Automatic Investing
- Automatic Finances
- Automatic Cash Management
- Automatic Investing (you are here)
- Automatic Insurance
The Setup
- Fidelity Brokerage Account ("brokerage") with margin enabled
- Fidelity Roth IRAs
- Fidelity Solo 401K
- Fidelity Multi-Asset Index Fund (FFNOX)
- iShares Core Aggressive Allocation ETF
How Money Flows
- Every investable dollar is in FFNOX across all non-401k tax advantaged accounts
- Every investable dollar in taxable accounts is invested in AOA
- Automatically contribute to my employer's 401K plan every pay period into whatever fund
Why
I don't want anyone to have to think about where to pull money from at any time. I want me or my wife to be able to login to Fidelity and sell enough to cover cash needs with a very small number of clicks.
FFNOX and AOA are funds of funds. FFNOX consists of low cost Fidelity funds and AOA consists of low cost Blackrock iShares ETFs. They both invest in approximately 60% US total stock market, 25% international developed total stock market, and 15% US total bond market. This fits our family's desired asset allocation.
The brokerage account has margin enabled. Margin allows you to borrow up to 50% of the value of your investable assets (everything but cash and CDs) from your broker for any purpose whatsoever. It kicks in while you run out of cash and will automatically pay itself back when you deposit cash in the account.
We have margin turned on so that we don't have to worry about selling investments to raise cash while something awful is happening. We can login to Fidelity and sell some FFNOX when it's convenient rather than having to do it one some kind of schedule.
Contributing to my employer's 401K plan is an automatic tax break and also means I get my employer's matching contribution. I currently (for 2024) have it set up to max out my employer's match.
We don't use robo-investors. FFNOX's total expenses are capped at 0.08%, or $80 per $100,000 annually. Wealthfront charges 0.25% (more than 3x) on top of the fees for the actual ETFs (typically ~0.1%). Robo-investors are never going to offset their fees when compared to FFNOX or similar funds (Target Retirement funds at Vanguard or Freedom Index funds at Fidelity).