FIDO Zero Funds losing to Vanguard?

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jdilla1107
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Re: FIDO Zero Funds losing to Vanguard?

Post by jdilla1107 » Sun Apr 07, 2019 8:23 am

Nate79 wrote:
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.
I always find it hard to take people seriously with their display of confirmation bias. I have a large taxable account and would never commit to a 40 year holding period with funds from a firm like Schwab. The idea that "all fund companies are the same" is reasonable if you have mostly tax advantaged accounts and can easily swap in the future. If you have a large taxable account, I think it's an foolish belief.

petulant
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Re: FIDO Zero Funds losing to Vanguard?

Post by petulant » Sun Apr 07, 2019 8:38 am

Iridium wrote:
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.
But iridium, your statement assumes that the outperformance and the custom index aren't linked. It may be the design of the index itself, or the fact that Fidelity administers both, that makes it easier to outperform.

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ruralavalon
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Re: FIDO Zero Funds losing to Vanguard?

Post by ruralavalon » Sun Apr 07, 2019 11:21 am

Tdubs wrote:
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
Thank you for the link, very interesting.
This paper compares Vanguard and Fidelity on 21 comparable funds in five aspects: performance, tax-efficiency, cost, diversification, benchmark and tracking precision. The conclusions are as follows: first, for pre-tax return, the difference between Vanguard and Fidelity is small, but Vanguard is the clear winner in after-tax return; second, Vanguard is much more tax-efficient than Fidelity; third, for the cost, Fidelity has lower expense ratio than Vanguard in all sample funds, while Vanguard has lower turnover, and both Vanguard and Fidelity have their own short-term redemption fee policy; fourth, Vanguard funds are more diversified which should reduce uncompensated risk; fifth, Fidelity funds have higher tracking precision to their benchmarks than Vanguard funds, but the difference is very small.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Iridium
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Re: FIDO Zero Funds losing to Vanguard?

Post by Iridium » Mon Apr 08, 2019 12:21 pm

petulant wrote:
Sun Apr 07, 2019 8:38 am
Iridium wrote:
Fri Apr 05, 2019 10:53 pm
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.
But iridium, your statement assumes that the outperformance and the custom index aren't linked. It may be the design of the index itself, or the fact that Fidelity administers both, that makes it easier to outperform.
Well, part of the out performance is certainly linked to the lower expenses of running one's own index vs licensing it and minimizing the chance of the fund being front-run when it needs to make constituent changes. The fact that the index doesn't contain ~1000 smallest companies that Vanguard's total index has probably keeps trading cost and bid-ask spread down by a tiny amount. That being said, these are all about minimizing underperformance compared to the index. I really can't imagine how you would design an index that is designed to be beat by its corresponding index fund(*) and having read Fidelity's description of the index, no obvious tricks stand-out. The simpler explanation for the recent performance is that the Fidelity index underperformed the CSRP index because it has a minuscule amount higher weight in mega caps (because the index doesn't include the tiniest of companies) and mega caps have underperformed compared to the rest of the market and that the zero fund is able to do better than its benchmark because Fidelity takes no fees from it and Fidelity is more aggressive about lending shares than Vanguard; there may also be a luck factor involved such that the zero fund has some level of random tracking error, and the randomness happened to go in the fund's favor last quarter.

* Okay, the one trick you could do is create an 'Expensive Short Index' that selects companies based on how much short sellers will pay to borrow the stock. Since the fund gets to collect lending revenue, but the index doesn't, it would be easy for an index fund to beat that index. That contrived example is certainly not what is happening here.

mervinj7
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Re: FIDO Zero Funds losing to Vanguard?

Post by mervinj7 » Wed Apr 10, 2019 11:23 am

Tdubs wrote:
Thu Apr 04, 2019 4:11 pm
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.
Exactly.
Oh oh, Tdubs, it looks like this morning FZROX is beating VTSAX in YTD returns. I think you should go ahead and edit your post title to "Vanguard funds losing to FIDO Zero Funds". Although you may have to edit it back next month or even tomorrow. :D

Growth on $10,000 from 1/1/2019 to 4/09/2019.
FZROX: 11,583.14
S&P 500 TR USD: 11,547.43
VTSAX: 11,582.31

http://quotes.morningstar.com/chart/fun ... en-US&cur=

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Tdubs
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Re: FIDO Zero Funds losing to Vanguard?

Post by Tdubs » Wed Apr 10, 2019 11:25 am

mervinj7 wrote:
Wed Apr 10, 2019 11:23 am
Tdubs wrote:
Thu Apr 04, 2019 4:11 pm
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.
Exactly.
Oh oh, Tdubs, it looks like this morning FZROX is beating VTSAX in YTD returns. I think you should go ahead and edit your post title to "Vanguard funds losing to FIDO Zero Funds". Although you may have to edit it back next month or even tomorrow. :D

Growth on $10,000 from 1/1/2019 to 4/09/2019.
FZROX: 11,583.14
S&P 500 TR USD: 11,547.43
VTSAX: 11,582.31

http://quotes.morningstar.com/chart/fun ... en-US&cur=
That's it! I'm switching to FIDO!

DaftInvestor
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Re: FIDO Zero Funds losing to Vanguard?

Post by DaftInvestor » Wed Apr 10, 2019 11:59 am

The only conclusion one can draw at this time is that the Fidelity Funds have the lower ER.

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TheTimeLord
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Re: FIDO Zero Funds losing to Vanguard?

Post by TheTimeLord » Sat Apr 13, 2019 8:33 am

DaftInvestor wrote:
Wed Apr 10, 2019 11:59 am
The only conclusion one can draw at this time is that the Fidelity Funds have the lower ER.
I think we could also draw some conclusions about people obsessing over things like this too.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

DaftInvestor
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Re: FIDO Zero Funds losing to Vanguard?

Post by DaftInvestor » Mon Apr 15, 2019 7:18 am

TheTimeLord wrote:
Sat Apr 13, 2019 8:33 am
DaftInvestor wrote:
Wed Apr 10, 2019 11:59 am
The only conclusion one can draw at this time is that the Fidelity Funds have the lower ER.
I think we could also draw some conclusions about people obsessing over things like this too.

You lost me. Who's obsessing and what conclusions do you draw as a result?

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