Fidelity S&P 500 Index Fund Recommendation

[OldShooter]

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Originally Posted by Running_Man There is an entire sub-sector in the S&P500 for REITS, Certainly is an included sector ...

Thank you. I didn't realize that there were that many from the REIT sector.

[OldShooter]

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Originally Posted by target2019 Standard and Poors defines their S&P 500 thing like this: ref: https://us.spindices.com/indices/equity/sp-500 For that reason, I'll continue to call the index an index, and the sub-categories of the index, "sectors." I couldn't find any references which call the S&P 500 a "sector."

So the S&P 500 is then a subcategory/aka sector of the total US market Russell 3000, Wilshire 5000 indices and of the ACWI. My point exactly. I agree.

There are lots of ways to slice up the total world stock market pie. One way is by line of business, another is by company size, another by geographic location, etc. And combinations are allowed. For example, the EAFE index is large companies in developed non-US markets. MSCI offers an emerging markets energy index. But the bottom line is that any time you are investing in less than the total pie, you are necessarily making bets on the pie slices you have chosen -- whether you call them sectors or not. If @bingybear wants to call some of the slices by some other name, that is his choice but it doesn't change anything.

(Edit: For the mathematicians, all of the pie slices are proper subsets of the world stock market. There is nothing to distinguish them except selection criteria.)

[Running_Man]

The major reason over the long run S&P500 works nearly as well is that if any small company comes up and grows tremendously, they get included in the S&P500, assuming a US company. Therefore the only difference between the S&P500 and the Russell 3000 will be how small companies are doing in the economy better or worse than the S&P500 and the effective difference is divided by 5 for market cap. so for VTI to do 2 percent better in a year than the S&P500 small stocks would need to outperform large stocks by 10 percent in the year. Of course this would lead some of these stocks to grow and become part of the S&P500 and losers to drop off the S&P500.
Over twenty years the difference is difference between $10,000 in VTI becomes $20,764 and SPY $19,342. Over the last 10 years from the bottom of the bear market $10,000 became 32,216 in VTI and $31,807 in SPX .

VTI is probably the better choice as a one fund, but only very marginally

[OldShooter]

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Originally Posted by Running_Man ... VTI is probably the better choice as a one fund, but only very marginally

Agreed.

I think the bigger question and a hard one to answer is the degree of home country bias a portfolio should have. VTI holds the US sector of the world market. The last number I saw was that the US was 52% of the world market cap, so about half. Should an investor be ignoring half the world?

[Running_Man]

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Originally Posted by OldShooter Agreed. Should an investor be ignoring half the world?

They are not ignoring half the world with the S&P500, these are mostly world class companies operating across the globe. I would not want 50% of my stock portfolio to be under accounting rules in place in China, Hong Kong and Brazil or Japan.

[explanade]

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Originally Posted by BigMoneyJim Um, well, there's the Fidelity 500 Index Fund...low ER open-ended mutual fund. That's a pretty open-ended question, though. In my Fid accts I balance between FXAIX (S&P 500) and FXNAX (bond index).

What are the ERs of those?

[explanade]

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Originally Posted by murphearlyretirement I am going to discontinue my Fidelity Portfolio Advisory Service for my IRA, what is a good Index fund to put the IRA into at Fidelity? I am 54.

Does the mean you will lose the free Turbo Tax if you go from advisory to their index funds?

[OldShooter]

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Originally Posted by Running_Man They are not ignoring half the world with the S&P500, these are mostly world class companies operating across the globe. I would not want 50% of my stock portfolio to be under accounting rules in place in China, Hong Kong and Brazil or Japan.

We have had this discussion before. "50% of my stock portfolio to be under accounting rules in place in China, Hong Kong and Brazil or Japan" is impossible in a total international fund. Here is VGTSX.



Note that Europe, the UK, and North America account for about 50% of the holdings and China is a single digit percent. Japan is significant but I don't know of any reason to be concerned about Japanese accounting.

If VGTSX doesn't assuage your paranoia, look at an EAFE index fund where you will have an even smaller number of emerging market investments where you might be paranoid.

I have asked before but don't remember the answer. Have you traveled internationally? Roughly how many countries? We've been to about 40 countries and, from that experience, your concerns are not even a radar blip for me.

[Running_Man]

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Originally Posted by OldShooter We have had this discussion before. "50% of my stock portfolio to be under accounting rules in place in China, Hong Kong and Brazil or Japan" is impossible in a total international fund. Here is VGTSX. Note that Europe, the UK, and North America account for about 50% of the holdings and China is a single digit percent. Japan is significant but I don't know of any reason to be concerned about Japanese accounting. If VGTSX doesn't assuage your paranoia, look at an EAFE index fund where you will have an even smaller number of emerging market investments where you might be paranoid. I have asked before but don't remember the answer. Have you traveled internationally? Roughly how many countries? We've been to about 40 countries and, from that experience, your concerns are not even a radar blip for me.

I was in charge of accounting for major US divisions for companies that underwent mergers with various US and Foreign companies. What is allowed and estimates placed under rules is vague enough under GAAP, under IFRS and other accounting standards you get what the company wants you to get. I have no issue with anyone that wants to be truly international. International passive funds have made this investing easy and low pressure for foreign companies. If one likes them I understand the passive index mentality and arguement for it. when you get annual reports and the flow of fixed assets doesn't even match for a top 40 company in Europe I don't think I'd want to invest,

[target2019]

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Originally Posted by OldShooter So the S&P 500 is then a subcategory/aka sector of the total US market Russell 3000, Wilshire 5000 indices and of the ACWI. My point exactly. I agree.

Actually, you're agreeing with a point you created, not what I typed.
A sub-category is not a sector. I haven't been able to find a reference that supports your position that an index is a sector, or sub-sector.
Nothing else to add on the subject. TTFN.

[OldShooter]

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Originally Posted by Running_Man ... you get what the company wants you to get.

Like Enron and Theranos?

You have some background and reasons to be paranoid, fine. (Did you travel much, then? Did you actually see a lot of fraud?) I am less concerned and I do not read a lot of concern from people who are active in international investing. So we are about 50% international. Basically all sectors, all feasible places.

Another factor that muddies the water is the long-term fate of the dollar. IMO this could swamp any accounting irregularity issues. To the extent that the dollar eventually declines, non-us investments (and TIPS) will shine. And IMO there are some fundamental reasons that the dollar will eventually decline. For example, everybody hates the dollar as the world's reserve currency.

[Dtail]

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Originally Posted by explanade what are the ers of those?

fxaix - 1.5 bps
fxnax - 2.5 bps

[Dtail]

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Originally Posted by bingybear Go look at his actual post! He even quoted you! So I would say he noticed.

I understand that, but you missed my point, so let's move on.

[audreyh1]

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Originally Posted by explanade What are the ERs of those?

0.015% and 0.025% - super low.

[Running_Man]

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Originally Posted by OldShooter Like Enron and Theranos? You have some background and reasons to be paranoid, fine. (Did you travel much, then? Did you actually see a lot of fraud?) I am less concerned and I do not read a lot of concern from people who are active in international investing. So we are about 50% international. Basically all sectors, all feasible places. Another factor that muddies the water is the long-term fate of the dollar. IMO this could swamp any accounting irregularity issues. To the extent that the dollar eventually declines, non-us investments (and TIPS) will shine. And IMO there are some fundamental reasons that the dollar will eventually decline. For example, everybody hates the dollar as the world's reserve currency.

Fraud is a criminal level of conduct that is usually determined after an estimate a company took aggressively does not work out. Before Theranos bombed out it was a ten billion dollar company that had managed to get multiple high level investors that one persons look at brought down. The less light that is shined on companies the more untoward behavior that will go down.

Enron was undone totally by estimates in accounting of the profitability of contracts over their life. These estimates are far more lenient under IFRS and international accounting. Enron had a full contingent of auditors under their wing. The special purpose vehicles that Enron used are really a subset of what I have seen done casually for profit manipulation in international accounting. One firm is founded in one country as holding technology patents,another the manufacturing facility, a third a shipping company, a fourth a financing company, a fifth an importer a 6th an exporter, another company to hold real estate holdings another to offer computer services and develop software for businesses that allows the software and labor of implementations to be capitalized instead of expensed if it was all under one roof is a short subset of what I have seen done.

Enron and the collapse and bankruptcy of the Arthur Anderson partners is what makes US accounting so much more demanding.

[bingybear]

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Originally Posted by target2019 Only investopedia can solve this.

Searched for what is a sector? selected "sector ETF"

Result

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What is a Sector ETF A sector exchange traded fund (ETF) invests in the stocks and securities of a specific sector, typically identified in the fund title.

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What is a Sector A sector is an area of the economy in which businesses share the same or a related product or service. It can also be thought of as an industry or market that shares common operating characteristics. Dividing an economy into different sectors allows for more in-depth analysis of the economy as a whole.

I was wondering how VTI would be a sector since it is a slice of the world market.

One could use sector funds in a prescribed amount and re-balance when they get out of balance too far. Not really a risky play since you would not be guessing the hot sector of the moment, but really having broad market diversity.

But yes, more work than holding SCHB

[steelyman]

The discussion seems to have veered from the thread topic of S&P 500 Fidelity fund recommendations.

The current considerations about “what are sectors” makes me think of the Callan Periodic Table of Investment Returns, as discussed in a recent thread.

S&P defines its own (US) sector breakdown, Callan has a more global view.

[Qs Laptop]

Quote:

What is a Sector A sector is an area of the economy in which businesses share the same or a related product or service. It can also be thought of as an industry or market that shares common operating characteristics. Dividing an economy into different sectors allows for more in-depth analysis of the economy as a whole.

Precisely.

For example, I am invested in Fidelity's Medical Devices and Technology sector fund. Also am into the Defense and Aerospace sector fund. This idea that the S&P 500 is a sector is strange.

[audreyh1]

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Originally Posted by steelyman The discussion seems to have veered from the thread topic of S&P 500 Fidelity fund recommendations. The current considerations about “what are sectors” makes me think of the Callan Periodic Table of Investment Returns, as discussed in a recent thread. S&P defines its own (US) sector breakdown, Callan has a more global view.

Those listed in the Callan table are mostly asset classes, not sectors, although real estate is also a sector.

[bingybear]

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Originally Posted by steelyman The discussion seems to have veered from the thread topic of S&P 500 Fidelity fund recommendations. The current considerations about “what are sectors” makes me think of the Callan Periodic Table of Investment Returns, as discussed in a recent thread. S&P defines its own (US) sector breakdown, Callan has a more global view.

Yes it got off early (2nd reply). While I didn't start the diversion, I did contribute to the diversion.

I would suggest IVV. I've owned it for a few years. IIRC the ER is 0.04%. Not Likely the lowest ER, but as and ETF tax characteristics. A MF in a taxable account can distribute capital gains when others withdraw assets and cause the MF to sell some of the assets that makes the MF realize embedded gains that are then distributed to current MF holders. This is less likely to happen in some types of fund like large broad indexes, but can happen.

I do not hold MF in taxable account for this reason.

In the past Blackrock had a document that showed how to add two style box ETF in a given proportions that would make IVV+ 2 other fund approximate ITOT. When I did this with mine I had IVV with significant embedded gains.

At Fido I would use IVV partially due to commission free trades.