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What Blend of These 2 Fidelity Funds Approximates TSM

Posted: Sat Sep 12, 2020 9:57 am
by poisedforflight
I have the option for an S&P500 and a Mid-Cap in my 401k that I'll be starting first of the year.

My 2 best options are:

FXAIX - Fidelity® 500 Index Fund - .02%ER - https://fundresearch.fidelity.com/mutua ... /315911750
FSMAX - Fidelity® Extended Market Index Fund - .04%ER - https://fundresearch.fidelity.com/mutua ... /315911743


I don't think this will give me a full approximation of TSM but I'd like to get as close as possible.

Re: What Blend of These 2 Fidelity Funds Approximates TSM

Posted: Sat Sep 12, 2020 10:00 am
by Brianmcg321
80/20

Extended market contains small caps also. The combination of the two will give you a TSM.

Re: What Blend of These 2 Fidelity Funds Approximates TSM

Posted: Sat Sep 12, 2020 10:03 am
by terran
80/20 or so would probably be good. https://www.bogleheads.org/wiki/Approxi ... ock_market should help

Re: What Blend of These 2 Fidelity Funds Approximates TSM

Posted: Sat Sep 12, 2020 10:03 am
by retiredjg
The fund might be called "mid cap" in your list, but it is actually the "rest of the market". Agree that about 80:20 will approximate the total stock market. Being very precise is not very important.

Re: What Blend of These 2 Fidelity Funds Approximates TSM

Posted: Sat Sep 12, 2020 10:11 am
by poisedforflight
Thank you for all the replies. I was just reading the Composition of FSMAX and noticed that it was and Mid and Small.

80/20 it is.

Re: What Blend of These 2 Fidelity Funds Approximates TSM

Posted: Sat Sep 12, 2020 10:14 am
by retired@50
poisedforflight wrote: Sat Sep 12, 2020 10:11 am Thank you for all the replies. I was just reading the Composition of VSMAX and noticed that it was and Mid and Small.

80/20 it is.
Vanguard also offers a "completion index" fund. Ticker is VEXAX. https://investor.vanguard.com/mutual-fu ... olio/vexax

Regards,

Re: What Blend of These 2 Fidelity Funds Approximates TSM

Posted: Sat Sep 12, 2020 9:53 pm
by RetiredCSProf
VXF -- ETF version of Vanguard extended equity (VEXAX) is an alternative to FSMAX for extended equity

Re: What Blend of These 2 Fidelity Funds Approximates TSM

Posted: Sun Sep 13, 2020 2:13 pm
by poisedforflight
RetiredCSProf wrote: Sat Sep 12, 2020 9:53 pm VXF -- ETF version of Vanguard extended equity (VEXAX) is an alternative to FSMAX for extended equity
Neither of these are available in my 401k.

Re: What Blend of These 2 Fidelity Funds Approximates TSM

Posted: Fri Sep 18, 2020 2:51 am
by 1789
I would just hold one fund - FXAIX

Re: What Blend of These 2 Fidelity Funds Approximates TSM

Posted: Fri Sep 18, 2020 6:38 am
by oldcomputerguy
poisedforflight wrote: Sat Sep 12, 2020 9:57 am I have the option for an S&P500 and a Mid-Cap in my 401k that I'll be starting first of the year.

My 2 best options are:

FXAIX - Fidelity® 500 Index Fund - .02%ER - https://fundresearch.fidelity.com/mutua ... /315911750
FSMAX - Fidelity® Extended Market Index Fund - .04%ER - https://fundresearch.fidelity.com/mutua ... /315911743


I don't think this will give me a full approximation of TSM but I'd like to get as close as possible.
Actually, it should. The index followed by FSMAX is designed to include the holdings in Total Market that are not included in the S&P500.

From the FSMAX Prospectus:
Normally investing at least 80% of assets in common stocks included in the Dow Jones U.S. Completion Total Stock Market Index℠, which represents the performance of stocks of mid- to small-capitalization U.S. companies.
Standard & Poor describes the Dow Jones U.S. Completion Total Stock Market Index as "a subindex of the Dow Jones U.S. Total Stock Market Index that excludes components of the S&P 500". So this means that FSMAX is basically "Total Market minus S&P500", and combining FSMAX with FXAIX in the proper proportion should do a very good job of approximating Total Market.

Re: What Blend of These 2 Fidelity Funds Approximates TSM

Posted: Fri Sep 18, 2020 6:45 am
by nisiprius
Image

Fidelity's Total Stock Market Index Fund, FSKAX, which I take it is not available to you, tracks the Dow Jones U.S. Total Stock Market Index. (It's from Dow Jones but it is a normal, cap-weighted, total market index, with no connection to the Dow Jones Industrial Average).

FXAIX tracks the S&P 500 Index.

FSMAX tracks the Dow Jones US Completion Stock Market Index.

The Dow Jones US Completion Total Stock Market Index is
a subindex of the Dow Jones U.S. Total Stock Market Index that excludes components of the S&P 500®
According to S&P
The index includes 500 leading companies and covers approximately 80% of available market capitalization.
The 80% number hasn't changed much in all the time I've been paying attention.

Notice, by the way, the careful phrasing: "500 leading companies," not "the 500 largest companies by market capitalization."

As others have noted, the S&P 500 and the total stock market are actually surprisingly similar, because not only does the S&P 500 include 80% of the market by cap weight (i.e. by dollar value), but the remaining 20% doesn't really behave all that differently from the rest--the correlation between the S&P 500 index and the completion index has been about 0.93. As a result, the overall financial behavior has been really very similar:

Source
Image

Personally, yes, I would go with 80% FXAIX and 20% FSMAX if they are both conveniently available in your 401(k) plan, and the biggest single reason is that you do not have to waste time reading overwrought nonsense about what it means for the S&P 500 when/if Tesla will be added to the S&P 500, because it is in FSMAX already, and if when/if Tesla is added to FXAIX it will be removed from FSMAX.

But someone who really prizes simplicity for the sake of simplicity could just shrug and go with FXAIX.

Re: What Blend of These 2 Fidelity Funds Approximates TSM

Posted: Sat Sep 19, 2020 12:23 am
by wizard903
I calculated this recently using Fidelity's hypothetical trade tool:

FSKAX
24-26-26
06-06-06
02-02-02

FXAIX (83%) + FSMAX (17%)
24-26-26
06-06-06
02-02-02

FXAIX (83%) + FSMDX (10%) + FSSNX (7%)
25-26-24
07-06-05
02-02-02

Re: What Blend of These 2 Fidelity Funds Approximates TSM

Posted: Sat Sep 19, 2020 7:43 am
by poisedforflight
I appreciate all of the additional answers.

I think I'll be going with the 83/17 split between the two from what I'm reading here and elsewhere.