Don’t Be Swayed

In the Nov 21, 2016 issue of the New Yorker magazine, Fidelity ran this ad:

sp500-vs-fidelity-recommended-fdfax-advertisementsp500-vs-fidelity-recommended-fdfax-advertisement

With an annualized total return of 14.5% over 30 years (1985 – 2015), and a very low risk coefficient, this “Consumer Staples” sector looks like a perfect investment. What to do?

  1. Sell everything and buy just FDFAX?
    (FSTA is only 2.5 years old – they should not have included it in the ad.)
  2. Begin adding FDFAX to the portfolio?
  3. Do Nothing – because S&P500 performs better than FDFAX

The correct action is #3. The S&P500 did outperform FDFAX over the same 30 year period. Here’s proof

sp500-vs-fidelity-recommended-fdfax-consumer-staples

The green line is the S&P500. As we know, VTI has been outperforming the S&P500 . So, do nothing is the correct action.