How Do I Compare FSTMX to VTSMX?

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Both Fidelity Spartan Total Market Index (FSTMX) and Vanguard Total Stock Market Index (VTSMX) are examples of index funds, specifically, total market index funds. Comparing between the two requires analysis of various performance and risk metrics, something that Internet databases that allow you to cross-reference different stocks, bonds, ETFs and mutual funds has made a bit easier. To directly compare two funds, you need to assess their goals to determine which metrics are most relevant.

Click "Start," "Internet Explorer." Navigate to the Smart Money Fund Compare tool (see Resources for link) and type "FSTMX, VTSMX" in the ticker and hit "Enter." If the Java tool doesn't work, click "Click here" for the HTML version. Alternatively, navigate to the website of each fund (see links under References).

Look at the types of stocks both funds are made of. Notice that both funds are made of multi-cap growth and income oriented stocks. This assumes you're interested in growing money long term while having enough of a return to provide some income. Multi-cap funds are more volatile than other index funds, allowing for the potential of smaller investments to make bigger returns in a relatively short amount of time.

Compare the management and history sections. The VTSMX was founded sooner and has successfully rode out multiple market shifts with the same management. Both stocks trade at a similar daily NAV (price per share of the fund), but VTSMX has a much larger asset pool. This indicates a more mature and therefore more conservative investment because a larger amount of data to reference usually translates into less risk.

Analyze initial investment, turnover and expense ratio to determine risk tolerance. The FSTMX is run by a management team of fund professionals. The scale of this funds' management is reflected in the high entry barrier of a $10,000 initial investment versus $3,000 for VTSMX. This also reflects in the higher turnover, or trading activity, of FSTMX. This means that FSTMX is managed more aggressively than VTSMX, creating greater risk and greater potential for short term gains.

Tips

  • In most respects, the two funds are remarkably similar in yield, rating and returns. The most relevant comparison between these two funds is risk tolerance and initial investment. Both have outperformed their indexes, but manage differently to achieve similar results over the long term.

References

About the Author

Based in the New York City Metro area, James Woudon began writing in 1999. He is a former editor of the college publication, "John Doe Comics." Woudon holds a Bachelor of Arts in communications from Rutgers University.

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