Question about "The Index"

[smooch]

In my 403b I have Fidelity Equity Income (FEQIX). On the Fidelity site, it is comparing that fund to the Russell 3000 Value. Others that I have are compared to the Russell 2000 Value, the Russell 1000 Value and the Russell MidCap Value. How would they decide which index to compare to? My results for FEQIX are miserable compared to the index.

Period FEQIX Russell 3000 Value
1 Year 8.00% 15.44%
3 Year 5.42% 8.68%
5 Year 3.63% 6.05%

 

[cute fuzzy bunny]

Probably pretty arbitrary. They pick a style for the funds investments and then decide which index most closely follows that style. Sometimes an index is 'invented' to help benchmark a managed fund...for example there is a wellington and wellesley 'index' that vanguard has created by allocating certain equity and bond indexes by percentage.

 

[Nords]

In my 403b I have Fidelity Equity Income (FEQIX). On the Fidelity site, it is comparing that fund to the Russell 3000 Value. Others that I have are compared to the Russell 2000 Value, the Russell 1000 Value and the Russell MidCap Value. How would they decide which index to compare to? My results for FEQIX are miserable compared to the index.

Period FEQIX Russell 3000 Value
1 Year  8.00%        15.44%
3 Year 5.42% 8.68%
5 Year  3.63%          6.05%

It's been about five years since we owned FEQIX, but doesn't that include a huge slug of bonds?  Is it possible that Fidelity is only comparing their stocks to the Russell 3000 value?

But you're right.  If you're not still adding DCA dollars, then an equivalent ETF could be a much cheaper way to replicate index performance.

 

[smooch]

The Fidelity site says:

Primarily invests at least 80% of its assets in income-producing equity securities, which tends to lead to investments in large cap "value" stocks. The fund may potentially invest in other types of equity and debt securities, including lower-quality debt securities. Lower-quality debt securities involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. The fund may invest in securities of domestic and foreign issuers.

Sounds lie they can't make up their mind what they invest in. This is part of my current 403(B), so I think I will allocate out of this fund.

 

[saluki9]

I just checked in on my research software from work. It's best fit index is the Russell 1000 value (witha 98%+ R Squared)

It also has a negative alpha, so I don't see too much advantage to hanging on to it.