FZROX vs VTSAX

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raveon
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FZROX vs VTSAX

Post by raveon »

I look at these funds. Fidelity one has 2503 holdings while Vanguard one has 3611. Why the difference if both are "total market index funds"?
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Re: FZROX vs VTSAX

Post by thelateinvestor43 »

I'm new to this, but someone here told me it's better to go with FSKAX (Total Market Index) instead. I think it has 3473 holdings in it.
lifeisinmirrors
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Re: FZROX vs VTSAX

Post by lifeisinmirrors »

VTSAX tracks the CRSP U.S. Total Market Index. FZROX tracks its own index that Fidelity made just for this fund.
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Re: FZROX vs VTSAX

Post by aristotelian »

Fidelity describes the fund as tracking an index designed to match the performance of the total market. That is different than owning all stocks in the total market. As to why, one reason might be to enable investors to tax loss harvest with competitors such as Vanguard. Another might be to keep expenses low. Fewer stocks, lower fees?
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Re: FZROX vs VTSAX

Post by Jack FFR1846 »

They track different indexes. FZROX pays nobody for their use of the index, which removes that cost, which Fidelity passes along to investors. 2000...3000 stocks? Who cares? The top maybe 50 are all that move the needle at all. The DOW number reported is only 30. I owned FSKAX and FZROX for a year in equal starting amounts so I could personally track how they did. FZROX did better so I sold out my FSKAX position and am now all in with Zero in my Fidelity IRA. I have other accounts with other large US equity funds. They're all the same in my mind. FSKAX, FZROX, SCHB, VTI, SPTM, FXAIX. Interchange any of these for any other and there's really not enough difference to care about. I own all of these.
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Re: FZROX vs VTSAX

Post by nisiprius »

It doesn't matter. They're all the same. They're all fine.

It's hard to visualize the structure of the stock market by dollar weight. We are used to the idea that small things begin to add up when there are a lot of them. But there are many distributions in nature in which this is not true. The stock market is one of them. By the time you get down to the smallest stocks, they have so little money invested in them that even in the mass they don't add up to much.

The reason why the Fidelity fund has fewer stocks in it is almost certainly "to save money" in their transactions (buying and selling stocks). It isn't necessarily the 2,503 largest, but that's a detail.

First, let's look at the difference between twenty-five hundred stocks versus thirty-six hundred.

If we look at the holdings for VTI--same as VTSAX--as of 10/31/2019 (thank you so much LazyDay for showing me how to do this) and doing a little spreadsheet work, I find that on that day, the holdings report only lists 3,586 stocks. (I'm not going to try to explain the apparent discrepancy).
  • The stocks in this fund are worth $811.0 billion (I believe that makes it the world's largest).
  • The 2,503 largest stocks are worth $839.6 billion or 99.74% of the total
  • The largest stock (as of that date) was Microsoft, and the value of their holding was $30.8 billion That's $30 billion worth of one stock alone. 3.6% or over 1/30th of the value of the fund is in a single stock.
  • The 2,503th-largest stock was Trecora Resources, TREC, value $6.32 million The value of the largest stock is almost five thousand times as big as the 2,503th-largest stock. I think you can see where we're going.
  • The 3,586 - 2,503 = 1,083 are all smaller than Trecora Resources, so, roughly we have a thousand stocks that are each less than 1/5000th the size of Microsoft.
  • In fact, the 1,083 smallest stocks, taken together, had a total value of $2.18 billion... which is, you know, a lot :wink: ... but is still only 0.26% of the fund.
  • By leaving out the 1,083 smallest stocks, we are leaving out 0.26%. If we had $10,000 invested in the fund and every one of those stocks suddenly doubled all at the same time, we'd have $10,026 If (more likely) they all went to zero on the same day, we'd have $9,974. The reality is that they are, in fact, going to go up and down along with rest of the market anyway. Leaving them out or including them can't possibly make much difference.
  • The 100 smallest stoc
  • The smallest stock listed in that holdings download is Harvest Natural Resources, HNR. The $811 billion fund is holding $0.52 worth of this stock, or 0.00000000006% of the total.
The reason why different indexes from different providers, that are supposed to track the same thing, like "the US stock market," is that at the edges it is hard to decide what should be included. When created, S&P wanted the S&P 500 to include all the "leading stocks in leading industries," and that's a judgement call. More modern indexes try to follow objective rules, but they are still complicated. The smaller the stock, the more thinly traded it is. If I can't buy a certain stock today because nobody happens to be selling any, is it really "on the market?"

Something thought-provoking happened recently with a Hong Kong company called Artgo Holdings. On the numbers, its market cap was high enough to entitle it to a place in international stock indexes, and FTSE dutifully entered it, and Vanguard Total International includes it. MSCI had also announced that they would be including it, but the price movements looked so suspicious that MSCI, probably suspecting shenanigans, decided not to, citing other index inclusion rules. So FTSE's index has it, and MSCI's index of "the same thing" doesn't.

Now, the job of an index fund is not to hold the exact stocks in an index, it is to track the value of that index, closely. When Vanguard first launched the 500 index, there weren't enough people that wanted to buy it and they couldn't afford to buy all 500 stocks, so they made do with something like 275. There are measurable characteristics of stocks that partially predict its behavior, and thus it is hard to predict what a stock will do but easier to predict that two different stocks will behavior similarly. One small-cap growth transportation stock is like another small-cap growth transportation stock. Therefore, fund companies can do a very good job of tracking an index by using a well-chosen representative sample of stocks in the index instead of actually holding the whole index.

This is what Fidelity has chosen to do in FZROX, they say so in the fund description--nowadays Vanguard does try to "replicate" the whole index.

The proof of the pudding is in the growth charts. If I cheat just a bit and leave out the first three days (glitches are common during the very first few days a fund is out) you can see that the differences between FZROX, Fidelity's FSKAX, and Vanguard VTSAX have been so small that you can't see the difference on a chart. The three lines overlap perfectly.

Source

Image
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Re: FZROX vs VTSAX

Post by dcabler »

nisiprius wrote: Mon Nov 25, 2019 6:52 am It doesn't matter. They're all the same. They're all fine.

It's hard to visualize the structure of the stock market by dollar weight. We are used to the idea that small things begin to add up when there are a lot of them. But there are many distributions in nature in which this is not true. The stock market is one of them. By the time you get down to the smallest stocks, they have so little money invested in them that even in the mass they don't add up to much.

The reason why the Fidelity fund has fewer stocks in it is almost certainly "to save money" in their transactions (buying and selling stocks). It isn't necessarily the 2,503 largest, but that's a detail.

First, let's look at the difference between twenty-five hundred stocks versus thirty-six hundred.

If we look at the holdings for VTI--same as VTSAX--as of 10/31/2019 (thank you so much LazyDay for showing me how to do this) and doing a little spreadsheet work, I find that on that day, the holdings report only lists 3,586 stocks. (I'm not going to try to explain the apparent discrepancy).
  • The stocks in this fund are worth $811.0 billion (I believe that makes it the world's largest).
  • The 2,503 largest stocks are worth $839.6 billion or 99.74% of the total
  • The largest stock (as of that date) was Microsoft, and the value of their holding was $30.8 billion That's $30 billion worth of one stock alone. 3.6% or over 1/30th of the value of the fund is in a single stock.
  • The 2,503th-largest stock was Trecora Resources, TREC, value $6.32 million The value of the largest stock is almost five thousand times as big as the 2,503th-largest stock. I think you can see where we're going.
  • The 3,586 - 2,503 = 1,083 are all smaller than Trecora Resources, so, roughly we have a thousand stocks that are each less than 1/5000th the size of Microsoft.
  • In fact, the 1,083 smallest stocks, taken together, had a total value of $2.18 billion... which is, you know, a lot :wink: ... but is still only 0.26% of the fund.
  • By leaving out the 1,083 smallest stocks, we are leaving out 0.26%. If we had $10,000 invested in the fund and every one of those stocks suddenly doubled all at the same time, we'd have $10,026 If (more likely) they all went to zero on the same day, we'd have $9,974. The reality is that they are, in fact, going to go up and down along with rest of the market anyway. Leaving them out or including them can't possibly make much difference.
  • The 100 smallest stoc
  • The smallest stock listed in that holdings download is Harvest Natural Resources, HNR. The $811 billion fund is holding $0.52 worth of this stock, or 0.00000000006% of the total.
The reason why different indexes from different providers, that are supposed to track the same thing, like "the US stock market," is that at the edges it is hard to decide what should be included. When created, S&P wanted the S&P 500 to include all the "leading stocks in leading industries," and that's a judgement call. More modern indexes try to follow objective rules, but they are still complicated. The smaller the stock, the more thinly traded it is. If I can't buy a certain stock today because nobody happens to be selling any, is it really "on the market?"

Something thought-provoking happened recently with a Hong Kong company called Artgo Holdings. On the numbers, its market cap was high enough to entitle it to a place in international stock indexes, and FTSE dutifully entered it, and Vanguard Total International includes it. MSCI had also announced that they would be including it, but the price movements looked so suspicious that MSCI, probably suspecting shenanigans, decided not to, citing other index inclusion rules. So FTSE's index has it, and MSCI's index of "the same thing" doesn't.

Now, the job of an index fund is not to hold the exact stocks in an index, it is to track the value of that index, closely. When Vanguard first launched the 500 index, there weren't enough people that wanted to buy it and they couldn't afford to buy all 500 stocks, so they made do with something like 275. There are measurable characteristics of stocks that partially predict its behavior, and thus it is hard to predict what a stock will do but easier to predict that two different stocks will behavior similarly. One small-cap growth transportation stock is like another small-cap growth transportation stock. Therefore, fund companies can do a very good job of tracking an index by using a well-chosen representative sample of stocks in the index instead of actually holding the whole index.

This is what Fidelity has chosen to do in FZROX, they say so in the fund description--nowadays Vanguard does try to "replicate" the whole index.

The proof of the pudding is in the growth charts. If I cheat just a bit and leave out the first three days (glitches are common during the very first few days a fund is out) you can see that the differences between FZROX, Fidelity's FSKAX, and Vanguard VTSAX have been so small that you can't see the difference on a chart. The three lines overlap perfectly.

Source

Image
Great response - this comes up often enough that it should be a sticky somewhere....
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Re: FZROX vs VTSAX

Post by billthecat »

nisiprius wrote: Mon Nov 25, 2019 6:52 am It doesn't matter. They're all the same. They're all fine.

<Snip>

The proof of the pudding is in the growth charts. If I cheat just a bit and leave out the first three days (glitches are common during the very first few days a fund is out) you can see that the differences between FZROX, Fidelity's FSKAX, and Vanguard VTSAX have been so small that you can't see the difference on a chart. The three lines overlap perfectly.

Source

Image
Close but it is interesting that the final value is slightly higher for FZROX.
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Re: FZROX vs VTSAX

Post by cowbman »

billthecat wrote: Tue Nov 26, 2019 8:54 am
nisiprius wrote: Mon Nov 25, 2019 6:52 am It doesn't matter. They're all the same. They're all fine.

<Snip>

The proof of the pudding is in the growth charts. If I cheat just a bit and leave out the first three days (glitches are common during the very first few days a fund is out) you can see that the differences between FZROX, Fidelity's FSKAX, and Vanguard VTSAX have been so small that you can't see the difference on a chart. The three lines overlap perfectly.

Source

Image
Close but it is interesting that the final value is slightly higher for FZROX.
Probably because of the 0% ER. To summarize, not worth it in taxable accounts because of capital gains. In a ROTH/IRA/401K you can if you want. I doubt this would change anyone's retirement in a meaningful way.
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Re: FZROX vs VTSAX

Post by Eric »

cowbman wrote: Tue Nov 26, 2019 2:01 pm
billthecat wrote: Tue Nov 26, 2019 8:54 amClose but it is interesting that the final value is slightly higher for FZROX.
Probably because of the 0% ER.
I think the difference is too large to be explained by that. Compared to Fidelity's slightly broader total market fund, the Zero fund has outperformed by nearly 21 basis points. Compared to Vanguard's slightly broader total market fund, the Zero fund has outperformed by over 17 basis points. That's over a roughly 15-month period -- I'm too lazy to annualize the figures -- but in any case the difference is substantially more than the difference in expense ratios (though still tiny, of course, in absolute terms).

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Re: FZROX vs VTSAX

Post by White Coat Investor »

thelateinvestor43 wrote: Mon Nov 25, 2019 4:48 am I'm new to this, but someone here told me it's better to go with FSKAX (Total Market Index) instead. I think it has 3473 holdings in it.
All three are fine. Doesn't matter enough to even discuss the very minor differences. Buy what is convenient.
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Re: FZROX vs VTSAX

Post by billthecat »

cowbman wrote: Tue Nov 26, 2019 2:01 pm
billthecat wrote: Tue Nov 26, 2019 8:54 am
nisiprius wrote: Mon Nov 25, 2019 6:52 am It doesn't matter. They're all the same. They're all fine.

<Snip>

The proof of the pudding is in the growth charts. If I cheat just a bit and leave out the first three days (glitches are common during the very first few days a fund is out) you can see that the differences between FZROX, Fidelity's FSKAX, and Vanguard VTSAX have been so small that you can't see the difference on a chart. The three lines overlap perfectly.

Source

Image
Close but it is interesting that the final value is slightly higher for FZROX.
Probably because of the 0% ER. To summarize, not worth it in taxable accounts because of capital gains. In a ROTH/IRA/401K you can if you want. I doubt this would change anyone's retirement in a meaningful way.
That, and new money, especially if it's sizable, such as from the sale of a home on the eve of retiring. Still, may not be worth opening a new account and all that. The $10,000 example is one thing but when you scale it up to $1,000,000, or even more, it's a few k, or more, per year, which won't make or break retirement but is a nice sweetener. If the difference persists...

Edit: your reference to capital gains made me think you were saying that it's not worth it in a taxable account because of the gains that would be realized to switch to FZROX, but actually now I think you are referring to the capital gains passed through because it's a mutual fund instead of an ETF.
Last edited by billthecat on Wed Nov 27, 2019 11:19 am, edited 1 time in total.
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Re: FZROX vs VTSAX

Post by arcticpineapplecorp. »

as was said previously, in effect, there's no appreciable difference between the two.

but here's a teachable moment.

don't assume that's true for all funds.

As an example, you may see other S&P 500 index funds and erroneously assume they're all the same.

nothing can be further from the truth.

For instance:
Vanguard's S&P 500 index fund's expense ratio is .04%, no 12b-1 fee, no loads, no management fees.
Fidelity's S&P 500 index fund's expense ratio is .02%, no 12b-1 fee, no loads, no management fees.

But here's an S&P 500 index fund with State Farm: SNPAX

pop quiz:

how much is State Farm's S&P 500 index fund's (SNPAX):

current management fee?
front load?
12-b 1 fee?
expense ratio?

if not sure, check here:

https://www.bloomberg.com/quote/SNPAX:US

and report back.
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Re: FZROX vs VTSAX

Post by FIREchief »

arcticpineapplecorp. wrote: Tue Nov 26, 2019 8:47 pm pop quiz:

how much is State Farm's S&P 500 index fund's (SNPAX):

current management fee?
front load?
12-b 1 fee?
expense ratio?

if not sure, check here:

https://www.bloomberg.com/quote/SNPAX:US

and report back.
I knew it was bad, but not THIS bad. The fact that they are able to attract and retain investors to this is a very sad statement on the financial literacy out there. :annoyed
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Re: FZROX vs VTSAX

Post by alx »

This article below talks about the difference in dividend distribution timing between the two. VTSAX distributions are quarterly, FZROX are annual.

https://www.personalfinanceclub.com/fzr ... dex-funds/

The article calculates the delayed dividend pay is a cost with the net effect of a 0.15%.
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Re: FZROX vs VTSAX

Post by willthrill81 »

Eric wrote: Tue Nov 26, 2019 2:07 pm
cowbman wrote: Tue Nov 26, 2019 2:01 pm
billthecat wrote: Tue Nov 26, 2019 8:54 amClose but it is interesting that the final value is slightly higher for FZROX.
Probably because of the 0% ER.
I think the difference is too large to be explained by that. Compared to Fidelity's slightly broader total market fund, the Zero fund has outperformed by nearly 21 basis points. Compared to Vanguard's slightly broader total market fund, the Zero fund has outperformed by over 17 basis points. That's over a roughly 15-month period -- I'm too lazy to annualize the figures -- but in any case the difference is substantially more than the difference in expense ratios (though still tiny, of course, in absolute terms).

Eric
Yes, the difference is too big to explain with a 4 basis point difference in the ER. It's more likely that Fidelity's 'homemade' index has a tiny tilt or a bit of tracking error that VTSAX doesn't have. Tracking error can result in outperforming the index being tracked.
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Re: FZROX vs VTSAX

Post by Ferdinand2014 »

willthrill81 wrote: Mon Jan 06, 2020 10:50 pm
Eric wrote: Tue Nov 26, 2019 2:07 pm
cowbman wrote: Tue Nov 26, 2019 2:01 pm
billthecat wrote: Tue Nov 26, 2019 8:54 amClose but it is interesting that the final value is slightly higher for FZROX.
Probably because of the 0% ER.
I think the difference is too large to be explained by that. Compared to Fidelity's slightly broader total market fund, the Zero fund has outperformed by nearly 21 basis points. Compared to Vanguard's slightly broader total market fund, the Zero fund has outperformed by over 17 basis points. That's over a roughly 15-month period -- I'm too lazy to annualize the figures -- but in any case the difference is substantially more than the difference in expense ratios (though still tiny, of course, in absolute terms).

Eric
Yes, the difference is too big to explain with a 4 basis point difference in the ER. It's more likely that Fidelity's 'homemade' index has a tiny tilt or a bit of tracking error that VTSAX doesn't have. Tracking error can result in outperforming the index being tracked.
It tilts ever so slightly large cap. This most likely explains difference. It’s halfway between an S&P 500 index and a total stock index.

FSKAX (3600 S&P TSM) top 10 17.89% 2019 return 30.92%
FZROX (2500 Fido) top 10 18.36% 2019 return 31.14%
FXAIX (S&P 500) top ten 21.53% 2019 return 31.47%

All the same top 10 stocks as well.

We are focusing on the bottom 1000, but the difference is explained in the top 10.
Last edited by Ferdinand2014 on Mon Jan 06, 2020 11:14 pm, edited 1 time in total.
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Re: FZROX vs VTSAX

Post by willthrill81 »

Ferdinand2014 wrote: Mon Jan 06, 2020 11:08 pm
willthrill81 wrote: Mon Jan 06, 2020 10:50 pm
Eric wrote: Tue Nov 26, 2019 2:07 pm
cowbman wrote: Tue Nov 26, 2019 2:01 pm
billthecat wrote: Tue Nov 26, 2019 8:54 amClose but it is interesting that the final value is slightly higher for FZROX.
Probably because of the 0% ER.
I think the difference is too large to be explained by that. Compared to Fidelity's slightly broader total market fund, the Zero fund has outperformed by nearly 21 basis points. Compared to Vanguard's slightly broader total market fund, the Zero fund has outperformed by over 17 basis points. That's over a roughly 15-month period -- I'm too lazy to annualize the figures -- but in any case the difference is substantially more than the difference in expense ratios (though still tiny, of course, in absolute terms).

Eric
Yes, the difference is too big to explain with a 4 basis point difference in the ER. It's more likely that Fidelity's 'homemade' index has a tiny tilt or a bit of tracking error that VTSAX doesn't have. Tracking error can result in outperforming the index being tracked.
It tilts ever so slightly large cap. This most likely explains difference. It’s halfway between an S&P 500 index and a total stock index.

FSKAX (3600 stocks S&P TSM index) top ten 17.89%
FZROX (2500 stocks Fido index) top ten 18.36%
FXAIX (S&P 500) top ten 21.53%

All the same top 10 stocks as well.

We are focusing on the bottom 1000, but the difference is explained in the top 10.
I'm not sure that a tilt of less than half a percent alone is responsible for a 21 basis point return difference, but combined with the 4 basis point smaller ER and a touch of tracking error, that's could easily be a contributing factor. But it's not enough to warrant further investigation, IMHO.
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Re: FZROX vs VTSAX

Post by danielc »

raveon wrote: Mon Nov 25, 2019 3:48 am I look at these funds. Fidelity one has 2503 holdings while Vanguard one has 3611. Why the difference if both are "total market index funds"?
FZROX and VTSAX track different indices. One of the ways that FZROX saves money is by following an in-house index made by Fidelity. They save money in licensing fees, and I suspect that their index might also be designed to reduce transaction costs. Fewer holdings means fewer transactions. They are trying to take a "statistical approach" where they pick a smaller sub-sample of stocks that they hope will also replicate the market. If you look at the Morningstar style boxes of the two funds, you will find that FZROX has larger companies --- they're a little low on their small cap allocation. This makes sense because small caps are less liquid (hence, higher bid/ask spreads), there are a lot of them, and they make up a small fraction of the market.

Overall, I trust VTSAX to better simulate the overall stock market. You have to decide for yourself whether paying the very tiny expense ratio of VTSAX is worth it. For me personally, I chose to pay the tiny ER because I do not trust that Fidelity's index will not under-perform by 0.1% because of some of the compromises that they made.
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Re: FZROX vs VTSAX

Post by whodidntante »

There is no total market fund that owns every publicly traded stock, nor would you want one. Some stocks go an entire day with no trades and are not suitable for indexation. So indexes have criteria for what is included and not included. Total market indexes have inclusion criteria also.

You can debate whether 2500 stocks is better than 3500 stocks but in my opinion it is a waste of time. Idiosyncratic risk is eliminated either way. The index just has different inclusion criteria.
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Re: FZROX vs VTSAX

Post by CoastalWinds »

I would be interested in seeing their comparative tax efficiency when held in a taxable account. Has anyone put these two funds (VTSAX and FZROX) thru triceratops’ spreadsheet?
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Re: FZROX vs VTSAX

Post by jhfenton »

alx wrote: Mon Jan 06, 2020 10:34 pm This article below talks about the difference in dividend distribution timing between the two. VTSAX distributions are quarterly, FZROX are annual.

https://www.personalfinanceclub.com/fzr ... dex-funds/

The article calculates the delayed dividend pay is a cost with the net effect of a 0.15%.
That article is based on a false premise. FZROX is not SPY. SPY, because of its structure, cannot reinvest dividends. FZROX is perfectly capable of internally reinvesting dividends during the year and still having enough cash to pay out unreinvested dividends at year end.
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Re: FZROX vs VTSAX

Post by rantk81 »

FIREchief wrote: Tue Nov 26, 2019 10:06 pm
arcticpineapplecorp. wrote: Tue Nov 26, 2019 8:47 pm pop quiz:

how much is State Farm's S&P 500 index fund's (SNPAX):

current management fee?
front load?
12-b 1 fee?
expense ratio?

if not sure, check here:

https://www.bloomberg.com/quote/SNPAX:US

and report back.
I knew it was bad, but not THIS bad. The fact that they are able to attract and retain investors to this is a very sad statement on the financial literacy out there. :annoyed
It's probably the fund that folks get put in, if they get (suckered?) into buying a Variable Annuity from State Farm?
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Re: FZROX vs VTSAX

Post by CoastalWinds »

rantk81 wrote: Tue Jan 07, 2020 9:39 am
FIREchief wrote: Tue Nov 26, 2019 10:06 pm
arcticpineapplecorp. wrote: Tue Nov 26, 2019 8:47 pm pop quiz:

how much is State Farm's S&P 500 index fund's (SNPAX):

current management fee?
front load?
12-b 1 fee?
expense ratio?

if not sure, check here:

https://www.bloomberg.com/quote/SNPAX:US

and report back.
I knew it was bad, but not THIS bad. The fact that they are able to attract and retain investors to this is a very sad statement on the financial literacy out there. :annoyed
It's probably the fund that folks get put in, if they get (suckered?) into buying a Variable Annuity from State Farm?
They should call it SPANX
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Re: FZROX vs VTSAX

Post by catchinup »

jhfenton wrote: Tue Jan 07, 2020 9:29 am FZROX is perfectly capable of internally reinvesting dividends during the year and still having enough cash to pay out unreinvested dividends at year end.
Even if it's capable, do we know that it does? Or are we making one assumption and the author of the article is making another?
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Re: FZROX vs VTSAX

Post by jhfenton »

catchinup wrote: Thu Jan 16, 2020 2:40 am
jhfenton wrote: Tue Jan 07, 2020 9:29 am FZROX is perfectly capable of internally reinvesting dividends during the year and still having enough cash to pay out unreinvested dividends at year end.
Even if it's capable, do we know that it does? Or are we making one assumption and the author of the article is making another?
The author of the article is making an ignorant, completely-unfounded assumption. We are assuming that the managers of FZROX aren't idiots who don't understand cash drag and can't manage their small bit of required cash just like every other index fund manager.
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Re: FZROX vs VTSAX

Post by mervinj7 »

catchinup wrote: Thu Jan 16, 2020 2:40 am
jhfenton wrote: Tue Jan 07, 2020 9:29 am FZROX is perfectly capable of internally reinvesting dividends during the year and still having enough cash to pay out unreinvested dividends at year end.
Even if it's capable, do we know that it does? Or are we making one assumption and the author of the article is making another?
You can look up the fund holdings or the Monthly Fact Sheet for the funds to see how much they are holding in cash. The author was too lazy to look up both FZROX (he assumed that that they hold all dividends in cash for the full year) and VTSAX (he assumed they hold all dividends in cash for up to 3 months).

On 11/29/19 FZROX held 0.2% in cash. You look up the November Monthly Holdings Report.
On 12/13/19, they distributed 1.48% in dividends.
As of 12/31/19 FZROX held 0.04% in "cash & net other assets."
https://fundresearch.fidelity.com/mutua ... /31635T708

If the author were correct (and didn't refuse to look up the monthly holdings reports), they would be holding close to 1.4% in cash before they distributed their dividends and close to 0 cash after all.
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Re: FZROX vs VTSAX

Post by catchinup »

mervinj7 wrote: Thu Jan 16, 2020 12:08 pm
You can look up the fund holdings or the Monthly Fact Sheet for the funds to see how much they are holding in cash. The author was too lazy to look up both FZROX (he assumed that that they hold all dividends in cash for the full year) and VTSAX (he assumed they hold all dividends in cash for up to 3 months).

On 11/29/19 FZROX held 0.2% in cash. You look up the November Monthly Holdings Report.
On 12/13/19, they distributed 1.48% in dividends.
As of 12/31/19 FZROX held 0.04% in "cash & net other assets."
https://fundresearch.fidelity.com/mutua ... /31635T708

If the author were correct (and didn't refuse to look up the monthly holdings reports), they would be holding close to 1.4% in cash before they distributed their dividends and close to 0 cash after all.
This is new to me and very informative. Much appreciated.
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Re: FZROX vs VTSAX

Post by 1789 »

I would not spend a minute on this. Pick whichever is convenient that creates less work.
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Re: FZROX vs VTSAX

Post by Tdubs »

So, I see that VTSAX is outperforming FZROX of late.

Image

Can we conclude the broader market holdings of VTSAX are benefitting the fund since small caps are doing a bit better than the S&P 500 this year? I'm comparing the S&P to the Dow Completion Index (DWCPF). The anguish on BH over the 0.04% ER difference seems to be unimportant.
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Re: FZROX vs VTSAX

Post by willthrill81 »

Since the inception of FZROX, the cumulative performance of it and VTSAX, according to M*, is 26.81% and 26.97%. So despite the 4 basis point ER, VTSAX is very narrowly ahead.
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Re: FZROX vs VTSAX

Post by bzzbzz »

One lesser-discussed aspect of FZROX (and the Fidelity Zero range of funds generally) is that the zero fee is made up for with securities lending.

This fact is buried in the prospectus and is also listed as an additional fund risk:
Securities Lending Risk. Securities lending involves the risk that the borrower may fail to return the securities loaned in a timely manner or at all. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral.
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Re: FZROX vs VTSAX

Post by abuss368 »

lifeisinmirrors wrote: Mon Nov 25, 2019 4:58 am VTSAX tracks the CRSP U.S. Total Market Index. FZROX tracks its own index that Fidelity made just for this fund.
Interesting. I did not know that Fidelity tracked it’s own index. Can they change the index at will?
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Re: FZROX vs VTSAX

Post by tj »

bzzbzz wrote: Sun Nov 22, 2020 1:10 pm One lesser-discussed aspect of FZROX (and the Fidelity Zero range of funds generally) is that the zero fee is made up for with securities lending.

This fact is buried in the prospectus and is also listed as an additional fund risk:
Securities Lending Risk. Securities lending involves the risk that the borrower may fail to return the securities loaned in a timely manner or at all. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral.
Much of the securities lending revenue goes back into the fund....
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Re: FZROX vs VTSAX

Post by SmileyFace »

Every time this discussion comes up there seems to be a lot of speculation along with a certain percentage of misinformation.
We don't know for certain how many stocks you need to approximate total market. The two funds seem to track within a rounding error. Which might do better over the long run is hard to determine. What I do know for certain is what Vanguard told me for years - Expenses do matter. And I also know which of the two funds has the lowest Expense Ratio giving it an advantage out of the gate: FZROX.
FZROX, VTSAX, FSKAX, ITOT, VTI, SWTSX, SWTSX, SCHB - all fine choices.
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Re: FZROX vs VTSAX

Post by UpperNwGuy »

bzzbzz wrote: Sun Nov 22, 2020 1:10 pm One lesser-discussed aspect of FZROX (and the Fidelity Zero range of funds generally) is that the zero fee is made up for with securities lending.

This fact is buried in the prospectus and is also listed as an additional fund risk:
Securities Lending Risk. Securities lending involves the risk that the borrower may fail to return the securities loaned in a timely manner or at all. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral.
VTSAX also engages in securities lending.
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Re: FZROX vs VTSAX

Post by MathIsMyWayr »

SmileyFace wrote: Sun Nov 22, 2020 1:43 pm FZROX, VTSAX, FSKAX, ITOT, VTI, SWTSX, SWTSX, SCHB - all fine choices.
I wouldn't touch FZROX. Taming greed is prudent. Not to the last penny.
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Re: FZROX vs VTSAX

Post by ThisTimeItsDifferent »

CoastalWinds wrote: Tue Jan 07, 2020 9:41 am
rantk81 wrote: Tue Jan 07, 2020 9:39 am
FIREchief wrote: Tue Nov 26, 2019 10:06 pm
arcticpineapplecorp. wrote: Tue Nov 26, 2019 8:47 pm pop quiz:

how much is State Farm's S&P 500 index fund's (SNPAX):

current management fee?
front load?
12-b 1 fee?
expense ratio?

if not sure, check here:

https://www.bloomberg.com/quote/SNPAX:US

and report back.
I knew it was bad, but not THIS bad. The fact that they are able to attract and retain investors to this is a very sad statement on the financial literacy out there. :annoyed
It's probably the fund that folks get put in, if they get (suckered?) into buying a Variable Annuity from State Farm?
They should call it SPANX

I'll see you SPANX and raise you RYSYX.

https://www.doughroller.net/investing/t ... %20million
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Re: FZROX vs VTSAX

Post by SmileyFace »

MathIsMyWayr wrote: Sun Nov 22, 2020 1:57 pm
SmileyFace wrote: Sun Nov 22, 2020 1:43 pm FZROX, VTSAX, FSKAX, ITOT, VTI, SWTSX, SWTSX, SCHB - all fine choices.
I wouldn't touch FZROX. Taming greed is prudent. Not to the last penny.
Not sure what greed has to do with any of these choices - none of them are charitable giving. In fact - the more I can save the more I will have for charitable giving - its the opposite of greed.
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Re: FZROX vs VTSAX

Post by index2max »

Just for fun, I decided to move over my HSA funds from my employer’s custodian to Fidelity’s individual account.

Decided to put all my money into Fidelity’s zero-expense total us stock fund, FZORX, for simplicity sake. One thing I noticed is that it only pays dividends annually in December, whereas Vanguard’s total us stock market fund, VTSAX, pays quarterly dividends.

Fidelity says they lean on loaning out securities held by FZORX to generate revenue for the fund. Are they stiffing me on dividends the other three quarters each year? Or Fidelity reinvesting them in spring, summer and fall? Why not pay quarterly dividends? Does that add extra expenses to their fund? They already use their own in-house total is stock market index instead of licensing someone else’s, so I figured the fund is making just enough money to stay profitable without charging clients an expense ratio.

Thanks for the explanation
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Re: FZROX vs VTSAX

Post by nalor511 »

index2max wrote: Wed May 12, 2021 10:10 pm Just for fun, I decided to move over my HSA funds from my employer’s custodian to Fidelity’s individual account.

Decided to put all my money into Fidelity’s zero-expense total us stock fund, FZORX, for simplicity sake. One thing I noticed is that it only pays dividends annually in December, whereas Vanguard’s total us stock market fund, VTSAX, pays quarterly dividends.

Fidelity says they lean on loaning out securities held by FZORX to generate revenue for the fund. Are they stiffing me on dividends the other three quarters each year? Or Fidelity reinvesting them in spring, summer and fall? Why not pay quarterly dividends? Does that add extra expenses to their fund? They already use their own in-house total is stock market index instead of licensing someone else’s, so I figured the fund is making just enough money to stay profitable without charging clients an expense ratio.

Thanks for the explanation
You may be over thinking things. I find annual dividend much easier for TLH tracking/avoiding-wash-sales, than quarterly. Everything has pros/cons
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Re: FZROX vs VTSAX

Post by willthrill81 »

ThisTimeItsDifferent wrote: Sun Nov 22, 2020 2:24 pm
CoastalWinds wrote: Tue Jan 07, 2020 9:41 am
rantk81 wrote: Tue Jan 07, 2020 9:39 am
FIREchief wrote: Tue Nov 26, 2019 10:06 pm
arcticpineapplecorp. wrote: Tue Nov 26, 2019 8:47 pm pop quiz:

how much is State Farm's S&P 500 index fund's (SNPAX):

current management fee?
front load?
12-b 1 fee?
expense ratio?

if not sure, check here:

https://www.bloomberg.com/quote/SNPAX:US

and report back.
I knew it was bad, but not THIS bad. The fact that they are able to attract and retain investors to this is a very sad statement on the financial literacy out there. :annoyed
It's probably the fund that folks get put in, if they get (suckered?) into buying a Variable Annuity from State Farm?
They should call it SPANX

I'll see you SPANX and raise you RYSYX.

https://www.doughroller.net/investing/t ... %20million
And we think that if we get together enough people, including those willing to buy into a fund like RYSYX, that there won't be any inefficiencies in the market, ever. Riiiiight. :mrgreen:
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Re: FZROX vs VTSAX

Post by UpperNwGuy »

index2max wrote: Wed May 12, 2021 10:10 pm Just for fun, I decided to move over my HSA funds from my employer’s custodian to Fidelity’s individual account.

Decided to put all my money into Fidelity’s zero-expense total us stock fund, FZORX, for simplicity sake. One thing I noticed is that it only pays dividends annually in December, whereas Vanguard’s total us stock market fund, VTSAX, pays quarterly dividends.

Fidelity says they lean on loaning out securities held by FZORX to generate revenue for the fund. Are they stiffing me on dividends the other three quarters each year? Or Fidelity reinvesting them in spring, summer and fall? Why not pay quarterly dividends? Does that add extra expenses to their fund? They already use their own in-house total is stock market index instead of licensing someone else’s, so I figured the fund is making just enough money to stay profitable without charging clients an expense ratio.

Thanks for the explanation
I wish Vanguard's stock mutual funds would pay out their dividends once a year instead of once a quarter. Is there some reason you prefer quarterly?
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Re: FZROX vs VTSAX

Post by index2max »

UpperNwGuy wrote: Thu May 13, 2021 5:47 am
index2max wrote: Wed May 12, 2021 10:10 pm Just for fun, I decided to move over my HSA funds from my employer’s custodian to Fidelity’s individual account.

Decided to put all my money into Fidelity’s zero-expense total us stock fund, FZORX, for simplicity sake. One thing I noticed is that it only pays dividends annually in December, whereas Vanguard’s total us stock market fund, VTSAX, pays quarterly dividends.

Fidelity says they lean on loaning out securities held by FZORX to generate revenue for the fund. Are they stiffing me on dividends the other three quarters each year? Or Fidelity reinvesting them in spring, summer and fall? Why not pay quarterly dividends? Does that add extra expenses to their fund? They already use their own in-house total is stock market index instead of licensing someone else’s, so I figured the fund is making just enough money to stay profitable without charging clients an expense ratio.

Thanks for the explanation
I wish Vanguard's stock mutual funds would pay out their dividends once a year instead of once a quarter. Is there some reason you prefer quarterly?
Well VTSAX current pays more dollars in total dividends per year About $1.2/share in 2020. FZROX only $0.171/share in 2020. Why ~1/4th the payout of VTSAX?

https://investor.vanguard.com/mutual-fu ... ions/vtsax

https://fundresearch.fidelity.com/mutua ... /31635T708
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Re: FZROX vs VTSAX

Post by Nate79 »

index2max wrote: Thu May 13, 2021 7:36 am
UpperNwGuy wrote: Thu May 13, 2021 5:47 am
index2max wrote: Wed May 12, 2021 10:10 pm Just for fun, I decided to move over my HSA funds from my employer’s custodian to Fidelity’s individual account.

Decided to put all my money into Fidelity’s zero-expense total us stock fund, FZORX, for simplicity sake. One thing I noticed is that it only pays dividends annually in December, whereas Vanguard’s total us stock market fund, VTSAX, pays quarterly dividends.

Fidelity says they lean on loaning out securities held by FZORX to generate revenue for the fund. Are they stiffing me on dividends the other three quarters each year? Or Fidelity reinvesting them in spring, summer and fall? Why not pay quarterly dividends? Does that add extra expenses to their fund? They already use their own in-house total is stock market index instead of licensing someone else’s, so I figured the fund is making just enough money to stay profitable without charging clients an expense ratio.

Thanks for the explanation
I wish Vanguard's stock mutual funds would pay out their dividends once a year instead of once a quarter. Is there some reason you prefer quarterly?
Well VTSAX current pays more dollars in total dividends per year About $1.2/share in 2020. FZROX only $0.171/share in 2020. Why ~1/4th the payout of VTSAX?

https://investor.vanguard.com/mutual-fu ... ions/vtsax

https://fundresearch.fidelity.com/mutua ... /31635T708
Divide each dividend amount by the share price for each (i.e. dividend yield) and report back to us what you find.
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Re: FZROX vs VTSAX

Post by DB2 »

UpperNwGuy wrote: Thu May 13, 2021 5:47 am
index2max wrote: Wed May 12, 2021 10:10 pm Just for fun, I decided to move over my HSA funds from my employer’s custodian to Fidelity’s individual account.

Decided to put all my money into Fidelity’s zero-expense total us stock fund, FZORX, for simplicity sake. One thing I noticed is that it only pays dividends annually in December, whereas Vanguard’s total us stock market fund, VTSAX, pays quarterly dividends.

Fidelity says they lean on loaning out securities held by FZORX to generate revenue for the fund. Are they stiffing me on dividends the other three quarters each year? Or Fidelity reinvesting them in spring, summer and fall? Why not pay quarterly dividends? Does that add extra expenses to their fund? They already use their own in-house total is stock market index instead of licensing someone else’s, so I figured the fund is making just enough money to stay profitable without charging clients an expense ratio.

Thanks for the explanation
I wish Vanguard's stock mutual funds would pay out their dividends once a year instead of once a quarter. Is there some reason you prefer quarterly?
What would be the advantage for once a year?
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Re: FZROX vs VTSAX

Post by UpperNwGuy »

DB2 wrote: Thu May 13, 2021 12:55 pm
UpperNwGuy wrote: Thu May 13, 2021 5:47 am
index2max wrote: Wed May 12, 2021 10:10 pm Just for fun, I decided to move over my HSA funds from my employer’s custodian to Fidelity’s individual account.

Decided to put all my money into Fidelity’s zero-expense total us stock fund, FZORX, for simplicity sake. One thing I noticed is that it only pays dividends annually in December, whereas Vanguard’s total us stock market fund, VTSAX, pays quarterly dividends.

Fidelity says they lean on loaning out securities held by FZORX to generate revenue for the fund. Are they stiffing me on dividends the other three quarters each year? Or Fidelity reinvesting them in spring, summer and fall? Why not pay quarterly dividends? Does that add extra expenses to their fund? They already use their own in-house total is stock market index instead of licensing someone else’s, so I figured the fund is making just enough money to stay profitable without charging clients an expense ratio.

Thanks for the explanation
I wish Vanguard's stock mutual funds would pay out their dividends once a year instead of once a quarter. Is there some reason you prefer quarterly?
What would be the advantage for once a year?
Fewer transactions reduces the potential for tax loss harvesting errors.
index2max
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Re: FZROX vs VTSAX

Post by index2max »

Nate79 wrote: Thu May 13, 2021 7:59 am
index2max wrote: Thu May 13, 2021 7:36 am
UpperNwGuy wrote: Thu May 13, 2021 5:47 am
index2max wrote: Wed May 12, 2021 10:10 pm Just for fun, I decided to move over my HSA funds from my employer’s custodian to Fidelity’s individual account.

Decided to put all my money into Fidelity’s zero-expense total us stock fund, FZORX, for simplicity sake. One thing I noticed is that it only pays dividends annually in December, whereas Vanguard’s total us stock market fund, VTSAX, pays quarterly dividends.

Fidelity says they lean on loaning out securities held by FZORX to generate revenue for the fund. Are they stiffing me on dividends the other three quarters each year? Or Fidelity reinvesting them in spring, summer and fall? Why not pay quarterly dividends? Does that add extra expenses to their fund? They already use their own in-house total is stock market index instead of licensing someone else’s, so I figured the fund is making just enough money to stay profitable without charging clients an expense ratio.

Thanks for the explanation
I wish Vanguard's stock mutual funds would pay out their dividends once a year instead of once a quarter. Is there some reason you prefer quarterly?
Well VTSAX current pays more dollars in total dividends per year About $1.2/share in 2020. FZROX only $0.171/share in 2020. Why ~1/4th the payout of VTSAX?

https://investor.vanguard.com/mutual-fu ... ions/vtsax

https://fundresearch.fidelity.com/mutua ... /31635T708
Divide each dividend amount by the share price for each (i.e. dividend yield) and report back to us what you find.
Thanks for pointing that out. For anyone else wanting to compare annual dividend yields (annual dividends/mean revinest price):

2020 FZROX:

$0.171/$13.21 = 1.29%

2020 VTSAX:

$1.3394 (2020 annual dividends)/$77.165 (mean [average] reinvest price = 1.73%

VTSAX is higher in 2020 because of some of the dividends reinvesting in March and June when the market was lower, but Nate79 made his point. The difference is pretty much due to when dividends are reinvested. Otherwise these funds are fairly similar.
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Re: FZROX vs VTSAX

Post by aristotelian »

willthrill81 wrote: Mon Oct 12, 2020 8:02 pm Since the inception of FZROX, the cumulative performance of it and VTSAX, according to M*, is 26.81% and 26.97%. So despite the 4 basis point ER, VTSAX is very narrowly ahead.
Just bumping this for those curious. FZROX appears to have made a comeback in 2021. Per Morningstar:

2021:
FZROX +26.01%
VTSAX +25.71

3 Year Returns:
FZROX +25.54%
VTSAX +25.46%
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Re: FZROX vs VTSAX

Post by willthrill81 »

aristotelian wrote: Wed Jan 05, 2022 10:06 am
willthrill81 wrote: Mon Oct 12, 2020 8:02 pm Since the inception of FZROX, the cumulative performance of it and VTSAX, according to M*, is 26.81% and 26.97%. So despite the 4 basis point ER, VTSAX is very narrowly ahead.
Just bumping this for those curious. FZROX appears to have made a comeback in 2021. Per Morningstar:

2021:
FZROX +26.01%
VTSAX +25.71

3 Year Returns:
FZROX +25.54%
VTSAX +25.46%
I'm interested to know why FZROX has rather suddenly pulled ahead. From M*, it looks like FZROX is very slightly tilted more to large-caps, momentum, low volatility, quality, and higher yield.
The Sensible Steward
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