(PUB) Investing 2015

June 2015

Morningstar FundInvestor

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considers the former to be one of the firm's best actively managed funds. Fidelity Contrafund FCNTX is also on her short list (and is also rated Silver), but she's concerned that ongoing redemptions, plus the fund's sizable embedded capital gains exposure, could translate into unwanted capital gains distributions. (That shouldn't be a concern for investors who own the fund in a tax-sheltered account like an IRA or 401 (k).) Index enthusiasts or investors in taxable accounts could simply use Fidelity Spartan Total Market Index for their entire U.S. stock exposure. Fidelity International Discovery provides foreign-stock exposure, including a stake in emerging markets. Here, again, index believers and/or tax-conscious investors could go with Fidelity's excellent Spartan index funds; however, they'll have to maintain separate index funds for developed- and developing-markets exposure. Fidelity Strategic Income divides itself between junkier, high-risk bonds (including emerging markets) and high-quality credits; but overall, it's aggressive. Thus, its best home is as part of Bucket 3 — the idea being that investors in such products should have suitably long time horizons. Moderate Bucket Portfolio Anticipated Time Horizon: 20 Years This portfolio contains the same holdings as the aggressive Fidelity portfolio, differing only in its allo- cations to them. Its cash stake is the same, but because it's geared toward retirees with shorter time horizons, it includes larger positions in high- quality short- and intermediate-term bonds and smaller positions in equities. Bucket 1: Years 1–2 8% : Cash (certificates of deposit, money market accounts, and so forth; percentages will vary based on amount of assets and spending rate)

Bucket 3: Years 11 and Beyond 15% : Fidelity Large Cap Stock 10% : Fidelity Spartan Total Market Index 10% : Fidelity International Discovery 10% : Fidelity Strategic Income

Conservative Bucket Portfolio Anticipated Time Horizon: 15 Years

In contrast with the aggressive and moderate portfolios, both of which emphasize growth to varying extents, this portfolio is geared toward older retirees with shorter time horizons. As such, its focus is on preserving purchasing power and funding living expenses; capital appreciation is secondary. Because its growth prospects are relatively low, it would not be appropriate for younger retirees unless they are extremely risk-averse and— more importantly—have more than enough money to last throughout their retirement years. Bucket 1: Years 1–2 8% : Cash (certificates of deposit, money market accounts, and so forth; percentages will vary based on amount of assets and spending rate) Bucket 2: Years 3–10 12% : Fidelity Short-Term Bond 30% : Fidelity Total Bond 15% : Fidelity Strategic Real Return Bucket 3: Years 11 and Beyond 15% : Fidelity Large Cap Stock 10% : Fidelity Spartan Total Market Index 5% : Fidelity International Discovery 5% : Fidelity Strategic Income K Contact Christine Benz at christine.benz@morningstar.com

Bucket 2: Years 3–10 7% : Fidelity Short-Term Bond 25% : Fidelity Total Bond 15% : Fidelity Strategic Real Return