I happened to be listening to somebody talk and they were talking about how they loved the Fidelity Zero fund and how the performance was so good.
The Fidelity Zero Total Stock Market fund in 2021 did 26.01%. The Vanguard Total Stock Market Fund did 25.71%. So you could say, "wow, this Fidelity Fund outperformed the Vanguard Total Stock Market fund by 30 basis points (0.3%) in 2021. If you thought it was the same index, you would say, "these people at Fidelity are rocket scientists. Look at how much value they're adding."
But that's not what happened. What happened was the Fidelity Zero fund follows a different index; they follow a broad market index, which only digs down to the top 2,500 stocks.
So you had bigger, average market capitalization. So therefore, in a year when large-cap stocks outperform small-cap and mid-cap, that broad market index, the Fidelity total market index that they use, which is 2,500 stocks would have outperformed a CRSP index or an S & P total Stock Market index or a Dow Jones Total Stock market index, which has 4,000 stocks in it. You would expect that to happen, and that's exactly what happened.
So, if you're gonna look at these things from a performance standpoint and say, " I'm gonna pick my total stock market index fund based on performance," you're gonna hone in on the Fidelity Zero and you're gonna hone in on the Schwab broad market index, which did 25.8%, so about 12 basis points better. They you'll say, "gee, that Vanguard fund, that's really not any good. It really doesn't even perform as well as that Schwab fund of the Fidelity fund."
Yes, it does. It's just that it's a different index. By understanding how the underlying indexes work - and what's in it and what's not in it - it'll tell you an awful lot. And exactly what we were seeing in the performance last year is exactly what I would've expected.