FIKFX

What's it for?

• Emergency Funds
• Savings for future expenses in the 1-5 year category.

When Not to use it?

• Money needed in the next year, see FTEXX
• Savings for > 5 years out, see VTI.
• Retirement/FI see FZROX

This is a mutual fund like FZROX also done by Fidelity named "Fidelity Freedom® Index Income Fund - Investor Class"

Their objective is: "Seeks high total current income and, as a secondary objective, capital appreciation. "

Which doesn't make a lot of sense, but this is what the fund actually does:

It takes all of our money and as of June 30, 2020 puts:

• 19.54% of it in equities(stocks)
• 77.46% in bonds and government treasuries
• 3% in cash

So it's basically 20% equities and 80% bonds. Bonds are loans to companies, state governments, local governments, schools, etc. The bonds in this case are almost all US government treasuries. i.e. the US govt would have to fail completely before we wouldn't get our money back.

So money in this fund is pretty safe, 80% of it is basically as safe as a bank account. but 20% of it is in equities (12% US and 8% international). The bonds won't make us very much money, since the US govt is very safe, they don't pay very much at all in the exchange. But we want to make money with our "safe" investments, and that is what the 20% in equities is for.

So if the entire global equities market plummeted 50%, the most this fund could go down is about 10%. IN fact in March of 2020, just before Covid-19, if you had $10,000 invested, it would have been worth $9,378 at the very worst part of the covid-19 crash or 6%.

The largest draw down over a months time was 3%. If you look here and click the drawdowns tab, you can see the results.

For that risk, we get about 4% growth annually. Way better than C360's 0.2% growth!

So for safe savings, this is a great way to do it. If you want to be *VERY* safe, over-fund this by 15% (as the single largest drop ever recorded for a fund like this since the great depression in the 1930's was 15%). Personally I "over-fund" by 10% and call it good enough.

For all of this, Fidelity charges us 0.12%/year, or $1.20 per $1,000 invested. Not a bad trade off!

The equivalents at the other large brokerages:

• Schwab: SWLRX
• Vanguard: VASIX

More explanation on why I use this fund here

If you want a slightly higher exposure to equities, then you can't use a Fidelity Fund (the ones they have are *very* expensive)

But that's fine, in a taxable account just buy VTI and BND at whatever ratio you want. though if your BND holding starts to get high, you might have tax issues, and might think about putting bonds in a tax-deferred account.