposits, realizing they has been robbed for decades. (I forget the historical backdrop, I just recall that that sound was jobs leaving the US under NAFTA in the 90s, and maybe the Mets in the 70's) Commented Feb 1, 2012 at 22:29

I'll respect the mod's suggestion. I'd answer with a warning. The concept of 401(k) pretax saving is to save at a high rate, while working, and withdraw at a lower rate. An annual expense pushing 1% or higher is likely to negate the benefit of the account over time.

If your employer offers the Roth 401(k), I'd suggest using that for your deposits, and only up to the match. Then invest outside the 401(k). In the 25% bracket, it's good to have a mix of both pre and post tax retirement money.

  • 2
    Alternatively, if you are likely to employers semi-regularly (more common in some industries than others - like computer programming), and want to stash away as much tax-advantaged money as you can, you can contribute and then roll over your 401(k) to an IRA provider. You'll lose a little under 1% a year that you don't roll over; you'll have to decide if that's worth the additional tax sheltering. (If you can fit that money in another tax shelter, such as Roth IRA, that's probably a better plan. I reached a point at my last job where I couldn't, however.)
    – user296
    Commented Feb 1, 2012 at 19:36
  • @fennec - I should edit this into my response. Great add-on. "If" is really the issue. Making the deposits to a bad plan is a bet you're moving on within a few years. Commented Feb 1, 2012 at 22:21
  • Hm. Thx for reminder to check fees. I've only got a small amount in a target date fund, but I might want to shift it elsewhere.
    – keshlam
    Commented Feb 4, 2017 at 1:32

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .