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To review: I asserted FXAIX was (simply) the best of the (plain-vanilla) SP500 indices.
Let us take your 5y as the period of merit. Here is $10k growth w reinvesting:
USPRX - $12,098.17. Loser. Oi. Quite aside from the yuge min. FDFIX - $12,296.16. Winner by $14 ! But wait. FXAIX - $12,281.93. See next.
(God, I pray my figure reading is right. It's like being in court.)
How did FDFIX do it?
Ooh: For 1y, D lags A by $3. For 1 month, by half that. But for 3mos, it's the other way round: A lags D by over a dollar.
Could it be their strategy? Can it be that FDFIX --- 'Flex', as you pointed out --- is a juiced SP500 fund? Let's look at their strategies:
A - Strategy Normally investing at least 80% of assets in common stocks included in the S&P 500 Index, which broadly represents the performance of common stocks publicly traded in the United States. D - Strategy Normally investing at least 80% of assets in common stocks included in the Fidelity U.S. Large Cap Index, which is a float-adjusted market capitalization-weighted index designed to reflect the performance of U.S. large capitalization stocks. It is a subset of the Fidelity U.S. Total Investable Market Index representing the largest companies. Lending securities to earn income for the fund.
So. Steroids? Well, a different (presumably wider?) stock selection range (a small constraint, surely, or is it advantage? Or, rather, one would expect D to outperform waaaaay better than A given its flex?). Also, income from shorting, right?
So the picayune question is Why does D not outdo A --- which as I originally posted is the best SP500 index fund [by any reasonable criteria, and for the last 5y] --- by a lot more than a few bucks? What's the value added by Fido's investment broadening and by the ability to short?
Not too long ago someone mentioned WCPBX in another thread. The only brokerage I could find that sold it for under $1M was Vanguard ($500 min). At Fido the min is $1M (even in IRAs), same at Schwab.
Wells Fargo will also sell it to you for $1M, but not if you're a DIY investor (WellsTrade). In fact, there are only three Weitz funds that Wells Fargo sells through WellsTrade: WBALX, WPOPX, and WVALX.
Every so often one finds a fund at Vanguard that one can't get elsewhere, at least without ponying up a seven (or higher) figure amount.
Vanguard offers the least expensive I shares for many Pimco mutual funds while the more costly I-3 shares are Fidelity's cheapest Pimco share class. Pimco I shares were previously available at Fidelity several years ago.
I asserted FXAIX was (simply) the best of the (plain-vanilla) SP500 indices.
And I took that to be any fund that Lipper and MFO classify as a plain vanilla S&P 500 Index fund. https://lipperleaders.com/index.aspx (Lipper screener; search for S&P 500 funds)
Let us take your 5y as the period of merit
I used 5 years only because FDFIX doesn't have a ten year record. When I scanned Lipper's S&P 500 funds rated "5" for total return, I used 10 years unless it wasn't available. And it certainly wouldn't make sense to compare FDIFX's 5 year record with FXAIX's ten year record.
A - Strategy Normally investing at least 80% of assets in common stocks included in the S&P 500 Index, which broadly represents the performance of common stocks publicly traded in the United States.
So it has the freedom to do anything it wants with the remaining 20% of its portfolio and all it can do is track its index? Of course that's a ridiculous question. As is "one would expect D to outperform waaaaay better than A given its flex, no?"
For the record, "Flex" is the name that Fidelity gave to its internal use zero ER funds. Nothing more.
Lending securities to earn income for the fund. ... Also, income from shorting, correct?
Now you've gone off the deep end. Lots of funds lend securities for income. That's not shorting, just the opposite. They lend their shares so someone else (the borrower) can short the securities. And pay the funds for the privilege. Vanguard has been doing that for decades. That's how, in some years, its fund managed to beat its benchmark. Or are you saying that VFINX / VFIAX is not a plain vanilla S&P index fund?
The [Vanguard 500] fund has historically used securities lending to generate additional income to offset expenses.
You may not be aware that Fidelity (and Schwab and ...) provide individual investors the same opportunity to generate income. This page describes both how to set that up at Fidelity and more broadly the risks and benefits of security lending. https://www.fidelity.com/trading/fully-paid-lending
I have received shorting fees from Fidelity for decades depending on the fund or stock, so I think I understand that process.
D’s zero ER leads to another instance of the question Why does it not then outperform and become another clear winner in a broader SP500 category. Speaking of which, why did you not speculate about D’s comparatively expanded strategy? You must have thoughts about how it effectively differs from A’s and what that should mean — ?
Seems to me the inability of FDFIX, with its zero ER and possible advantage in shorting fees, to decisively outdo FXAIX in any period gives support to my original assertion.
Many times I have posted that people should RTFM (read the fine manual, i.e. prospectus). Once again sounding like a broken record, you also might consider doing that. Fund companies have a lot of leeway in what they can publish outside of SEC filings so long as they don't fabricate and so long as they stick to standardized performance figures. They may tell the truth, but not the whole truth. Even if you quote them in toto:
Great stuff. ... A - Strategy Normally investing at least 80% of assets in common stocks included in the S&P 500 Index, which broadly represents the performance of common stocks publicly traded in the United States. D - Strategy Normally investing at least 80% of assets in common stocks included in the Fidelity U.S. Large Cap Index, which is a float-adjusted market capitalization-weighted index designed to reflect the performance of U.S. large capitalization stocks. It is a subset of the Fidelity U.S. Total Investable Market Index representing the largest companies. Lending securities to earn income for the fund.
From this, you drew a mistaken inference. That FDFIX uses a tactic, security lending, that is unavailable to FXAIX. Let's go to the videotape, er, FXAIX prospectus.
Principal Investment Strategies
Normally investing at least 80% of assets in common stocks included in the S&P 500® Index.
The S&P 500 ® Index is a widely recognized, unmanaged index of common stock prices. The S&P 500 ® Index broadly represents the performance of common stocks publicly traded in the United States.
Effective December 11, 2025, derivative instruments that provide investment exposure to the investments above or exposure to one or more market risk factors associated with such investments are included in the fund's 80% policy, consistent with the fund's investment policies and limitations with respect to investments in derivatives.
Lending securities to earn income for the fund.
Why did you not speculate on FXAIX's possible advantage in shorting fees? What is your speculation on the impact of using derivatives to track an index? Will introducing derivatives into a fund where the usual expectation is tracking via full replication or sampling render the fund no longer "plain vanilla" (a term you introduced)?
USPRX - $12,098.17. Loser. Oi. Quite aside from the yuge min. If were going to include share classes with "yuge min.", I would have mentioned VFFSX ($5B [sic] min).
Yes, you mentioned short stuff re FXAIX, I believe. I did not infer it was unavailable, not at all. But why do you think A's strategy statement is as it is, compared w FDFIX. Why does A not have the last sentence that D has? Something lawyerly? And why does FDFIX not clearly outperform A, do you speculate? (Honest question.)
VFFSX outperforms FXAIX a hair at 5y and 3mo. I wonder why it has 4* and FXAIX 5* from M*.
As a tech writer and editor of many decades I have always embraced RTFM. Alas, last I inquired it was taken as a Mass. license plate.
morningstar's star rating imo is a dumpster fire. VFIAX (vanguard sp500 admiral) is also a 5 star. VFFSX is effectively the same pool of money. 4 star.
morningstar's star rating imo is a dumpster fire. VFIAX (vanguard sp500 admiral) is also a 5 star. VFFSX is effectively the same pool of money. 4 star.
"The Morningstar Rating is based on Morningstar Risk-Adjusted Return, using Morningstar Risk-Adjusted Return % Rank for funds in a category. Morningstar calculates ratings for the three-, five-, and 10-year periods, and then the overall Morningstar Rating is based on a weighted average of the available time-period ratings."
Ten year risk-adjusted returns are an input for the overall M* Rating. VFIAX has been in existence for over ten years while VFFSX does not have a 10-year history. This may be why VFIAX has 5 stars but VFFSX has only 4 stars.
But why do you think A's strategy statement is as it is, compared w FDFIX. Why does A not have the last sentence that D has? Something lawyerly?
I doubt it, except to the extent that marketing material has to stay within the bounds of the law. I don't understand what's in the minds of pitchmen. Though I'll toss out a wild guess, so long as it is clear that this is just spitballing.
Investors may think they know all about S&P 500 index funds - that they invest in "the market", that the stock selection is purely mechanical (both by S&P and by the fund), that the funds just buy the requisite 500 stocks and do nothing else. All of which range from oversimplified to plain wrong. But if Fidelity says little to disabuse investors of these ideas, it may sell more shares.
With FDFIX, Fidelity relies instead on a different investor article of faith. That the robo advisors buying this fund "know" what they are doing. Trust the machine, much as investors trust that the S&P 500 is mechanically constructed.
An anecdote may help demonstrate how investor perception is used. A couple of decades ago, Vanguard worked with MSCI to create indexes that were more amenable to tracking by funds. For example, they used buffers, something novel back then. At the time VLCAX was better designed than VFIAX.
Yet when Vanguard prepared a free financial plan for my mother, the plan recommended VFIAX, not VLCAX. I asked the Vanguard planner why. The response was along the lines that VFIAX was the better known fund.
Compare the stated risk factors for the two funds. For FXIAX, Fidelity say only that, well golly gee, stocks are risky thingies. Especially foreign ones of which it has none.
Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments.
But Fidelity says more about the risks of FDFIX:
Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. Fund and index performance may vary somewhat due to factors such as transaction costs, sample selection, and timing differences associated with index additions and deletions.
The same golly gee stuff, but also risk of tracking error including sampling. Based on everything (and everything omitted) on the FXAIX page, you wouldn't know that FXAIX might also use sampling. Don't dare shatter the illusion that S&P 500 index funds contain precisely 500 stocks.
Next, compare the strategy and risk statements of both of these funds, which Fidelity wants to sell, with the verbiage about VFIAX which Fidelity would rather you not buy.
Below text is taken from the Fidelity brokerage (marketing) page for VFIAX:
Strategy The fund employs an indexing investment approach designed to track the performance of the Standard & Poor's 500 Index, a widely recognized benchmark of U.S. stock market performance that is dominated by the stocks of large U.S. companies. The advisor attempts to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index. The fund is non-diversified.
Risk Value and growth stocks can perform differently from other types of stocks. Growth stocks can be more volatile. Value stocks can continue to be undervalued by the market for long periods of time. Stock markets are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, economic or other developments. These risks may be magnified in foreign markets. Additional risk information for this product may be found in the prospectus or other product materials, if available.
Not just that stock markets are risky, but that they have all sorts of risk - persistent undervaluation, extra volatile growth stocks. And this Vanguard fund is buying all of this risk! And not diversifying (non-diversified fund). And there's so much other risk that we can't include it all here - look at the prospectus. That's something that the Fidelity fund pages don't suggest.
I wonder why [VFFSX] has 4* and FXAIX 5* from M*. Adding to what @Observant1 wrote: Both funds have 3/5/10 year ratings of 4*, 4*, and 5*. So without a true 10 year rating, the average (overall) rating would have to be 4*.
The 10 year 5* rating is extrapolated by M*, not real. It is shown as as hollow stars.
What do hollow stars indicate? Hollow stars indicate the Morningstar Rating calculation was performed using extended performance. Extended performance takes the performance string of an older share class of the same portfolio, strips away the fees and expenses of the older share to determine base performance, then adjusts for the fees and expenses of the new share.
@msf, I think your musings must be accurate and the very case for these funds. Tyvm!
Only somewhat off-topic: Fidelity hired me maybe 20y ago to write/rewrite, bundle, simplify and clarify retail bond mfund materials. Reduce their number too. Drawing on existing text from individual fund materials. V good freelance pay.
I went to a Fido branch and grabbed everything they had in order to study it. I went to the first meeting of the group I was working for with a draft and the 3-4 pamphlets. The group asked where I had gotten these, as they had never seen them before. I told them.
After reworking text further, my main achievement intellectually was in partly bundling their risk types and 'shortening' their category overlaps and redundancies. What I submitted was pretty cool, the group agreed, a mere handful of distinct categories of risk, helpful and clarifying for customers. "Let's see what legal says."
Of course nothing I wrote about risk was permitted by legal, and iirc only a few sentences of mine found their way into the final new materials regardless. The PM apologized and said that was often how things went, 'Management say they want fresh thinking and new eyes, but not really'.
Comments
To review:
I asserted FXAIX was (simply) the best of the (plain-vanilla) SP500 indices.
Let us take your 5y as the period of merit. Here is $10k growth w reinvesting:
USPRX - $12,098.17. Loser. Oi. Quite aside from the yuge min.
FDFIX - $12,296.16. Winner by $14 ! But wait.
FXAIX - $12,281.93. See next.
(God, I pray my figure reading is right. It's like being in court.)
How did FDFIX do it?
Ooh: For 1y, D lags A by $3. For 1 month, by half that.
But for 3mos, it's the other way round: A lags D by over a dollar.
Could it be their strategy? Can it be that FDFIX --- 'Flex', as you pointed out --- is a juiced SP500 fund? Let's look at their strategies:
A - Strategy
Normally investing at least 80% of assets in common stocks included in the S&P 500 Index, which broadly represents the performance of common stocks publicly traded in the United States.
D - Strategy
Normally investing at least 80% of assets in common stocks included in the Fidelity U.S. Large Cap Index, which is a float-adjusted market capitalization-weighted index designed to reflect the performance of U.S. large capitalization stocks. It is a subset of the Fidelity U.S. Total Investable Market Index representing the largest companies. Lending securities to earn income for the fund.
So. Steroids? Well, a different (presumably wider?) stock selection range (a small constraint, surely, or is it advantage?
Or, rather, one would expect D to outperform waaaaay better than A given its flex?). Also, income from shorting, right?
So the picayune question is Why does D not outdo A --- which as I originally posted is the best SP500 index fund [by any reasonable criteria, and for the last 5y] --- by a lot more than a few bucks? What's the value added by Fido's investment broadening and by the ability to short?
Wells Fargo will also sell it to you for $1M, but not if you're a DIY investor (WellsTrade). In fact, there are only three Weitz funds that Wells Fargo sells through WellsTrade: WBALX, WPOPX, and WVALX.
https://www.wellsfargoadvisors.com/research-center/mutual-funds.htm
(screen for Weitz funds)
Every so often one finds a fund at Vanguard that one can't get elsewhere, at least without ponying up a seven (or higher) figure amount.
while the more costly I-3 shares are Fidelity's cheapest Pimco share class.
Pimco I shares were previously available at Fidelity several years ago.
And I took that to be any fund that Lipper and MFO classify as a plain vanilla S&P 500 Index fund.
https://lipperleaders.com/index.aspx (Lipper screener; search for S&P 500 funds)
Let us take your 5y as the period of merit
I used 5 years only because FDFIX doesn't have a ten year record. When I scanned Lipper's S&P 500 funds rated "5" for total return, I used 10 years unless it wasn't available. And it certainly wouldn't make sense to compare FDIFX's 5 year record with FXAIX's ten year record.
A - Strategy
Normally investing at least 80% of assets in common stocks included in the S&P 500 Index, which broadly represents the performance of common stocks publicly traded in the United States.
So it has the freedom to do anything it wants with the remaining 20% of its portfolio and all it can do is track its index? Of course that's a ridiculous question. As is "one would expect D to outperform waaaaay better than A given its flex, no?"
For the record, "Flex" is the name that Fidelity gave to its internal use zero ER funds. Nothing more.
Lending securities to earn income for the fund. ... Also, income from shorting, correct?
Now you've gone off the deep end. Lots of funds lend securities for income. That's not shorting, just the opposite. They lend their shares so someone else (the borrower) can short the securities. And pay the funds for the privilege. Vanguard has been doing that for decades. That's how, in some years, its fund managed to beat its benchmark. Or are you saying that VFINX / VFIAX is not a plain vanilla S&P index fund? https://www.morningstar.com/funds/what-is-vanguard-500-indexs-achilles-heel
You may not be aware that Fidelity (and Schwab and ...) provide individual investors the same opportunity to generate income. This page describes both how to set that up at Fidelity and more broadly the risks and benefits of security lending.
https://www.fidelity.com/trading/fully-paid-lending
D’s zero ER leads to another instance of the question Why does it not then outperform and become another clear winner in a broader SP500 category. Speaking of which, why did you not speculate about D’s comparatively expanded strategy? You must have thoughts about how it effectively differs from A’s and what that should mean — ?
Seems to me the inability of FDFIX, with its zero ER and possible advantage in shorting fees, to decisively outdo FXAIX in any period gives support to my original assertion.
USPRX - $12,098.17. Loser. Oi. Quite aside from the yuge min.
If were going to include share classes with "yuge min.", I would have mentioned VFFSX ($5B [sic] min).
VFFSX outperforms FXAIX a hair at 5y and 3mo. I wonder why it has 4* and FXAIX 5* from M*.
As a tech writer and editor of many decades I have always embraced RTFM. Alas, last I inquired it was taken as a Mass. license plate.
using Morningstar Risk-Adjusted Return % Rank for funds in a category.
Morningstar calculates ratings for the three-, five-, and 10-year periods,
and then the overall Morningstar Rating is based on a weighted average
of the available time-period ratings."
Ten year risk-adjusted returns are an input for the overall M* Rating.
VFIAX has been in existence for over ten years while VFFSX does not have a 10-year history.
This may be why VFIAX has 5 stars but VFFSX has only 4 stars.
I doubt it, except to the extent that marketing material has to stay within the bounds of the law. I don't understand what's in the minds of pitchmen. Though I'll toss out a wild guess, so long as it is clear that this is just spitballing.
Investors may think they know all about S&P 500 index funds - that they invest in "the market", that the stock selection is purely mechanical (both by S&P and by the fund), that the funds just buy the requisite 500 stocks and do nothing else. All of which range from oversimplified to plain wrong. But if Fidelity says little to disabuse investors of these ideas, it may sell more shares.
With FDFIX, Fidelity relies instead on a different investor article of faith. That the robo advisors buying this fund "know" what they are doing. Trust the machine, much as investors trust that the S&P 500 is mechanically constructed.
An anecdote may help demonstrate how investor perception is used. A couple of decades ago, Vanguard worked with MSCI to create indexes that were more amenable to tracking by funds. For example, they used buffers, something novel back then. At the time VLCAX was better designed than VFIAX.
Yet when Vanguard prepared a free financial plan for my mother, the plan recommended VFIAX, not VLCAX. I asked the Vanguard planner why. The response was along the lines that VFIAX was the better known fund.
Compare the stated risk factors for the two funds. For FXIAX, Fidelity say only that, well golly gee, stocks are risky thingies. Especially foreign ones of which it has none. But Fidelity says more about the risks of FDFIX: The same golly gee stuff, but also risk of tracking error including sampling. Based on everything (and everything omitted) on the FXAIX page, you wouldn't know that FXAIX might also use sampling. Don't dare shatter the illusion that S&P 500 index funds contain precisely 500 stocks.
Next, compare the strategy and risk statements of both of these funds, which Fidelity wants to sell, with the verbiage about VFIAX which Fidelity would rather you not buy.
Below text is taken from the Fidelity brokerage (marketing) page for VFIAX: Not just that stock markets are risky, but that they have all sorts of risk - persistent undervaluation, extra volatile growth stocks. And this Vanguard fund is buying all of this risk! And not diversifying (non-diversified fund). And there's so much other risk that we can't include it all here - look at the prospectus. That's something that the Fidelity fund pages don't suggest.
I wonder why [VFFSX] has 4* and FXAIX 5* from M*.
Adding to what @Observant1 wrote: Both funds have 3/5/10 year ratings of 4*, 4*, and 5*. So without a true 10 year rating, the average (overall) rating would have to be 4*.
The 10 year 5* rating is extrapolated by M*, not real. It is shown as as hollow stars. https://advisor.morningstar.com/Enterprise/VTC/Essentials_Guidelines_US_2023_0323.pdf
The Jerk
Only somewhat off-topic:
Fidelity hired me maybe 20y ago to write/rewrite, bundle, simplify and clarify retail bond mfund materials. Reduce their number too. Drawing on existing text from individual fund materials. V good freelance pay.
I went to a Fido branch and grabbed everything they had in order to study it. I went to the first meeting of the group I was working for with a draft and the 3-4 pamphlets. The group asked where I had gotten these, as they had never seen them before. I told them.
After reworking text further, my main achievement intellectually was in partly bundling their risk types and 'shortening' their category overlaps and redundancies. What I submitted was pretty cool, the group agreed, a mere handful of distinct categories of risk, helpful and clarifying for customers. "Let's see what legal says."
Of course nothing I wrote about risk was permitted by legal, and iirc only a few sentences of mine found their way into the final new materials regardless. The PM apologized and said that was often how things went, 'Management say they want fresh thinking and new eyes, but not really'.