TIAA-CREF vs Fidelity investments?
October 13, 2005 12:51 PM Subscribe
Currently I have at my work the option to choose between funds, TIAA-CREF and Fidelity investments. Since it is a non-profit organization they put in 6.5% of my salary plus anything else I want to contribute (it's a 403b). I have tried to do some research to see which company is better in the long run but can't find any information on TIAA-CREF besides that it used to be exclusively for teachers and federal employees. Does anyone know which investor I should get? I am looking for the greatest gain in the long run.
I am no financial genius, but I will say I've been incredibly happy with TIAA-CREF in the ten years I've been with them. The reports are clear and easy to read. There is a lot of flexibility with the fund choices.
posted by Miko at 1:14 PM on October 13, 2005
posted by Miko at 1:14 PM on October 13, 2005
TIAA-CREF and Fidelity manage many funds - do you know, specifically, what options you have within TIAA and Fidelity? For example, TIAA-CREF offers mutual funds with strategies such as: Growth Equity, Growth & Income, International Equity, High-Yield Bond, Real Estate Securities, etc. Each of these has a different goal (growing capital vs. generating current income) and risk profile (high risk with high potential returns vs. low risk and high likelihood of maintaining principal). TIAA-CREF and Fidelity are both highly respected fund managers, but I think TIAA-CREF has a slightly better reputation, IMO. But since both are highly reputatable, this should be a tertiary consideration.
Once you know what options are available, I would choose an equity index fund. Over the long run, equities deliver the greatest returns but also come with relatively high risk. An an index fund refers to a fund that is managed passively rather than actively.
posted by mullacc at 1:14 PM on October 13, 2005
Once you know what options are available, I would choose an equity index fund. Over the long run, equities deliver the greatest returns but also come with relatively high risk. An an index fund refers to a fund that is managed passively rather than actively.
posted by mullacc at 1:14 PM on October 13, 2005
Yes, the real determinant of "greatest gain in the long run" is not which company you pick, but which funds you pick.
Some funds to look at are TIAA-CREF's "LifeCycle" funds. These are "funds of funds" that are designed to meet the needs of a typical retirement investor who knows the approximate date on which they will retire. If you want to retire around 2040, put 100% of your money into their 2040 fund. The beauty of this is set-it-and-forget-it: when you are young, the fund invests in high-risk but also potentially high-return investments, but as you get older it gradually shifts to more conservative investments. In other words, it replicates what a paid money manager would do for you, but at a fraction of the cost.
posted by profwhat at 1:18 PM on October 13, 2005
Some funds to look at are TIAA-CREF's "LifeCycle" funds. These are "funds of funds" that are designed to meet the needs of a typical retirement investor who knows the approximate date on which they will retire. If you want to retire around 2040, put 100% of your money into their 2040 fund. The beauty of this is set-it-and-forget-it: when you are young, the fund invests in high-risk but also potentially high-return investments, but as you get older it gradually shifts to more conservative investments. In other words, it replicates what a paid money manager would do for you, but at a fraction of the cost.
posted by profwhat at 1:18 PM on October 13, 2005
TIAA-CREF and Fidelity are both large, reputable financial services companies that offer mutual funds that you can put your retirement savings into. The primary differences between them are:
1) Breadth of products offered. TIAA-CREF offers far fewer funds, though the ones they do offer cover the basics and are perfectly good for the majority of investors who want to put their money into a broadly diversified portfolio. Fidelity offers more, and more specialized, funds. If you really know what you're doing and want to invest in somewhat more esoteric funds, then you might consider Fidelity; but in all likelihood TIAA-CREF will be just fine for you.
2) Fees. This is one of the most important considerations if your goal is indeed "the greatest gain in the long run." Even a seemingly small fee will compound over the course of years, and wind up eating a significant chunk out of the return on your investment.
In order to determine which company offers the better (e.g. lower) fees, you first need to determine what sort of funds you will want to invest in. Then you can look at their websites and compare. For example, suppose you want to invest in a broad stock market index fund. TIAA-CREF Equity Fund (TCEIX) has an expense ratio of 0.26%; Fidelity's Spartan Equity Index Fund (FUSEX) has an expense ratio of 0.10%. Both ratios are quite low, but Fidelity's is better.
My advice (though IANAFA) is to figure out what funds you are likely to invest in and then compare fees to see if there is an appreciable difference, and go from there.
posted by googly at 1:19 PM on October 13, 2005
1) Breadth of products offered. TIAA-CREF offers far fewer funds, though the ones they do offer cover the basics and are perfectly good for the majority of investors who want to put their money into a broadly diversified portfolio. Fidelity offers more, and more specialized, funds. If you really know what you're doing and want to invest in somewhat more esoteric funds, then you might consider Fidelity; but in all likelihood TIAA-CREF will be just fine for you.
2) Fees. This is one of the most important considerations if your goal is indeed "the greatest gain in the long run." Even a seemingly small fee will compound over the course of years, and wind up eating a significant chunk out of the return on your investment.
In order to determine which company offers the better (e.g. lower) fees, you first need to determine what sort of funds you will want to invest in. Then you can look at their websites and compare. For example, suppose you want to invest in a broad stock market index fund. TIAA-CREF Equity Fund (TCEIX) has an expense ratio of 0.26%; Fidelity's Spartan Equity Index Fund (FUSEX) has an expense ratio of 0.10%. Both ratios are quite low, but Fidelity's is better.
My advice (though IANAFA) is to figure out what funds you are likely to invest in and then compare fees to see if there is an appreciable difference, and go from there.
posted by googly at 1:19 PM on October 13, 2005
Also, Morningstar will give you performance data for each manager's funds. TIAA-CREF and Fidelity - these are snapshots of the entire fund family of each manager, not one fund in particular. I'd recommend that you not make decisions based on the data found on Morningstar, but instead go with an index fund that fits your risk appetite (and has lower fees).
posted by mullacc at 1:21 PM on October 13, 2005
posted by mullacc at 1:21 PM on October 13, 2005
TIAA-CREF recently started jacking up fees, which Morningstar was dismayed to see. They may still be cheaper than Fidelity though. But yes, look at the equity index finds of each...
posted by pmurray63 at 7:31 PM on October 13, 2005
posted by pmurray63 at 7:31 PM on October 13, 2005
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posted by kindall at 1:11 PM on October 13, 2005