From Randy Bartlett: “Aloha Andy: You’ve espoused upon the virtues of index funds such as Vanguard’s in the past. Any comments on the info below?”

The information Randy refers to comes from Mutual Funds Magazine on-line (www.mfmag.com). “Although Fidelity’s performance lagged in late 1995 and in 1996, in the first half of this year it is once again among the leading fund families. In fact, the average return of Fidelity’s and Vanguard’s domestic diversified stock funds so far this year is within three-tenths of a percentage point. And, over the long-term, Fidelity’s actively managed fund approach beats Vanguard’s indexing philosophy.”

While I have high regard for the folks at Fidelity, I don’t think Fidelity can beat the market averages consistently — they’re so big, they ARE the market averages, more or less. Given that, the extra handicap of their low-load sales commissions (in some cases) and higher expense ratios (in most cases) make it unlikely to me that over long periods Fidelity will beat the index funds, let alone by enough to make it worth risking the possibility that they won’t. (Some of Fidelity’s hundreds of funds will do considerably better than average for a long time, but neither they nor we know which.)

 

 

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