I'm especially happy about the muni fund.
https://finance.yahoo.com/news/fidelity-steps-fee-war-vanguard-120000274.html
https://finance.yahoo.com/news/fidelity-steps-fee-war-vanguard-120000274.html
Fidelity offering four new index funds and a muni fund with .07 ER
- Thread starter Helen
- Start date
OldShooter
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Here are the funds: Fidelity Mid Cap Growth Index Fund, Fidelity Mid Cap Value Index Fund, Fidelity Small Cap Growth Index Fund, Fidelity Small Cap Value Index Fund, Fidelity Municipal Bond Index Fund
And the press release: https://www.fidelity.com/bin-public...ease/fidelity-extends-index-lineup-071619.pdf
It is unfortunate, IMO, that the fund industry has successfully confused its customers into buying any fund with the word "index" in its name when what is universally recommended from the research and statistics is the "market portfolio," which is buying virtually everything.
To me, betting on "growth" vs "value" or "small cap" vs "large cap" is only a small step away from the discredited business of funds trying to pick individual stocks. I was hoping to see Fido come out with a total world market fund to compete with VTWSX/VT but I guess it is not to be.
And the press release: https://www.fidelity.com/bin-public...ease/fidelity-extends-index-lineup-071619.pdf
It is unfortunate, IMO, that the fund industry has successfully confused its customers into buying any fund with the word "index" in its name when what is universally recommended from the research and statistics is the "market portfolio," which is buying virtually everything.
To me, betting on "growth" vs "value" or "small cap" vs "large cap" is only a small step away from the discredited business of funds trying to pick individual stocks. I was hoping to see Fido come out with a total world market fund to compete with VTWSX/VT but I guess it is not to be.
audreyh1
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I’m sure Fidelity is just trying to catch up with Vanguard’s extensive collection of index funds. Growth and value indexes for various market capitalizations have been around for quite a while.
They may still come out with a world market index fund.
njhowie
Thinks s/he gets paid by the post
- Joined
- Mar 11, 2012
- Messages
- 3,931
I have to disagree. There are many indexes out there and an "index mutual fund" is any mutual fund which tracks a particular index in a way which minimizes expenses to the greatest extent possible. It's not a matter of attempting to confuse, but rather to provide an alternative to a broader range of traditional mutual funds which have high expenses.
Each of these Fidelity funds tracks a specific index, and so they are index funds.
An investor who is looking for municipal bond exposure (as here) for his/her fixed income allocation can simply peruse a set of municipal bond index funds and pretty much know what the objective is and that it will be low cost.
OldShooter
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Well, they are what they are and some of the more arcane funds with "index" in their names are not low cost at all. Stock-picker funds did have very high expenses, but the recent price wars have fixed a lot of that. IIRC the average stock picker is now charging something like 50bps. A Good Thing.
Buying one of the Fido offerings or similar, though, is not the equivalent of passive investing. These Fido funds are narrow slices of the market, hence really betting tools rather than investing tools, which are the total market funds. As sectors (call them categories if you like) wax and wane, so will people's money in the funds. Total market funds diversify away both sector risk and individual stock risk away, leaving only market risk.
njhowie
Thinks s/he gets paid by the post
- Joined
- Mar 11, 2012
- Messages
- 3,931
I still think you are taking a very narrow definition of "index" in meaning some total market index like S&P, Russell, etc. However, these are not particularly diversified because they are 100% stock funds...where a balanced "index" fund would be more indicative of the overall market, have bond (debt) allocation to it, and would have less volatility with more diversification.
In any case, I really don't think that Fidelity is looking to confuse anyone, simply provide funds with very low cost just as the competition has done.
Again, they each track an index, so are rightfully "index" funds.
FMDGX tracks Russell Midcap Growth Index
FIMVX tracks Russell Midcap Value Index
FECGX tracks Russell 2000 Growth Index
FISVX tracks Russell 2000 Value Index
FMBIX tracks Bloomberg Barclays Municipal Bond Index
In any case, I really don't think that Fidelity is looking to confuse anyone, simply provide funds with very low cost just as the competition has done.
Again, they each track an index, so are rightfully "index" funds.
FMDGX tracks Russell Midcap Growth Index
FIMVX tracks Russell Midcap Value Index
FECGX tracks Russell 2000 Growth Index
FISVX tracks Russell 2000 Value Index
FMBIX tracks Bloomberg Barclays Municipal Bond Index
corn18
Thinks s/he gets paid by the post
- Joined
- Aug 30, 2015
- Messages
- 1,890
Except for the muni bond fund, these are for the folks that like to "tilt" or "factor" their passive index portfolio. It's all the rage over on Bogleheads. I think they spend way more time on bogleheads.org talking about how to NOT be a boglehead than the 3 fund portfolio. The three fund portfolio is boring. These factor funds allow them to feed their active investing fever and then talk endlessly about why it's superior. Frankly, I am happy that most people can't leave well enough alone. It feeds the churn and allows price discovery and growth. If we all indexed, the market would stop. Yeah greed!
Red Badger
Thinks s/he gets paid by the post
+1.
2 funds (1 total market, 1 TIPS bond fund). A bunch of lumpy CD's. I am content to lag slightly behind/below the market.
I am in the camp where narrow(er) index funds that are trying to squeeze extra juice from the orange are just cleverly disguised as not stock licking. Sector picking is just stock picking with a shotgun.
NW-Bound
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Jul 3, 2008
- Messages
- 35,712
"Greed, for lack of a better word, is good" -- Gordon Gekko.
Holding both Fido and Vanguard, it’s encouraging to see Fidelity going in this direction. But to come anywhere close to catching up with Vanguard they need to offer some very low cost balanced index funds as well. Yes, I know they have their Freedom (target date) index funds but they still have a ways to go.
Totally agree - being an index stock fund doesn't automatically mean it's a total-market-index fund. There are many indices out there and total market is just one of them.
Not to repeat the endless wars over on bogleheads, but these stock funds track indexes which are there to capture factors besides Beta, not sectors which are a totally different thing. Because the indexes have fixed construction rules, these funds/indexes are passive, not actively managed.
If one wants simplicity, then by all means, a total stock market (or even SP500) + broad market international + bond fund in some proportion (including zero) is just fine - nothing at all wrong with it. However, there is also nothing wrong with adding additional sources of stock diversification one's portfolio, especially if the additional diversification is available at low cost as long as one is able to stick with it even through periods of underperformance.
As they say, there are many roads to Dublin.
Yep, that's exactly what they're doing. First, they made an agreement with Blockrock to provide iShares ETF's with no commissions. That opened up a pretty large group of additional funds/indices in which to invest. Not always the lowest cost from an e/r perspective, however. Then they created their broad market ZERO funds. But they've always had a hole in their own factor offerings which they've now mostly closed and they've done so at low cost. Seems like between the 3 options just described, they have nearly all of the major bases covered, finally, with only a few exceptions.
I hadn't heard of stock licking. A new investments strategy?
It only applies to those with a taste for equities...
Index Funds are for people who are content with lower earnings by buying the losers as well as the winners.
Targeted Index Funds can be better. Or worse.
Target Date Funds are only good as a place to park your employer's 401(k) contributions until an opportunity is identified.
But an Actively Managed find is the best choice if an investor truly wants to maximize returns.
For the 12 month period ending 6/30/2019:
S&P 500 yielded 10.2%
DJIA yielded 12.0%
Top Actively Managed Funds yielded 18.5%
Targeted Index Funds can be better. Or worse.
Target Date Funds are only good as a place to park your employer's 401(k) contributions until an opportunity is identified.
But an Actively Managed find is the best choice if an investor truly wants to maximize returns.
For the 12 month period ending 6/30/2019:
S&P 500 yielded 10.2%
DJIA yielded 12.0%
Top Actively Managed Funds yielded 18.5%
Last edited:
target2019
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I can find a fund or ETF that invests in S&P500, for example. But where do I find a Top Actively Managed Fund? And where would find the source of the last statement in your post?
Good luck finding the top fund each and every year before it outperforms. Or even finding one that's consistently a top fund year after year. They're still managed by people: people who sometimes make bad choices, go through divorces, get cancer, have car accidents or retire.
OldShooter
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Well, you are correct to the extent that there are always actively-managed funds that outperform passive funds. The semiannual S&P SPIVA reports typically show that over a year roughly 1/3 of actively managed funds outperform their benchmarks. Over five and ten years the percentage drops into the single digits. So as passive investors we are beating over 90% of the stock-pickers.
To say that the answer is to buy an actively managed fund is incorrect. What you want to buy is an actively managed fund that will outperform in the future.
Well, again, top actively managed funds are easy to find by looking in the rear view mirror. Most web sites and financial publications will publish a list shortly after the end of every quarter. "Best Funds of 2018" for example.
The situation is this: The fund results are pretty much random. If over a year each manager flipped a coin, about half of them would be right. Subtract fees and (usually large) trading costs and you can understand why only 1/3 or so outperform. The randomness is also the reason that the percentage of winners declines with time. To win over time, a stock picker has to be repeatedly lucky. Few are. But some are.
So the problem becomes: How to pick a winner ahead of time? Nobel winner Eugene Fama and his regular co-author Kenneth French spent a lot of time and money trying to solve this problem. Here is French discussing the results: https://famafrench.dimensional.com/videos/identifying-superior-managers.aspx (Spoiler: They failed.) The paper that French is referring to was published IIRC a little over ten years ago and is 43 pages. For an amateur like me it becomes unreadable shortly after the abstract, but the conclusions are crystal clear. Past performance is no guarantee of future results. Ever heard that one before?
So no, @MI-Roger, randomly picking an actively managed fund is statistically very likely to produce a loser. And, as Dr. French explains, that is what any investor is doomed to be doing.
target2019
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
As Fidelity adds passive index funds, as mentioned in the OP, Vanguard adds an actively-managed fund.
https://investornews.vanguard/vanguard-to-add-a-new-core-international-active-equity-fund/
https://investornews.vanguard/vanguard-to-add-a-new-core-international-active-equity-fund/
You need a high quality Fund Newsletter to identify those, and then react. Top Performing funds do not stay a Top Fund forever. The likes of Magellan Fund are now just a footnote in history. Are you investing outside of a 401(k) plan, or inside a 401(k) which offers lots of retail fund choices, or are you investing only in a 401(k)plan that is populated exclusively with Institutional Funds? For the first two options a newsletter such as I use, NoLoad FundX, will be of great benefit. I have subscribed for 30 years or so and done well when I follow their recommendations. For the third choice you will need a newsletter that exclusively tracks Institutional Funds by the managing investment house.
Eight or so years ago the Ariel Fund was a consistent top performer. Then the managers lost their mo-jo and the fund is a medium to low performer. Currently Polen Growth is a consistent top fund, but that may change in a year or so. Past performance is no guarantee of future performance, but it is about the only indicator which can be used. So you MUST monitor performance and change funds when appropriate.
My final statement in my personal opinion based on past and current experiences. I was invested in Fidelity's 2020 Target Date Fund prior to the Great Recession. I naively assumed the fund managers would move the fund goals from Growth to a defensive position as the recession hit in order to preserve funds for future growth when the recession ended. Wrong! The fund's focus stayed on Growth only, and the fund rode the recession down 40%. So now I take a more active role and don't maintain funds in Target Date Funds. All of my current employer's contributions MUST be invested in a Target Date Fund linked to my assumed retirement year, but quarterly I flush those funds into other investments within the plan based on the articles in the Newsletter to which I subscribe.
gwraigty
Thinks s/he gets paid by the post
It should be easy enough to find actively managed funds through your brokerage screener. Then, depending on your criteria, growth vs. income, volatility levels, performance against appropriate benchmark, use a tool such as https://www.portfoliovisualizer.com/ to compare.
OldShooter
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Yes. Unfortunately that tells you everything about the past and nothing about the future. Here is a graphic I have posted before. It ranks mutual fund performance top to bottom for five years and then looks at what happened to funds in the top quintile during the next five years.
You can seach/find and read any number of SPIVA and Manager Persistence reports. They are always the same except for minor jitter in the percentages.
@MI-Roger, if the author of your newsletter could accurately predict winners, why would he be on the internet hustling a newsletter? I think he would be on a private tropical island sipping from a glass garnished with an orchid. There is no way he would be selling his expertise to the masses for a pittance. Said another way, the mere fact that he is hawking a newsletter is proof that he can't reliably predict the future.
gwraigty
Thinks s/he gets paid by the post
Yes. Unfortunately that tells you everything about the past and nothing about the future. Here is a graphic I have posted before. It ranks mutual fund performance top to bottom for five years and then looks at what happened to funds in the top quintile during the next five years.
The topic here is "persistence." Does a manager's past performance persist into the future? Fortunately, S&P regularly publishes a companion to the SPIVA reports called the Manager Persistence Score Card. Like the SPIVA report, it is always the same. There is no persistence.
You can seach/find and read any number of SPIVA and Manager Persistence reports. They are always the same except for minor jitter in the percentages.
@MI-Roger, if the author of your newsletter could accurately predict winners, why would he be on the internet hustling a newsletter? I think he would be on a private tropical island sipping from a glass garnished with an orchid. There is no way he would be selling his expertise to the masses for a pittance. Said another way, the mere fact that he is hawking a newsletter is proof that he can't reliably predict the future.
Yes, and that's all we have to go on. I meant that someone could hone in on a specific actively managed fund and compare it to a specific index fund or benchmark over time, preferably both with comparable adequate time periods of existence.
OldShooter
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Yes, but the beginning of the time period when the fund is identified has to have been time zero and the end has to be some years later. Using the rear view mirror it is easy to identify winners. Not useful though.
