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: 

Portfolio Performance Comparison
Ticker/Portfolio Name YTD
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: 

Portfolio Performance Comparison (as of 8/3/2018):
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. 

Market Overview

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. 

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