FIDO Zero Funds losing to Vanguard?

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Tdubs
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FIDO Zero Funds losing to Vanguard?

Post by Tdubs » Thu Apr 04, 2019 3:50 am

So is it possible the Zero funds are producing inferior returns compared to Vanguard?

International

Image

And TSM.

Image
[/quote]

Iridium
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Re: FIDO Zero Funds losing to Vanguard?

Post by Iridium » Thu Apr 04, 2019 4:19 am

As of 3/31 YTD

Fidelity US Total Investable Market: 13.96%
CRSP US Total Market Index: 14.06%

It is tough for an index fund to make up for a difference in performance of 0.10% of their underlying index. The zero fund actually outperformed its index by 0.05%. Time will tell whether that was luck or good management by Fidelity.

rkhusky
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Re: FIDO Zero Funds losing to Vanguard?

Post by rkhusky » Thu Apr 04, 2019 6:19 am

Looks like a mixed bag to me. The difference is in the noise.

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Tdubs
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Re: FIDO Zero Funds losing to Vanguard?

Post by Tdubs » Thu Apr 04, 2019 11:21 am

rkhusky wrote:
Thu Apr 04, 2019 6:19 am
Looks like a mixed bag to me. The difference is in the noise.
Not a mixed bag. VT pretty consistently out performs by millimeters. It doesn't add up to much, of course, but perhaps all those who bolted to Fidelity to gain pennies are actually losing pennies.

MichCPA
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Re: FIDO Zero Funds losing to Vanguard?

Post by MichCPA » Thu Apr 04, 2019 11:31 am

Tdubs wrote:
Thu Apr 04, 2019 11:21 am
rkhusky wrote:
Thu Apr 04, 2019 6:19 am
Looks like a mixed bag to me. The difference is in the noise.
Not a mixed bag. VT pretty consistently out performs by millimeters. It doesn't add up to much, of course, but perhaps all those who bolted to Fidelity to gain pennies are actually losing pennies.
FIDO Intl seems to win by 36 bps and VG US seems to win by 8 bps over 6 mo. I would argue that the results are inconclusive. If one method is better or worse, shouldn't there be a clear difference?

To me, the performance is basically equal and I wouldn't leave a broker or pay extra fees to have one over the other. (I haven't seen any tax efficiency numbers on FIDO though.)

I would also discard 1 mo , 3 mo, YTD (same as 3 mo right now) as not being very useful due to the short evaluation period.

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Re: FIDO Zero Funds losing to Vanguard?

Post by alex_686 » Thu Apr 04, 2019 11:37 am

Tdubs wrote:
Thu Apr 04, 2019 3:50 am
So is it possible the Zero funds are producing inferior returns compared to Vanguard?
Nope - they are not. They are following different indexes so you are going to get different returns. You have found a time frame where one index has preformed differently than another - which is not that surprising. When you have very similar indexes you are going to get periods where one preforms better than the next just by chance.

What you really need to do is figure out why one index preformed better than the other, and if those factors are going to be prescient in the future, and how efficient those funds are relative to the underlying index.

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Re: FIDO Zero Funds losing to Vanguard?

Post by willthrill81 » Thu Apr 04, 2019 11:43 am

Tdubs wrote:
Thu Apr 04, 2019 11:21 am
rkhusky wrote:
Thu Apr 04, 2019 6:19 am
Looks like a mixed bag to me. The difference is in the noise.
Not a mixed bag. VT pretty consistently out performs by millimeters. It doesn't add up to much, of course, but perhaps all those who bolted to Fidelity to gain pennies are actually losing pennies.
Several of us suspected that this would happen.
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Re: FIDO Zero Funds losing to Vanguard?

Post by rkhusky » Thu Apr 04, 2019 11:45 am

Tdubs wrote:
Thu Apr 04, 2019 11:21 am
rkhusky wrote:
Thu Apr 04, 2019 6:19 am
Looks like a mixed bag to me. The difference is in the noise.
Not a mixed bag. VT pretty consistently out performs by millimeters. It doesn't add up to much, of course, but perhaps all those who bolted to Fidelity to gain pennies are actually losing pennies.
Look at the month by month results - VTSAX wins 3, Fidelity wins 3, and 1 tie. A mixed bag indeed. You will need many months of data to tease any signal out of that noise.

edit: On the int'l side: FZILX wins 6 months and VTIAX wins 1.

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Re: FIDO Zero Funds losing to Vanguard?

Post by Angst » Thu Apr 04, 2019 2:44 pm

alex_686 wrote:
Thu Apr 04, 2019 11:37 am
Tdubs wrote:
Thu Apr 04, 2019 3:50 am
So is it possible the Zero funds are producing inferior returns compared to Vanguard?
Nope - they are not. They are following different indexes so you are going to get different returns. You have found a time frame where one index has preformed differently than another - which is not that surprising. When you have very similar indexes you are going to get periods where one preforms better than the next just by chance.

What you really need to do is figure out why one index preformed better than the other, and if those factors are going to be prescient in the future, and how efficient those funds are relative to the underlying index.
Well it really depends on how you're looking at this. Nobody last year was discussing leaving Vanguard's US or Int'l TSM funds for those superior in-house indexes they'd be getting instead at Fidelity; it was only for for the lower ER's, plain and simple. For all intensive purposes, the assumption here was (and is) that the indexes are fungible and that the only way to evaluate the success or failure of such a decision process as this one is by comparing the bottom line returns over time.

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Re: FIDO Zero Funds losing to Vanguard?

Post by H-Town » Thu Apr 04, 2019 2:51 pm

Tdubs wrote:
Thu Apr 04, 2019 3:50 am
So is it possible the Zero funds are producing inferior returns compared to Vanguard?
Both funds are the same as far as I concern... At Fidelity HSA I have the zero funds. At Vanguard brokerage and Roth IRA I have VTI and the likes.

The money you put in makes a more meaningful impact than a few basis points...

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Re: FIDO Zero Funds losing to Vanguard?

Post by Raabe34 » Thu Apr 04, 2019 2:58 pm

Does anybody know the securities lending rebating % Fidelity is using? I'm guessing that's a pretty big piece of this equation.

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Re: FIDO Zero Funds losing to Vanguard?

Post by TheTimeLord » Thu Apr 04, 2019 2:59 pm

Why would I base an investment decision on a comparison of 6 months of performance?
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Re: FIDO Zero Funds losing to Vanguard?

Post by saintsfan342000 » Thu Apr 04, 2019 3:14 pm

Can we please but a ban on all threads about the performance and superiority/inferiority of Fidelity Zero funds until 2023? Trying to draw any such conclusion from such a limited data set is ridiculous and not actionable.

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Re: FIDO Zero Funds losing to Vanguard?

Post by anil686 » Thu Apr 04, 2019 3:20 pm

rkhusky wrote:
Thu Apr 04, 2019 11:45 am
Look at the month by month results - VTSAX wins 3, Fidelity wins 3, and 1 tie. A mixed bag indeed. You will need many months of data to tease any signal out of that noise.

edit: On the int'l side: FZILX wins 6 months and VTIAX wins 1.
I thought the international zero fund was a developed only market fund. I think the non zero Fidelity has EM in it...

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Re: FIDO Zero Funds losing to Vanguard?

Post by Doom&Gloom » Thu Apr 04, 2019 3:48 pm

saintsfan342000 wrote:
Thu Apr 04, 2019 3:14 pm
Can we please but a ban on all threads about the performance and superiority/inferiority of Fidelity Zero funds until 2023? Trying to draw any such conclusion from such a limited data set is ridiculous and not actionable.
Agree and disagree. Drawing conclusions is premature.

However, investors considering the Zero funds based only upon the hype of "Woo-hoo! 0% ER!" may certainly benefit from the discussion--including the admonitions that the data are limited at this point.

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Tdubs
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Re: FIDO Zero Funds losing to Vanguard?

Post by Tdubs » Thu Apr 04, 2019 4:04 pm

TheTimeLord wrote:
Thu Apr 04, 2019 2:59 pm
Why would I base an investment decision on a comparison of 6 months of performance?
Lots of people jumped based on an announcement from Fidelity. Nothing more.

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Tdubs
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Re: FIDO Zero Funds losing to Vanguard?

Post by Tdubs » Thu Apr 04, 2019 4:11 pm

Angst wrote:
Thu Apr 04, 2019 2:44 pm
alex_686 wrote:
Thu Apr 04, 2019 11:37 am
Tdubs wrote:
Thu Apr 04, 2019 3:50 am
So is it possible the Zero funds are producing inferior returns compared to Vanguard?
Nope - they are not. They are following different indexes so you are going to get different returns. You have found a time frame where one index has preformed differently than another - which is not that surprising. When you have very similar indexes you are going to get periods where one preforms better than the next just by chance.

What you really need to do is figure out why one index preformed better than the other, and if those factors are going to be prescient in the future, and how efficient those funds are relative to the underlying index.
Well it really depends on how you're looking at this. Nobody last year was discussing leaving Vanguard's US or Int'l TSM funds for those superior in-house indexes they'd be getting instead at Fidelity; it was only for for the lower ER's, plain and simple. For all intensive purposes, the assumption here was (and is) that the indexes are fungible and that the only way to evaluate the success or failure of such a decision process as this one is by comparing the bottom line returns over time.
Exactly.

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Re: FIDO Zero Funds losing to Vanguard?

Post by TheTimeLord » Thu Apr 04, 2019 7:53 pm

Tdubs wrote:
Thu Apr 04, 2019 4:04 pm
TheTimeLord wrote:
Thu Apr 04, 2019 2:59 pm
Why would I base an investment decision on a comparison of 6 months of performance?
Lots of people jumped based on an announcement from Fidelity. Nothing more.
Which I understand. I don't understand trying to draw a conclusion about long term performance in 6 months.
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Re: FIDO Zero Funds losing to Vanguard?

Post by LadyGeek » Thu Apr 04, 2019 9:46 pm

This thread is now in the Investing - Theory, News & General forum (theory).
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Re: FIDO Zero Funds losing to Vanguard?

Post by Ferdinand2014 » Fri Apr 05, 2019 6:05 am

Tdubs wrote:
Thu Apr 04, 2019 3:50 am
So is it possible the Zero funds are producing inferior returns compared to Vanguard?

International

Image

And TSM.

Image
[/quote]
They do not follow the same index. This is irrelevant data.

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Re: FIDO Zero Funds losing to Vanguard?

Post by JoMoney » Fri Apr 05, 2019 6:07 am

FWIW on a apples to apples index, the Fidelity 500 index FXAIX has had slightly better total returns than the Vanguard 500 VFIAX
MStar Growth Chart
Since there are multiple different "Total Market" indices, comparing funds tracking a different index isn't the right comparison. The Russell 3000 and Wilshire 5000 performed differently than the CRSP Total Market Index too...
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Re: FIDO Zero Funds losing to Vanguard?

Post by Ferdinand2014 » Fri Apr 05, 2019 6:10 am

Tdubs wrote:
Thu Apr 04, 2019 4:11 pm
Angst wrote:
Thu Apr 04, 2019 2:44 pm
alex_686 wrote:
Thu Apr 04, 2019 11:37 am
Tdubs wrote:
Thu Apr 04, 2019 3:50 am
So is it possible the Zero funds are producing inferior returns compared to Vanguard?
Nope - they are not. They are following different indexes so you are going to get different returns. You have found a time frame where one index has preformed differently than another - which is not that surprising. When you have very similar indexes you are going to get periods where one preforms better than the next just by chance.

What you really need to do is figure out why one index preformed better than the other, and if those factors are going to be prescient in the future, and how efficient those funds are relative to the underlying index.
Well it really depends on how you're looking at this. Nobody last year was discussing leaving Vanguard's US or Int'l TSM funds for those superior in-house indexes they'd be getting instead at Fidelity; it was only for for the lower ER's, plain and simple. For all intensive purposes, the assumption here was (and is) that the indexes are fungible and that the only way to evaluate the success or failure of such a decision process as this one is by comparing the bottom line returns over time.
Exactly.
Not exactly. They are different indexes. The FZROX for example has the largest 2500 stocks in the U.S. vs 3500 for the vanguard fund. FZROX has a slight large cap tilt. It is approximately 3/4 of the way between an S&P 500 index and a total market index. You will likely find over time that if large caps outperform, you will find FZROX ahead by a small amount, if you find small caps ahead you will find Vanguard slightly ahead. It is that simple. The differences you point out are way to short of a time frame to even compare if they were the same index especially since the fund hasn't been around even a full year. I find it strange how this forum's fundamental tenet is low cost index based investing, then loves to bash a company (and the individuals that chose to go with the ZERO funds) that actually does exactly what this forum is all about. FWIW I own no ZERO funds because I have S&P 500 index funds and no international.

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Re: FIDO Zero Funds losing to Vanguard?

Post by onourway » Fri Apr 05, 2019 7:39 am

Ferdinand2014 wrote:
Fri Apr 05, 2019 6:10 am
Not exactly. They are different indexes. The FZROX for example has the largest 2500 stocks in the U.S. vs 3500 for the vanguard fund. FZROX has a slight large cap tilt. It is approximately 3/4 of the way between an S&P 500 index and a total market index. You will likely find over time that if large caps outperform, you will find FZROX ahead by a small amount, if you find small caps ahead you will find Vanguard slightly ahead. It is that simple. The differences you point out are way to short of a time frame to even compare if they were the same index especially since the fund hasn't been around even a full year. I find it strange how this forum's fundamental tenet is low cost index based investing, then loves to bash a company (and the individuals that chose to go with the ZERO funds) that actually does exactly what this forum is all about. FWIW I own no ZERO funds because I have S&P 500 index funds and no international.
For all intents and purposes, the vast majority of people who will look to purchase this fund will not care that Fidelity chose to develop their own index to follow that is nearly identical to the total market index funds they will be compared to. This is a sleight-of-hand by Fidelity. They don't want to be compared directly to other low-cost index funds, so they develop their own index which allows any difference in performance to be attributed to that rather than to the fact that once you are at the cost threshold of say, 5 basis points or less, other factors start to become more important in determining the total return of the fund.

Altogether these differences are too small to worry about one way or another, but it's important to pull back the curtain on what Fidelity is doing here to give investors wooed by the 'zero-cost' pitch a little insight into what they should really expect.

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Re: FIDO Zero Funds losing to Vanguard?

Post by jeffyscott » Fri Apr 05, 2019 7:53 am

The most important thing that one can learn from this discussion is which of the following is correct :P (I have provided some clues).

Angst wrote:
Thu Apr 04, 2019 2:44 pm
For all intensive purposes...
:(

onourway wrote:
Fri Apr 05, 2019 7:39 am
For all intents and purposes...
:happy
press on, regardless - John C. Bogle

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Re: FIDO Zero Funds losing to Vanguard?

Post by Whakamole » Fri Apr 05, 2019 8:19 am

Ferdinand2014 wrote:
Fri Apr 05, 2019 6:10 am
Not exactly. They are different indexes. The FZROX for example has the largest 2500 stocks in the U.S. vs 3500 for the vanguard fund. FZROX has a slight large cap tilt. It is approximately 3/4 of the way between an S&P 500 index and a total market index. You will likely find over time that if large caps outperform, you will find FZROX ahead by a small amount, if you find small caps ahead you will find Vanguard slightly ahead. It is that simple. The differences you point out are way to short of a time frame to even compare if they were the same index especially since the fund hasn't been around even a full year. I find it strange how this forum's fundamental tenet is low cost index based investing, then loves to bash a company (and the individuals that chose to go with the ZERO funds) that actually does exactly what this forum is all about. FWIW I own no ZERO funds because I have S&P 500 index funds and no international.
It's barely a difference. Looking at the CRSP data, the stocks in position 2501 (Northwest Pipe) to 3608 (PHI Inc which recently filed for bankruptcy) make up 0.335% of the CRSP Total Stock Market index. NW Pipe's market cap is $250M, so we're looking at microcaps. I believe Ferri likes microcaps but 0.335% is not going to move the needle either way.
onourway wrote:
Fri Apr 05, 2019 7:39 am
For all intents and purposes, the vast majority of people who will look to purchase this fund will not care that Fidelity chose to develop their own index to follow that is nearly identical to the total market index funds they will be compared to. This is a sleight-of-hand by Fidelity. They don't want to be compared directly to other low-cost index funds, so they develop their own index which allows any difference in performance to be attributed to that rather than to the fact that once you are at the cost threshold of say, 5 basis points or less, other factors start to become more important in determining the total return of the fund.
I'm not sure I find this argument compelling. There are multiple indices, from multiple companies, and funds not only go with different providers but switch as Vanguard has done in the past. And note that Vanguard has a Large Cap Index fund that uses a CRSP index, not the S&P 500 index.This is not a bad thing, it certainly makes TLH easier when we can jump to a similar fund that tracks a different index.

As I've mentioned before, index providers will create white label indices for you according to your specifications, and do the tracking. We know from SEC filings at FZROX is "calculated by S&P Dow Jones indices" so it's very likely that Fidelity hired Dow Jones S&P to create the index, partially to avoid having to pay the licensing fee for existing indices (which we know can be steep, at least according to Jack Bogle.) It would not surprise me if Fidelity also asked that the index have lower trading costs and perhaps that is why microcaps are absent in FZROX and international small caps are absent from the corresponding international fund FZILX; of course we cannot know that for sure.

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Re: FIDO Zero Funds losing to Vanguard?

Post by onourway » Fri Apr 05, 2019 8:28 am

Whakamole wrote:
Fri Apr 05, 2019 8:19 am

I'm not sure I find this argument compelling. There are multiple indices, from multiple companies, and funds not only go with different providers but switch as Vanguard has done in the past. And note that Vanguard has a Large Cap Index fund that uses a CRSP index, not the S&P 500 index.This is not a bad thing, it certainly makes TLH easier when we can jump to a similar fund that tracks a different index.

As I've mentioned before, index providers will create white label indices for you according to your specifications, and do the tracking. We know from SEC filings at FZROX is "calculated by S&P Dow Jones indices" so it's very likely that Fidelity hired Dow Jones S&P to create the index, partially to avoid having to pay the licensing fee for existing indices (which we know can be steep, at least according to Jack Bogle.) It would not surprise me if Fidelity also asked that the index have lower trading costs and perhaps that is why microcaps are absent in FZROX and international small caps are absent from the corresponding international fund FZILX; of course we cannot know that for sure.
Yes, but FZROX is, in Fidelity's own words, a "Total Market Index Fund". They know people will compare this with other funds of the same name. They also have a zero-fee large cap fund, FNILX which tracks yet a different index. I'm sure that cost-savings were a consideration in which index they track, but they are absolutely aware that it helps obfuscate any difference in performance as well.

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Re: FIDO Zero Funds losing to Vanguard?

Post by Whakamole » Fri Apr 05, 2019 9:27 am

onourway wrote:
Fri Apr 05, 2019 8:28 am
Whakamole wrote:
Fri Apr 05, 2019 8:19 am

I'm not sure I find this argument compelling. There are multiple indices, from multiple companies, and funds not only go with different providers but switch as Vanguard has done in the past. And note that Vanguard has a Large Cap Index fund that uses a CRSP index, not the S&P 500 index.This is not a bad thing, it certainly makes TLH easier when we can jump to a similar fund that tracks a different index.

As I've mentioned before, index providers will create white label indices for you according to your specifications, and do the tracking. We know from SEC filings at FZROX is "calculated by S&P Dow Jones indices" so it's very likely that Fidelity hired Dow Jones S&P to create the index, partially to avoid having to pay the licensing fee for existing indices (which we know can be steep, at least according to Jack Bogle.) It would not surprise me if Fidelity also asked that the index have lower trading costs and perhaps that is why microcaps are absent in FZROX and international small caps are absent from the corresponding international fund FZILX; of course we cannot know that for sure.
Yes, but FZROX is, in Fidelity's own words, a "Total Market Index Fund". They know people will compare this with other funds of the same name. They also have a zero-fee large cap fund, FNILX which tracks yet a different index. I'm sure that cost-savings were a consideration in which index they track, but they are absolutely aware that it helps obfuscate any difference in performance as well.
ITOT (iShares Total Market) tracks the S&P Total Market Index, SCHB (Schwab Broad Market) tracks the Dow Jones U.S. Broad Stock Market Index, SPTM (SPDR Total Market) tracks the SSGA Total Stock Market Index, FSKAX (Fidelity Total Market) tracks the Dow Jones U.S. Total Stock Market Index (which is different than the Broad Stock Market index), etc. I don't believe everyone here is trying to obfuscate performance. Vanguard has changed the underlying index for VTSAX twice. I also think the differences between these funds are minimal and it's up to personal preference and situation.

FNILX tracks a different index because it is a large cap fund, not a total market fund. It should track a different index.

I honestly don't understand the obfuscation argument. If I go to Vanguard and look at the performance data for VTSAX, it compares it to a "spliced index" that takes into account the index changes that the fund has gone through over the years. So Vanguard is comparing the performance of their index fund to the specific index it tracks - which is exactly what Fidelity (and Schwab and iShares and State Street) are doing.

What are you suggesting Fidelity do, because there doesn't seem to be a universal agreed-upon total stock market index?

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Re: FIDO Zero Funds losing to Vanguard?

Post by Ferdinand2014 » Fri Apr 05, 2019 9:40 am

One benefit of this is it forced down prices and lowered minimums on admiral class for many funds at Vanguard.

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Re: FIDO Zero Funds losing to Vanguard?

Post by brcarls » Fri Apr 05, 2019 9:48 am

jeffyscott wrote:
Fri Apr 05, 2019 7:53 am
The most important thing that one can learn from this discussion is which of the following is correct :P (I have provided some clues).

Angst wrote:
Thu Apr 04, 2019 2:44 pm
For all intensive purposes...
:(

onourway wrote:
Fri Apr 05, 2019 7:39 am
For all intents and purposes...
:happy
Both are wrong. I take it for granite that they meant to say "for all intensive porpoises" .

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Re: FIDO Zero Funds losing to Vanguard?

Post by onourway » Fri Apr 05, 2019 9:58 am

Whakamole wrote:
Fri Apr 05, 2019 9:27 am

ITOT (iShares Total Market) tracks the S&P Total Market Index, SCHB (Schwab Broad Market) tracks the Dow Jones U.S. Broad Stock Market Index, SPTM (SPDR Total Market) tracks the SSGA Total Stock Market Index, FSKAX (Fidelity Total Market) tracks the Dow Jones U.S. Total Stock Market Index (which is different than the Broad Stock Market index), etc. I don't believe everyone here is trying to obfuscate performance. Vanguard has changed the underlying index for VTSAX twice. I also think the differences between these funds are minimal and it's up to personal preference and situation.

FNILX tracks a different index because it is a large cap fund, not a total market fund. It should track a different index.

I honestly don't understand the obfuscation argument. If I go to Vanguard and look at the performance data for VTSAX, it compares it to a "spliced index" that takes into account the index changes that the fund has gone through over the years. So Vanguard is comparing the performance of their index fund to the specific index it tracks - which is exactly what Fidelity (and Schwab and iShares and State Street) are doing.

What are you suggesting Fidelity do, because there doesn't seem to be a universal agreed-upon total stock market index?
It seems to me the difference in all of those cases, other than SPDR (which was also changed to track an in-house index right as they introduced their ultra-low cost index funds), is that they are tracking a known, 3rd party index. For these zero-fee funds Fidelity has chosen to contract their own custom indices. Cost is certainly one issue. It's also surprisingly convenient for Fidelity that there will be no chance of another company tracking this same index.

Again, in the end, none of this really matters because of exactly the details that we are discussing in this and other similar threads, but the lure of 'zero-fee' as a marketing slogan is strong - as witnessed by the parade of questions asked here by people considering choosing these funds over other low-fee alternatives.

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Re: FIDO Zero Funds losing to Vanguard?

Post by Whakamole » Fri Apr 05, 2019 10:22 am

onourway wrote:
Fri Apr 05, 2019 9:58 am
It seems to me the difference in all of those cases, other than SPDR (which was also changed to track an in-house index right as they introduced their ultra-low cost index funds), is that they are tracking a known, 3rd party index. For these zero-fee funds Fidelity has chosen to contract their own custom indices. Cost is certainly one issue. It's also surprisingly convenient for Fidelity that there will be no chance of another company tracking this same index.
Question (and I hope this isn't too pithy) - so what? So what if Fidelity is the only company tracking a given total stock market index? VTSAX is the only fund tracking the CRSP Total Stock Market index. Perhaps that is contractual and perhaps it isn't, but does it actually matter for the retail investor?

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Re: FIDO Zero Funds losing to Vanguard?

Post by alex_686 » Fri Apr 05, 2019 10:47 am

Whakamole wrote:
Fri Apr 05, 2019 10:22 am
Question (and I hope this isn't too pithy) - so what? So what if Fidelity is the only company tracking a given total stock market index? VTSAX is the only fund tracking the CRSP Total Stock Market index. Perhaps that is contractual and perhaps it isn't, but does it actually matter for the retail investor?
It is like debating which is better, the Toyota Corolla or the Honda Accord. Both are solid implementations of a 4 door sedan. For most people they are interchangeable. We are talking about variations of a domestic cap weighted free float index. The only real question is if you want 2k+ or 3k+ stocks in the index. And since it is cap weighted, we are talking about less than 3% of the index.

So don't worry too much about it. We are kind of dealing with the mucky fine grain details. For example.
Angst wrote:
Thu Apr 04, 2019 2:44 pm
Well it really depends on how you're looking at this. Nobody last year was discussing leaving Vanguard's US or Int'l TSM funds for those superior in-house indexes they'd be getting instead at Fidelity; it was only for for the lower ER's, plain and simple. For all intensive purposes, the assumption here was (and is) that the indexes are fungible and that the only way to evaluate the success or failure of such a decision process as this one is by comparing the bottom line returns over time.
Yes, lots of people compare the returns to figure out which index is better. It is a simple, intuitive method. Also, lots of people think that heavier objects fall faster than lighter objects. Also, simple and intuitive. Both represent poor methodology and theory.
TheTimeLord wrote:
Thu Apr 04, 2019 7:53 pm
I don't understand trying to draw a conclusion about long term performance in 6 months.
Heck, we got 50+ years of data on small / micro caps and still have a hard time drawing conclusions. Because that is what we are really debating here. What is the impact of adding a few hundred of the smallest stocks to the index. The general consensus is that you are going to need at least a 10 year time frame to figure out if adding these matters or not. And then the structures of the economy and stock market keep changing, so who knows what will happen for the next 10. Because that is what we are really debating here. What is the impact of adding a few hundred of the smallest stocks to the index.

Once again, to the average retail investor it does not matter much.

Angst
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Re: FIDO Zero Funds losing to Vanguard?

Post by Angst » Fri Apr 05, 2019 10:49 am

jeffyscott wrote:
Fri Apr 05, 2019 7:53 am
The most important thing that one can learn from this discussion is which of the following is correct :P (I have provided some clues).

Angst wrote:
Thu Apr 04, 2019 2:44 pm
For all intensive purposes...
:(

onourway wrote:
Fri Apr 05, 2019 7:39 am
For all intents and purposes...
:happy
Hey! Thanks JS. I think I've been called out on that before - I'm an old dog and a slow learner, no doubt. In the very long run though, word usage can eventually trump correctness. I'm not going to pursue it now but there are good examples out there. Personally, my biggest annoyances are still things like the use of impact as a verb and various evolving pronunciations... like "stu-Dent"

But let's not hijack the thread.

onourway
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Re: FIDO Zero Funds losing to Vanguard?

Post by onourway » Fri Apr 05, 2019 10:51 am

Whakamole wrote:
Fri Apr 05, 2019 10:22 am
onourway wrote:
Fri Apr 05, 2019 9:58 am
It seems to me the difference in all of those cases, other than SPDR (which was also changed to track an in-house index right as they introduced their ultra-low cost index funds), is that they are tracking a known, 3rd party index. For these zero-fee funds Fidelity has chosen to contract their own custom indices. Cost is certainly one issue. It's also surprisingly convenient for Fidelity that there will be no chance of another company tracking this same index.
Question (and I hope this isn't too pithy) - so what? So what if Fidelity is the only company tracking a given total stock market index? VTSAX is the only fund tracking the CRSP Total Stock Market index. Perhaps that is contractual and perhaps it isn't, but does it actually matter for the retail investor?
No, I don't think it matters for the investor. It just means that every time this topic comes up, there can be no resolution as someone will just bring up the fact they are following different indices. :D

EnjoyIt
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Re: FIDO Zero Funds losing to Vanguard?

Post by EnjoyIt » Fri Apr 05, 2019 11:01 am

brcarls wrote:
Fri Apr 05, 2019 9:48 am
jeffyscott wrote:
Fri Apr 05, 2019 7:53 am
The most important thing that one can learn from this discussion is which of the following is correct :P (I have provided some clues).

Angst wrote:
Thu Apr 04, 2019 2:44 pm
For all intensive purposes...
:(

onourway wrote:
Fri Apr 05, 2019 7:39 am
For all intents and purposes...
:happy
Both are wrong. I take it for granite that they meant to say "for all intensive porpoises" .
Image

Don't mess with this porpoise

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Re: FIDO Zero Funds losing to Vanguard?

Post by aristotelian » Fri Apr 05, 2019 11:05 am

JoMoney wrote:
Fri Apr 05, 2019 6:07 am
FWIW on a apples to apples index, the Fidelity 500 index FXAIX has had slightly better total returns than the Vanguard 500 VFIAX
MStar Growth Chart
Since there are multiple different "Total Market" indices, comparing funds tracking a different index isn't the right comparison. The Russell 3000 and Wilshire 5000 performed differently than the CRSP Total Market Index too...
I think this is the key point here that nearly everybody on the thread is missing. Performance of funds following different indices is irrelevant. The question is whether Fidelity's zero fee model works. The apples to apples comparison of the S&P funds appears to vindicate their model.

If you believe that Fidelity's index consistently underperforms, you should buy only the small caps that their index excludes.

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Re: FIDO Zero Funds losing to Vanguard?

Post by Angst » Fri Apr 05, 2019 11:28 am

alex_686 wrote:
Fri Apr 05, 2019 10:47 am
[Snip...]
Angst wrote:
Thu Apr 04, 2019 2:44 pm
Well it really depends on how you're looking at this. Nobody last year was discussing leaving Vanguard's US or Int'l TSM funds for those superior in-house indexes they'd be getting instead at Fidelity; it was only for for the lower ER's, plain and simple. For all intensive purposes, the assumption here was (and is) that the indexes are fungible and that the only way to evaluate the success or failure of such a decision process as this one is by comparing the bottom line returns over time.
Yes, lots of people compare the returns to figure out which index is better. It is a simple, intuitive method. Also, lots of people think that heavier objects fall faster than lighter objects. Also, simple and intuitive. Both represent poor methodology and theory.
(My bolding above)

No - some people couldn't care less about the two indexes; they don't think one is any "better" than the other. Ultimately, whether you track 3500 stocks vs. 3499 stocks it approaches irrelevance and is overwhelmed by things like tracking error, securities lending and ER differences as small as 0.03%. At least in this admittedly extreme example there's a larger forest behind that pesky tree of one's choice of index.

I don't know how else to say it.

Yes, I understand that two extremely similar indexes can and will still vary over time.
But when they are so similar that those variances are going to be extremely small, other non-index but Fund company/implementation related issues will become more important, i.e. will overwhelm any purely index-related differences. Will they show up in just 6 months? Maybe, maybe not, but they will not be static noise, they will be real and cumulative. I certainly need a lot more time before passing judgement, but I have my expectations.

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Re: FIDO Zero Funds losing to Vanguard?

Post by lukestuckenhymer » Fri Apr 05, 2019 12:37 pm

I think the differences are minimal. I think it will be a virtual tie after 10 years, with one or the other besting its rival by a minuscule factor.

To me, the $0 minimum investment is a much bigger story than the ER dropping to zero.

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Re: FIDO Zero Funds losing to Vanguard?

Post by anil686 » Fri Apr 05, 2019 3:29 pm

lukestuckenhymer wrote:
Fri Apr 05, 2019 12:37 pm
I think the differences are minimal. I think it will be a virtual tie after 10 years, with one or the other besting its rival by a minuscule factor.

To me, the $0 minimum investment is a much bigger story than the ER dropping to zero.
+1 - making it accessible to everybody without the requirement of buying 1 share of VTI is the biggest news - Schwab has that too at a 0.04% level I think...

nix4me
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Re: FIDO Zero Funds losing to Vanguard?

Post by nix4me » Fri Apr 05, 2019 10:10 pm

FZROX for the win

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Re: FIDO Zero Funds losing to Vanguard?

Post by Iridium » Fri Apr 05, 2019 10:53 pm

onourway wrote:
Fri Apr 05, 2019 9:58 am
For these zero-fee funds Fidelity has chosen to contract their own custom indices. Cost is certainly one issue. It's also surprisingly convenient for Fidelity that there will be no chance of another company tracking this same index.
Not convenient at all. Quite inconvenient so far, actually. The zero total market fund clobbered its index by 5 bp last quarter. Meanwhile, the Vanguard lagged its index by 2 bp. They would have beat Vanguard by 0.07% if it was not for the difference in index. I would not expect quite that level of difference moving forward, but the zero fund does seem well positioned to consistently outperform Vanguard on a tracking basis. Instead, the difference in index performance will continue to muddy the picture.

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camillus
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Re: FIDO Zero Funds losing to Vanguard?

Post by camillus » Fri Apr 05, 2019 11:18 pm

lukestuckenhymer wrote:
Fri Apr 05, 2019 12:37 pm
To me, the $0 minimum investment is a much bigger story than the ER dropping to zero.
This is so nice. I'm just starting some taxable investing after filling up tax advantaged space. I opened a brokerage at Fidelity and a few times a month contribute extra cash to FZROX. It's just plain easy & it works. These funds are accessible to everyone, and as a boglehead they are a near bullseye per investment philosophy.

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Re: FIDO Zero Funds losing to Vanguard?

Post by fwellimort » Sat Apr 06, 2019 9:22 am

Fidelity Zero funds are doing incredibly well.

I don't understand the mindset of "Vanguard is always good. Other companies are all out to get your money."
Vanguard post Bogle is already planning towards an increase in actively managed fund (including a commodities fund) and also trying its best to stay in the competition by lowering many of its funds' expense ratios on its ETF line because it understands it is behind in competition.

Vanguard is just another brokerage at end of day. Fidelity too.

Anyways, to the FZILX post, you should be comparing FZILX more towards VFWAX or FSGGX. And even then FZILX is a bit hazy in the comparison (since it is a different index at end of day).
You should not be comparing VTIAX with FZILX. You compare VTIAX with FTIHX.
Anyways, at least 2 months ago: (https://www.reddit.com/r/Bogleheads/com ... urce=share)
From reddit:
Pretty good.
Fund Inception was 8/2/2018. Let's look at fund performance from 8/30 to 1/30 and ignore most of the first month. The market is down, but we can still compare on Morningstar. Here's how a $10,000 investment would be doing:
- FZROX: $9,213.79 (the new domestic fund)
- VTSAX: $9,215.41 (closest Vanguard fund)
- FSKAX: $9,206.36 (the old Fidelity total stock market index fund)

Let's also compare FZILX for another data point:
- FZILX: $9,423.70 (the new international fund)
- VFWAX: $9,399.95 (closest Vanguard fund)
- FSGGX: $9,419.02 (the old Fidelity international large-cap and mid-cap stock market index fund)

TL;DR Looks fine to me.
The Fidelity zero funds are great. Really great on tax advantaged accounts. No need to be skeptical of a great product.
It's a good thing Fidelity has came with a zero expense ratio fund. Hopefully, capitalism pressures other firms to do the same.
We might even see negative expense ratios over time with share lending returns. Who knows.

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Re: FIDO Zero Funds losing to Vanguard?

Post by ruralavalon » Sat Apr 06, 2019 10:46 am

Doom&Gloom wrote:
Thu Apr 04, 2019 3:48 pm
saintsfan342000 wrote:
Thu Apr 04, 2019 3:14 pm
Can we please but a ban on all threads about the performance and superiority/inferiority of Fidelity Zero funds until 2023? Trying to draw any such conclusion from such a limited data set is ridiculous and not actionable.
Agree and disagree. Drawing conclusions is premature.

However, investors considering the Zero funds based only upon the hype of "Woo-hoo! 0% ER!" may certainly benefit from the discussion--including the admonitions that the data are limited at this point.
I agree.

We don't have a long enough history on the Fidelity ZERO funds to judge performance. Likewise the history is not long enough to conclude that the Fidelity ZERO funds' lower expense ratios by a few basis points will make any difference to the investor.

It may well be that a few basis points difference in expense ratios will prove to be just noise, unimportant compared to differences in the indexes used or tracking error. We will have to wait and see.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: FIDO Zero Funds losing to Vanguard?

Post by munemaker » Sat Apr 06, 2019 11:26 am

alex_686 wrote:
Thu Apr 04, 2019 11:37 am
They are following different indexes so you are going to get different returns.
+1

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Random Musings
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Re: FIDO Zero Funds losing to Vanguard?

Post by Random Musings » Sat Apr 06, 2019 8:36 pm

There is the forest, there are the trees and there is this particular topic.

RM
I figure the odds be fifty-fifty I just might have something to say. FZ

jdilla1107
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Re: FIDO Zero Funds losing to Vanguard?

Post by jdilla1107 » Sat Apr 06, 2019 10:42 pm

fwellimort wrote:
Sat Apr 06, 2019 9:22 am
Vanguard is just another brokerage at end of day. Fidelity too.
Not really. Vanguard is fundamentally different than Fidelity and other brokerages:

https://about.vanguard.com/what-sets-va ... p-matters/

Fidelity has a profit motive and could raise their fees to drive increased profits or protect their business. Imagine you were sitting on 100% gains and Fidelity starts having profitability issues. You might feel stuck for not wanting to realize big capital gains.

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Re: FIDO Zero Funds losing to Vanguard?

Post by H-Town » Sat Apr 06, 2019 10:49 pm

Random Musings wrote:
Sat Apr 06, 2019 8:36 pm
There is the forest, there are the trees and there is this particular topic.

RM
LOL that's very accurate!

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Nate79
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Re: FIDO Zero Funds losing to Vanguard?

Post by Nate79 » Sun Apr 07, 2019 7:58 am

jdilla1107 wrote:
Sat Apr 06, 2019 10:42 pm
fwellimort wrote:
Sat Apr 06, 2019 9:22 am
Vanguard is just another brokerage at end of day. Fidelity too.
Not really. Vanguard is fundamentally different than Fidelity and other brokerages:

https://about.vanguard.com/what-sets-va ... p-matters/

Fidelity has a profit motive and could raise their fees to drive increased profits or protect their business. Imagine you were sitting on 100% gains and Fidelity starts having profitability issues. You might feel stuck for not wanting to realize big capital gains.
LOL. Sometimes it's hard to take people seriously with their pro Vanguard propaganda.

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Tdubs
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Re: FIDO Zero Funds losing to Vanguard?

Post by Tdubs » Sun Apr 07, 2019 8:08 am

More generally, a recent paper on Vanguard vs Fidelity posted on another thread.

https://papers.ssrn.com/sol3/papers.cfm ... id=3361263

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