In January 2008 I put my Roth IRA contribution with Fidelity because they always have big taxable distributions on their funds and I thought it would be better to put any investments with them in an account that wouldn’t be taxed on those distributions. I still think that is a good idea, but my choices on where to put the money certainly didn’t work out. Last year I put money in a Small Cap Growth fund which proceeded to lose 42% of its value. The other part went to Fidelity Value Discovery which lost 37% of its value.
Anyway, one good thing about the market going in the tank is that Fidelity re-opened Contrafund in December to new investors. That was where I wanted the Discovery money to go anyway (where it would have lost “only” 34%) so I moved the Discovery money over there before Christmas and allocated my entire 2009 contribution to Contrafund as well. I am leaving the money in the small cap growth fund where it is. I’m also leaving alone my Vanguard Roth account which didn’t do as badly (the small cap value fund only lost 28% although the total international index fund lost 45%).
Moving the money turned out to be trickier than I thought. First, I didn’t realize that I had never linked my bank account to my Roth account (although the same bank account is linked to my non-IRA account). Second, the Fidelity website doesn’t let you move money directly into a fund in your Roth account. Instead the money goes to the holding account first (a money market fund) and then you can buy shares from there. Not wanting to lose out if the stock market goes up the day the money is in holding, I called Fidelity to see if they could buy Contrafund shares at the end of the day tomorrow instead of waiting until Monday. Eventually they were able to work that out. I don’t see why you can’t do that online. The other problem is that I exchanged all of my non-IRA Small Cap Stock shares for shares in my other non-IRA fund, Diversified International, to realize a loss in 2008, knowing I would put that money into my Roth in 2009 only days later. Fidelity charges a special fee for selling shares held less than 30 days, but this wouldn’t apply since I had enough longer term shares in Diversified. However, I do earn a “warning letter” about frequent trading on that account saying if I continue to jump in and out of the fund quickly they will put some kind of lock on my account. This is still more flexible than Vanguard who put the lock on there automatically. Since I don’t plan on doing this again, I’m not worried about their letter.
Not including the new purchases, since 2004 I have contributed $20,000 to my Roth account and currently those investments are worth $13,500. So I’ve lost about a third of my money in the last three years. Horrible. And because Roth accounts don’t pay taxes on gains, I can’t claim the losses either.
After the shares are bought I should have a nice blend of mostly large-cap funds (Contrafund), with smaller amounts in small cap (small cap growth and small cap value), and international (total international market) funds. We’ll see how that goes.