The Fidelity-Vanguard Face Off

MJG

Hi Guys,

I’ll be investing in a mutual fund or ETF in the next few weeks so I’m currently doing a little fund specific research. Since I have accounts at both Fidelity and Vanguard, funds/ETFs from those houses are on my candidates list.

In the research process, I stumbled onto a nice direct comparison chart generated by Advisor Investments that just might service both my and your needs. Here is a Link to this Fidelity versus Vanguard tradeoff:

http://www.adviserinvestments.com/reports/FidVVanP2.pdf

The comparative analysis chart that closes the document is especially instructive. It offers 24 head-to-head face offs between these two behemoth fund organizations in many fund categories.

Not unexpectedly, results are a mixed bag. From that time stamped table, Vanguard has the highest percentage of winners for both the 10-year and 5-year time horizons.

Intrigued by this temporal result, I visited a local Fidelity outlet. A representative was familiar with the comparative table. She was anxious to show me an updated Advisor Investments release. It still had Vanguard slightly ahead in the winner number count over the 10-year period, but Fidelity was ahead in outperformers over the 5-year period.

The comparative results have tightened considerably. It’s a moving target. My interpretation is that both the company investment philosophy and its style join together with the current market cycle to produce these time dependent and constantly changing outcomes.

I believe fund managers and their staff are the dominant factor in determining performance. Fidelity and Vanguard use very different methods when selecting fund managers. Simply put, Fidelity emphasizes an inside approach while Vanguard exploits an outside approach. Fidelity fundamentally trains managers internally; Vanguard basically hires outside managers of institutional quality.

The history of Advisor Investments itself is quite interesting. It’s a union of two principle newsletter writers who competed against one another in earlier days: Dan Wiener who founded the Independent Adviser for Vanguard Investors newsletter, and Jim Lowell who publishes the Fidelity Investor newsletter.

These newsletters still monitor their respective target fund families. Although Fidelity and Vanguard practice fund management in a totally distinctive way, Wiener and Lowell have managed to merge their individual styles into a mostly friendly cooperative enterprise. They also recognized that they make more profits giving advice than writing newsletters.

Both Wiener and Lowell have toiled for decades to service Vanguard and Fidelity clients. I consider them fair, honest, and trustworthy public researchers. Neither gentleman is a tool for the fund giants they cover.

Both have prompted changes to be made at the organizations they monitor. They have successfully promoted the firing of several fund managers who cost customers their savings with badly informed decisions. Here is a Link to an interview of the dynamic pair conducted by Barron’s:

http://online.barrons.com/news/articles/SB50001424052970203594904576237053101928820?tesla=y

It’s great to have so many fine fund choices at a respectable annual cost.

Best Regards.

davidrmoran

You won't go wrong with either, and of course you can get the other's penchant post-questionnaire (which is kinda false dichotomy in many spots, btw) with either outfit too --- meaning you can get cheapo indexing with Fido and good active management with Vanguard. I who am in Fido (and ML) steered a sibling with moderate retirement moneys to Vanguard, and she likes it fine but spends an awful lot of slightly frustrating time on the phone and writing letters getting questions answered. Much of that's on her, of course, but she sure would do well to have a Fido center to be able walk into and chat.