Re-balance Cycle Reminder All MyPlanIQ’s newsletters are archived here.
For regular SAA and TAA portfolios, the next re-balance will be on Monday, August 20, 2018. You can also find the re-balance calendar for 2017 on ‘Dashboard‘ page once you log in.
As a reminder to expert users: advanced portfolios are still re-balanced based on their original re-balance schedules and they are not the same as those used in Strategic and Tactical Asset Allocation (SAA and TAA) portfolios of a plan.
Please note that we now list the next re-balance date on every portfolio page.
Fidelity Zero-Fee Index Funds
Fidelity made some news last week by announcing it now charges nothing for two new major stock index funds.The two funds are called Fidelity ZERO Total Market Index Fund (FZROX) and Fidelity ZERO International Index Fund (FZILX). Both funds are tracking Fidelity newly created proprietary indices — FZROX is based on Fidelity U.S. Total Investable Market Index while FZILX is based on Fidelity Global ex U.S. Index.
Marketing plot aside, perhaps more importantly, Fidelity also announced that it has substantially reduced the expense ratios of its existing index funds. Unlike the two zero-fee funds, these funds have existed for a while and they are tracking some well known indices. In a show of how low the expense ratios are, Fidelity compares them with Vanguard funds:
In the following, we look at some of these funds in more details.
Fidelity vs. Vanguard
The following table shows the indices the five core index funds are tracking:
|Fidelity Fund||Index||Vanguard Fund||Index|
|Fidelity Total Market (FSTVX)||Dow Jones US Total Stock Market Index||Vanguard Total Stock Market (VTSAX, VTSMX)||CRSP US Total Market Index|
|Fidelity International Index (FSIVX)||MSCI EAFI Index||Vanguard Developed Markets Index (VTMGX, VDVIX)||FTSE Developed All Cap ex US Index|
|Fidelity Emerging Markets Index (FPMAX)||MSCI Emerging Markets Index||Vanguard Emerging Mkts Stock Index (VEMAX, VEIEX)||FTSE Emerging Markets All Cap China A Inclusion Index,|
|Fidelity Real Estate Index (FSRVX)||Dow Jones U.S. Select Real Estate||Vanguard REIT Index (VGSLX, VGSIX)||MSCI US Investable Market Real Estate 25/50 IndexF|
|Fidelity US Bond Index (FSITX)||Bloomberg Barclays U.S. Aggregate Bond Index||Vanguard Total Bond Index (VBTLX, VBMFX)||Bloomberg Barclays U.S. Aggregate Bond Index|
From this table, one can see that Fidelity premium class index funds mostly track some of well known indices, ditto Vanguard funds. Unfortunately, other than the total bond index fund, Fidelity and Vanguard funds in all other categories are tracking different indices.
Next, let’s compare performance:
|1Yr AR||3Yr AR||5Yr AR||10Yr AR|
|FSTVX (Fidelity Spartan Total Mkt Idx Advtg)||7.2%||17.1%||12.5%||12.5%||10.8%|
|VTSAX (Vanguard Total Stock Mkt Idx Adm)||8.1%||18.0%||12.8%||12.7%||11.0%|
|FSIVX (Fidelity Spartan Intl Idx Advtg)||-1.3%||4.2%||4.8%||5.2%||3.6%|
|VTMGX (Vanguard Tax-Managed Intl Adm)||-1.1%||5.3%||5.8%||5.8%||3.9%|
|FPMAX (Fidelity Spartan EMkts Idx Advtg)||-5.7%||3.3%||8.3%||4.9%|
|VEMAX (Vanguard Emerging Mkts Stock Idx Adm)||-5.2%||2.9%||7.2%||4.4%||2.5%|
|FSRVX (Fidelity Spartan Real Estate Idx Advtg)||3.0%||4.6%||5.6%||8.3%|
|VGSLX (Vanguard REIT Index Adm)||3.0%||4.7%||6.4%||8.5%||8.0%|
|FSITX (Fidelity Spartan US Bond Idx Advtg)||-1.6%||-1.3%||1.2%||2.1%|
|VBTLX (Vanguard Total Bond Market Index Adm)||-1.7%||-1.4%||1.3%||2.1%||3.6%|
From the above table, the two bond index funds have in par performance. Fidelity’s Emerging market stock fund FPMAX has done noticeably better than the Vanguard counterpart. We suspect that’s because of the difference of the indices they are tracking. In the rest 3 categories, Vanguard funds have done better than Fidelity counterparts.
Keep in mind that the above comparison is based on the old expense ratios Fidelity charged. The underperformance of Fidelity funds can be attributed to the expense cost difference, in addition to the index difference. However, from now on, Fidelity funds have lower expense ratios than Vanguard funds, this can definitely make some difference in their future performance comparison.
In addition to the newly reduced fees, the above Fidelity funds have zero minimum requirement, unlike Vanguard’s funds. For example, Vanguard Total Stock Market Index Inv.VTSMX has a $3,000 minimum (fee 0.14%) while its Admiral class VTSAX has $10,000 minimum requirement.
Fidelity Core Index Fund Portfolios
Based on the above discussion, we believe one can construct portfolios using MyPlanIQ’s basic principles (see for example, our previous newsletter March 6, 2017: Asset Classes for Retirement Investments):
- For stock funds, use low cost index funds.
- For bond/fixed income, use total return bond funds.
We now construct a plan called Fidelity Core that will eventually replace the Fidelity Core Mutual Funds listed on What We Do -> Brokerage Investors page. The following shows this plan’s fund lineup:
Note, in the above, we use more expensive investor class funds because these funds have much longer history. This is purely for the purpose of understanding past performance. Going forward, these funds will be replaced by the ultra low cost premium class funds.
The performance have been very reasonable:
|Ticker/Portfolio Name||1Yr AR||3Yr AR||5Yr AR||10Yr AR||Since 12/31/2000||Max Drawdown|
|Fidelity Core Tactical Asset Allocation Moderate||5.8%||6.5%||6.2%||7.8%||9.9%||11%|
|Fidelity Core Strategic Asset Allocation – Optimal Moderate||6.0%||7.1%||7.0%||7.2%||6.7%||39%|
|VBINX (Vanguard Balanced Index Inv)||10.2%||8.2%||8.4%||8.2%||6.4%||36%|
Keep in mind that VBINX is Vanguard’s 60% US stocks/40% US Bonds index fund. Its recent performance is very much skewed by the recent strong returns of US stocks. The two Fidelity portfolios are global asset allocation based. Though they have underperformed VBINX for the past 10 years, they have done better if we extend the timeframe to 2001 since.
We are encouraged by the substantial fee reduction of Fidelity index funds. For the two zero-fee index funds, however, we believe it’s better to wait and see as these funds are based on the new unproven indices. We feel more comfortable with the existing Fidelity index funds and believe that by using these ultra low cost funds, one can construct some very reasonable portfolios.
A word of caution here: Fidelity has a history of changing its policy. For example, it has made several changes (sometimes substantially) on its commission free ETFs. These changes are definitely not good for a long term investor as we either have to change our portfolios (thus incurring tax events) or have to move to other brokerages. We are weary whether the low cost event this time is a temporary gimmick to attract clients. We hope it’s not. Because of this, we believe Vanguard funds, even though their funds have higher expense ratios as it stands right now, is still a very reliable and trustworthy choice.
Last week, financial media made a big thing when Apple market capitalization reached $1 trillion dollar. The euphoria continued as up till last Friday, 80% of S&P 500 companies had reported their Q2 earnings. The blended earnings growth was 24%, much higher than the 20% expected on 6/30 (see Factset). Wage growth has been anemic, which caused the 10 year Treasury bond yield retreated back below 3% last week. At the moment, investors are still in a mood to chase returns with little regard to stock valuation and other geopolitical and trade uncertainties. As a prudent investor, we believe it’s important to be alert when everything seems rosy.
As always, we call for staying the course.
For more detailed asset trend scores, please refer to 360° Market Overview.
Now that the Trump administration has been in the office for more than a year, the economy and financial markets are in general still in a good shape. Whether the economy will continue to benefit from the supposedly trickle down of the tax cut, the deregulation, and the promised infrastructure spending remains to be seen. On the other hand, stocks continued to ascend, regardless of the progress. Looking ahead, however, we remain convinced that markets will experience more volatilities at some point when reality finally sets in.
In terms of investments, U.S. stock valuation is at a historically high level. It is thus not a good time to take excessive risk. However, we remain optimistic about U.S. economy in the long term and believe much better investment opportunities will arise in the future.
We again would like to stress for any new investor and new money, the best way to step into this kind of markets is through dollar cost average (DCA), i.e. invest and/or follow a model portfolio in several phases (such as 2 or 3 months) instead of the whole sum at one shot.
How can we improve this newsletter? Please take our survey
–Thanks to those who have already contributed — we appreciate it.
- July 30, 2018: Tax Efficient Portfolios
- July 23, 2018: Municipal Bond Funds And Portfolios
- July 16, 2018: A Guide To Conservative Portfolios
- July 9, 2018: Conservative Allocation Mutual Funds Based Portfolios
- July 2, 2018: Small Cap Stocks For The Long Term
- June 25, 2018: What Can We Learn From GE’s Removal From Dow Jones Index?
- June 18, 2018: The ‘Best’ Balanced Portfolio Continues To Excel
- June 11, 2018: Is 10 Year Long Enough For Portfolio Comparison?
- June 4, 2018: Action Plan: Risk Review For Investments
- May 21, 2018: Rising Rates, Consumer Staples And Stock Index
- May 14, 2018: Newsletter Collection Update
- May 7, 2018: Money Market Fund Taxonomy
- April 30, 2018: Momentum Investing Review
- April 23, 2018: Commodities In Current Environment
- April 16, 2018: Municipal Bonds As A Fixed Income Asset Class
- April 9, 2018: Exponential Or Compounding Nature In Investing
- April 2, 2018: Inside Of The Stock Chaos
- March 26, 2018: Total Return Bond Update
- March 19, 2018: Treasury Bills vs. Brokered CDs
- March 12, 2018: Defensive Conservative Portfolio Review
- March 5, 2018: Warren Buffett’s Advices
- February 26, 2018: Pros And Cons of Strategic And Tactical Portfolios In 2018
- February 12, 2018: Trend Review
- February 5, 2018: Market Selloff And Long Term Investing
- January 29, 2018: The New Addition To Our Total Return Bond Fund Candidates
- January 22, 2018: Where Are Bonds Heading?
- January 15, 2018: Tactical Portfolios Review
- January 8, 2018: Strategic Portfolios Review
- December 18, 2017: Record Highs And Risk
- December 11, 2017: Cash Return And Interest Rate Update
- December 4, 2017: Mutual Fund Star Ratings: Are They Useful?
- November 20, 2017: Thankful And Mindful
- November 13, 2017: Is This A Good Time For Retirees Or Would Be Retirees?
- November 6, 2017: Newsletter Collection Update
- October 30, 2017: Rising Interest Rates
- October 23, 2017: A Primer For Portfolios
- October 16, 2017: REITs As An Asset Class
- October 9, 2017: Conservative Portfolios Revisited
- October 2, 2017: The Role of Short Term Bond Funds
- September 25, 2017: Fees In Cash Investments
- September 18, 2017: Conservative Portfolios Review
- September 11, 2017: International Diversification Effect
- September 4, 2017: Invest And Speculate Revisited
- August 28, 2017: Total Return Bond Fund Portfolios: Where Do They Fit?
- August 21, 2017: Portfolio Performance: A Walk In The Past
- August 14, 2017: Fidelity Commission Free ETFs Update
- August 7, 2017: I Didn’t Learn Anything — Mistake vs. Temporary Underperformance
- July 31, 2017: Asset Classes And Fund Choices: A Primer
- July 24, 2017: Total Return Bond Fund Portfolios And Cash
- July 17, 2017: Long Term Stock Holding Periods For Retirement
- July 10, 2017: Half Year Asset Trend Review
- June 26, 2017: How To Beat The Best Balanced Allocation Fund
- June 19, 2017: Newsletter Collection Update
- June 12, 2017: A Mixed Bag Performance of Momentum Investing
- June 5, 2017: How To Start A New Portfolio
- May 29, 2017: Alternative Assets And Their Role In Portfolios
- May 22, 2017: Summer Seasonality And Portfolio Management
- May 15, 2017: Cash: Banking Or Investing?
- May 8, 2017: Holding Period of Long Term Timing Portfolios
- May 1, 2017: Debate on Risk vs. Volatility
- April 24, 2017: The Long Term Stock Market Timing Return Since 1871
- April 17, 2017: Risk vs. Volatility: Long Term Stock Market Returns
- April 10, 2017: Total Return Bond ETFs And Portfolios
- April 3, 2017: Quarter End Asset Trend Review
- March 27, 2017: Practical Consideration For IRAs And 401k Accounts
- March 20, 2017: Fund Fees: That’s (Still) Outrageous
- March 13, 2017: Long Term Stock Valuation Review
- March 6, 2017: Asset Classes for Retirement Investments
- February 27, 2017: Fidelity Total Bond Fund Review
- February 20, 2017: Long Term Stock Timing Based Portfolios And Their Roles
- February 13, 2017: Alternative Investment Portfolios Review
- February 6, 2017: Tax Free Municipal Bond Investments Review
- January 30, 2017: Brokerage Specific Conservative Portfolios
- January 23, 2017: Fixed Income Portfolio Review
- January 16, 2017: Long Term Trend Following Portfolio Review
- January 9, 2017: Tactical Asset Allocation Review
- January 3, 2017: Strategic Asset Allocation Review
- December 12, 2016: Enhanced Index Funds
- December 5, 2016: Review Of Broad Base Core Mutual Funds For Brokerages
- November 28, 2016: Core Index ETFs Review
- November 21, 2016: International Exposure Of U.S. Large Companies
- November 14, 2016: Asset Trends After The Election
- November 7, 2016: Rising Rate And Current Bond Trend
- October 31, 2016: Economy Power And Long Term Stock Returns
- October 24, 2016: Current Commodity Trend And Managed Futures
- October 17, 2016: Investment Mistakes And Good Or Bad Investment Strategies
- October 10, 2016: Momentum Investing Review
- October 3, 2016: Survey & Feedback
- September 26, 2016: Fixed Income Investing: Actively Managed Funds vs. Index Funds
- September 19, 2016: Stock Investing: Actively Managed Funds vs. Index Funds
- September 12, 2016: Newsletter Update
- September 5, 2016: Overvalued Markets And Long Term Timing Strategies
- August 29, 2016: Your 401K Finally Draws Attention
- August 22, 2016: Inflation Protected Securities TIPS For Current Overvalued Markets
- August 15, 2016: Risk On: Emerging Market Stocks And Small Cap Stocks
- August 8, 2016: Portfolio Construction Using Stock ETFs And Bond Mutual Funds
- August 1, 2016: Adding Value To Your Own Investments
- July 25, 2016: Tactical Asset Allocation Funds Review
- July 18, 2016: Strategic Asset Allocation & Lazy Portfolio Review
- July 11, 2016: Asset Trend Review
- June 27, 2016: Secular Cycles For Tactical And Strategic Investment Strategies
- June 20, 2016: A World of Debt
- June 13, 2016: Managed Futures For Portfolio Building
- June 6, 2016: Newsletter Summary
- May 30, 2016: Swensen Portfolio And Permanent Portfolios
- May 23, 2016: AAII Article And Some Web Changes
- May 16, 2016: The PIMCO (Dis)Advantages
- May 9, 2016: Boost Your Dull Summer Investments
- May 2, 2016: Low Cost Index Fund Investing
- April 25, 2016: Tax Free Municipal Bond Funds & Portfolios
- April 18, 2016: Asset Class Trend Review
- April 11, 2016: Construction of Sound And Conservative Portfolios
- March 28, 2016: Total Return Bond ETFs Review
- March 21, 2016: Small And Large Company Stock Performance In Different Economic Expansion Cycles
- March 14, 2016: Are Tactical And Timing Strategies Losing Steam?
- March 7, 2016: Defined Maturity Bond Fund Analysis
- February 29, 2016: Smart Strategic Asset Allocation Rebalance When Market Trend Changes
- February 22, 2016: Be Cash Smart
- February 15, 2016: Bond ETF Portfolios
- February 8, 2016: Newsletter Collection Update
- February 1, 2016: Total Return Bond Fund Portfolios In A Volatile Period
- January 25, 2016: Alternative Portfolios Review
- January 18, 2016: Strategic Asset Allocation: A Cautious Outlook
- January 11, 2016: Review Of Trend Following Tactical Asset Allocation
- January 4, 2016: What Worked And Didn’t In 2015
- December 21, 2015: Distressed Assets
- December 14, 2015: High Yield Bonds And Their Correlation With Stocks
- December 7, 2015: Diversification And Global Allocation
- November 30, 2015: Investors and Speculators Combined
- November 23, 2015: Active Stock Fund Performance Consistency
- November 16, 2015: Permanent, Risk Parity And Alternative Portfolios Review
- November 9, 2015: Broad Base Core Mutual Fund Review
- November 2, 2015: Broad Base Index Core ETFs Review
- October 26, 2015: Total Return Bond Fund Review
- October 19, 2015: Advanced Portfolio Review
- October 12, 2015: What About Commodities?
- October 5, 2015: Core Satellite Portfolios In A 401k Account
- September 28, 2015: Risk Managed Strategic Asset Allocation Portfolios Revisited
- September 21, 2015: Quest For The Best Investment Strategy
- September 14, 2015: Core Satellite Portfolios In Market Turmoil
- September 7, 2015: Market Rout Creates An Opportunity to Reposition Your Portfolios
- August 31, 2015: Review of Asset Allocation Funds and Portfolios
- August 24, 2015: Market Rout And Your Portfolios
- August 17, 2015: ETF or Mutual Fund Based Portfolios
- August 10, 2015: Updated Newsletter Collection
- August 3, 2015: Slippery Asset Trends
- July 27, 2015: Performance Dispersion Among Momentum Based Portfolios
- July 20, 2015: Global Balanced Portfolio Benchmarks
- July 13, 2015: Pain in Tactical Portfolios
- July 6, 2015: Fixed Income Total Return Bond Funds In Strategic Asset Allocation Portfolios
- June 29, 2015: Core ETF Commission Free Portfolios
- June 22, 2015: Secular Asset Trends
- June 15, 2015: Giving Up Bonds?
- June 1, 2015: Summer Blues?
- May 26, 2015: Cash, Bonds and Stocks In A Rising Rate Environment
- May 18, 2015: Portfolio Update
- May 11, 2015: Pain in Fixed Income?
- May 4, 2015: The Balanced Stock and Long Term Treasury Bond Portfolios
- April 27, 2015: Long Term Treasury Bond Behavior
- April 20, 2015: 529 College Savings Plan Rebalance Policy Change
- April 13, 2015: Total Return Bond Funds As Smart Cash
- April 6, 2015: The Low Return Environment
- March 30, 2015: Brokerage Specific Core Mutual Fund Portfolios 2
- March 23, 2015: Investment Arithmetic for Long Term Investments
- March 16, 2015: Brokerage Specific Core Mutual Fund Portfolios
- March 9, 2015: Newsletter Collection Update
- March 2, 2015: Total Return Bond ETFs
- February 23, 2015: Why Is Global Tactical Asset Allocation Not Popular?
- February 16, 2015: Where Are Permanent Portfolios Going?
- February 9, 2015: How Have Asset Allocation Funds Done?
- February 2, 2015: Risk Management Everywhere
- January 26, 2015: Composite Portfolios Review
- January 19, 2015: Fixed Income Investing Review
- January 12, 2015: How Does Trend Following Tactical Asset Allocation Strategy Deliver Returns
- January 5, 2015: When Forecast Fails
- December 22, 2014: Long Term Asset Returns: How Long Is Long?
- December 15, 2014: Beaten Down Assets
- December 8, 2014: Implementing Core Asset Portfolios In a Brokerage
- December 1, 2014: Two Key Issues of Investment Strategies
- November 24, 2014: Holiday Readings
- November 17, 2014: Retirement Spending Portfolios Update
- November 10, 2014: Fixed Income Or Cash
- November 3, 2014: Asset Trend Review
- October 27, 2014: Investment Loss, Mistakes And Market Cycles
- October 20, 2014: Strategic Portfolios With Managed Volatility
- October 13, 2014: Embrace Volatility
- October 6, 2014: Tips For 401k Open Enrollment
- September 29, 2014: What Can We Learn From Bill Gross’ Departure From PIMCO?
- September 22, 2014: Why Total Return Bond Funds?
- September 15, 2014: Equity And Total Return Bond Fund Composite Portfolios
- September 8, 2014: Momentum Based Portfolios Review
- September 1, 2014: Risk & Diversification: Mint.com Interview
- August 25, 2014: Remember Risk
- August 18, 2014: Consistency, The Most Important Edge In Investing: Tactical Case
- August 11, 2014: What To Do In Overvalued Stock Markets
- August 4, 2014: Is This The Peak Or Correction?
- July 28, 2014: Stock Musings
- July 21, 2014: Permanent Portfolios & Four Pillar Foundation Based Framework
- July 14, 2014: Composite Portfolios Review
- July 7, 2014: Portfolio Behavior During Market Corrections
- June 30, 2014: Half Year Brokerage ETF and Mutual Fund Portfolios Review
- June 23, 2014: Newsletter Collection Update
- June 16, 2014: There Are Always Lottery Winners
- June 9, 2014: The Arithmetic of Investment Mistakes
- June 2, 2014: Tips On Portfolio Rebalance
- May 26, 2014: In Praise Of Low Cost Core Asset Class Based Portfolios
- May 19, 2014: Consistency, The Most Important Edge In Investing: Strategic Case
- May 12, 2014: How To Handle An Elevated Overvalued Market
- May 5, 2014: Asset Allocation Funds Review
- April 28, 2014: Now The Economy Backs To The ‘Old Normal’, Should Our Investments Too?
- April 21, 2014: Total Return Bond Investing In The Current Market Environment