heybro wrote: ↑
Sat Nov 17, 2018 1:53 am
IF you already own Fidelity Total Market Index Fund, which has an expense ratio of .015, should you switch to the Fidelity Zero Total Market fund?...
It is my honest opinion, and my prediction
, is that five years from now, if you use Morningstar to chart and compare the growth of
a) the Fidelity Total Market Index Fund, FSKAX, ER 0.015%,
b) the Fidelity ZERO Total Market Index Fund, ER 0.00%, and
c) The Vanguard Total Stock Market Index Fund, Admiral shares, VTSAX, ER 0.04%
- there will be no visible white space between the lines;
- the difference in final value, after five years, starting at $10,000, will be less than fifty bucks.
- and, going out on a limb here, the order of the final values will not be FZROX < FSKAX < VTSAX. I do not mean that Fidelity sucks or that Vanguard is better, not at all. I just mean that the differences in ER are so tiny that tiny variations in the indexes or sampling could be larger, and there is no guarantee that the lower ER funds will outperform by the amount implied by their ERs. I'm not predicting what the order will be, I'm just saying that I think it's close to random and there are five other orders they could be in.
In virtually identical index funds with tiny expense ratios, the order of expense ratios doesn't necessarily predict which fund makes the most money. My reason for saying this is simple: for the last five years FSKAX has had an expense ration less than or equal to VTSAX's, yet a $10,000 investment in VTSAX earned $3.21 more. I am not, not, not
saying Vanguard will always beat Fidelity. I'm just saying FZROX is not guaranteed to beat VTSAX.
In this case, FSKAX tracks the Dow Jones U.S. Total Stock Market Index;
FZROX tracks the "Fidelity U.S. Total Investable Market Index, which is a float-adjusted market capitalization-weighted index designed to reflect the performance of the U.S. equity market, including large-, mid- and small-capitalization stocks. Using statistical sampling techniques..."
VTSAX tracks the "CRSP US Total Market Index, which represents approximately 100% of the investable U.S. stock market and includes large-, mid-, small-, and micro-cap stocks regularly traded on the New York Stock Exchange and Nasdaq. The fund invests by sampling the index..."
The total US market is pretty well defined, and the style maps are reassuringly identical, so no issues about with/without small caps:
If I were in the same situation, and I already owned FSKAX, my instincts would be that the difference is negligible, and there is never
any reason to be the first kid on the block in a new fund, so I'd "stay the course" in FSKAX.
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.