Vanguard and Fidelity Domestic Active Stock Funds: Both Beat their Style Mimicking Vanguard Index Funds, & Vanguard Beats by More

Abstract

This paper contrasts the return of Vanguard and Fidelity active stock mutual funds with the style-mimicking portfolio of Vanguard’s index funds. Vanguard’s equally-weighted portfolio of domestic active funds out-returns the portfolio of Vanguard index funds with the same style, as does Fidelity’s active-fund portfolio. The superiority of Vanguard active to Fidelity active is roughly equal to the excess of the average Fidelity expense ratio over Vanguard’s. The equally-weighted Fidelity index-fund portfolio under-returns the same-style Vanguard index-fund portfolio even though its expenses are slightly lower.

Keywords: Vanguard mutual funds, Fidelity, active management, index mutual funds

JEL Classification: G11, G14