Fidelity Closes Small-Cap International Fund 

In May 2005, Fidelity Investments closed its International Small-Cap Fund (FISMX) to new investors after reaching nearly $2.1 billion in assets since the fund opened in September 2002. This left one less option for investors who want to include international small-cap stocks in their portfolios.

Updated recommendations:

1. If you have money in this fund, there is no reason to sell. You also (at the time of the closure) may make additional investments in the fund, and we see no reason not to do so.
2. If you have access to Fidelity International Small-Cap through a Fidelity 401(k) or other retirement plan, the closure should not affect you.
3. For other Fidelity investors, our recommendation (Updating Table 12.3 in the book) is the following:

Spartan 500 Index	12.5%
Equity Income	12.5%
Small-Cap Stock	25%
Spartan International Index	40%
Emerging Markets	10%

However, this suggested portfolio has a serious flaw with the lack of any international small-cap exposure.

To solve that, we suggest two alternatives.

First, investors who want or need to remain exclusively at Fidelity may wish to reduce their international exposure from 50 percent to 30 percent. That would call for 24 percent in Spartan International Index, 6 percent in Emerging Markets and 17.5 percent each in the four U.S. Fidelity funds. This suggestion is based on the premise that small-cap exposure and value exposure are more important than exposure to international stocks.

Second, investors who can add a fund from outside Fidelity should consider reducing Spartan International Index from 40 percent to 20 percent and allocating 20 percent to the Laudus Rosenberg International Small Cap Fund (RISIX), which is part of the all-equity Merriman Model Portfolio (Table 12.6).

The Merriman Model Portfolio (Table 12.6) is updated as follows:

Fidelity Spartan 500 Index	FSMKX	12.5%
Vanguard Value Index	VIVAX	12.5%
Vanguard Small-Cap Index	NAESX	12.5%
Vanguard Small-Cap Value Index	VISVX	12.5%
Fidelity Spartan International Index	FSIIX	10%
Vanguard International Value	VTRIX	10%
Laudus Rosenberg International Small Cap	RISIX	10%
Third Avenue International Value	TAVIX	10%
Vanguard Emerging Markets Index	VEIEX	10%

 This article was last updated May 8, 2005.