ETF Drawdowns vs Mutual Fund Drawdowns

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Topic Author
gitsy
Posts: 17
Joined: Wed Jun 05, 2024 10:57 am

ETF Drawdowns vs Mutual Fund Drawdowns

Post by gitsy »

I've been comparing drawdowns between funds and ETFs using the site https://portfolioslab.com -- I notice that ETF drawdowns look to be about 20% steeper than the equivalent mutual funds. If this is correct, then why is this so? Is it because ETFs can be sold more easily so that investors react more quickly to market downturns?

For example this comparison of FSKAX vs ITOT:

https://portfolioslab.com/tools/stock-c ... FSKAX/ITOT

Or FXAIX vs IVV, the same thing, around 20% difference:

https://portfolioslab.com/tools/stock-c ... /FXAIX/IVV

So is this a glitch or a real thing? At my age (early 70s) I would definitely prefer a smoother ride.
PersonalFinanceJam
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Re: ETF Drawdowns vs Mutual Fund Drawdowns

Post by PersonalFinanceJam »

I only looked at the first one, but I'm pretty sure this holds for your other example as well. The tool appears to be reporting max draw down since inception of the fund. In FSKAX instance that share class was created in 2011. If I'm not mistaken Fidelity combined several other share classes into one. ITOT was created in 2004. This means that from a reporting perspective FSKAX missed the 2008 financial crisis where there was a 50% draw down but ITOT did not. So it's purely on the reporting and fund inception dates and nothing to do with mutual funds or ETFs. All of your examples are going to perform almost identically.
Topic Author
gitsy
Posts: 17
Joined: Wed Jun 05, 2024 10:57 am

Re: ETF Drawdowns vs Mutual Fund Drawdowns

Post by gitsy »

PersonalFinanceJam wrote: Tue Jul 09, 2024 3:24 pm I only looked at the first one, but I'm pretty sure this holds for your other example as well. The tool appears to be reporting max draw down since inception of the fund. In FSKAX instance that share class was created in 2011. If I'm not mistaken Fidelity combined several other share classes into one. ITOT was created in 2004. This means that from a reporting perspective FSKAX missed the 2008 financial crisis where there was a 50% draw down but ITOT did not. So it's purely on the reporting and fund inception dates and nothing to do with mutual funds or ETFs. All of your examples are going to perform almost identically.
Thanks much for the reply -- I compared an older Fidelity fund FFIDX with IVV (the latter was started in May of 2000) and the drawdowns are similar.
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nisiprius
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Re: ETF Drawdowns vs Mutual Fund Drawdowns

Post by nisiprius »

My kneejerk reaction is that it is Not Possible that there could be such a big difference, and if PortfoliosLab says there is, so much the worse for PortfoliosLab. Particularly since PortfoliosLab is showing virtually identical growth charts, and not showing us either the time range over which they calculated max drawdown, or the time at which that max drawdown occurred.

I'm not sure just yet how reliable testfol.io is, but the big thing is that it will give us max drawdown for any time period.

So here's what happens in testfol.io if I plot both, then just FSKAX, then just ITOT. Pay attention to the time range.


Source

BOTH: 2011-09-14 - 2024-07-08
Image

FSKAX ALONE: 2011-09-14 - 2024-07-08

Image

ITOT ALONE: 2004-01-23 - 2024-07-08

Image

So that's what happened. FSKAX only had a -35% drawdown because it didn't exist in 2008-2009 and escaped the global financial crisis. ITOT suffered a -55% drawdown during the crisis.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
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