FLVEX: Large-Caps in Your Lazy Portfolio
Fidelity’s Alternative to Vanguard’s VVIAX.
When it comes to building a 3-fund portfolio, Vanguard is a go-to choice for many investors due to its low-cost and diversified funds. However, Fidelity also offers competitive options that can be just as effective. One standout is Fidelity Large Cap Value Enhanced Index Fund (FLVEX), which gives U.S. stock market exposure similar to Vanguard’s offerings but with a unique Fidelity edge.
Why Choose Fidelity FLVEX Over Vanguard?
FLVEX is Fidelity’s response to Vanguard’s total market funds, particularly VTI (Vanguard Total Stock Market ETF). While both track the U.S. stock market, FLVEX focuses on large-cap value stocks with an enhanced indexing approach that seeks to outperform the broader market slightly. Here’s why you might consider it:
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Competitive Fees: Like Vanguard’s ETFs, FLVEX has very low expense ratios, keeping your investment costs manageable. Fidelity’s strong commitment to low fees makes it a viable alternative for investors who already have accounts there.
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Enhanced Indexing: FLVEX doesn’t just passively track an index; it uses a strategy to slightly tilt towards undervalued large-cap stocks. For investors who believe in value investing but don’t want the hassle of picking individual stocks, this offers a built-in advantage.
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Broad U.S. Exposure: While FLVEX is large-cap focused, it aligns well with the 3-fund portfolio approach, covering a major asset class and balancing out well with international and bond funds.
FLVEX vs. VVIAX: Fidelity vs. Vanguard for Large-Cap Value
If you’re comparing FLVEX directly to Vanguard’s Value Index Fund Admiral Shares (VVIAX), here are some key differences to consider:
| Feature | FLVEX | VVIAX |
|---|---|---|
| Management Style | Enhanced Indexing | Passive Indexing |
| Expense Ratio | 0.39% | 0.05% |
| Strategy | Focus on undervalued large-cap stocks | Tracks CRSP US Large Cap Value Index |
| Objective | Slight outperformance of the market | Replicate benchmark performance |
FLVEX employs an enhanced indexing strategy, using active management techniques to slightly outperform its benchmark, while VVIAX is passively managed to closely replicate its index with minimal costs. Investors who prefer active elements and already use Fidelity might favor FLVEX, while Vanguard’s low-cost, fully passive approach in VVIAX could be ideal for expense-conscious investors.
Balancing FLVEX with Other Fidelity Funds
Building a complete 3-fund portfolio with Fidelity funds allows you to stay within one brokerage while accessing similar diversification as a Vanguard portfolio. Here’s how you might structure it:
| Asset | Fund | % |
|---|---|---|
| U.S. Stocks | Fidelity Large Cap Value Enhanced Index Fund (FLVEX) | 40% |
| International Stocks | Fidelity Total International Index Fund (FTIHX) | 30% |
| Bonds | Fidelity U.S. Bond Index Fund (FXNAX) | 30% |
This setup mirrors the classic 3-fund portfolio and provides exposure to large-cap U.S. stocks, international markets, and U.S. bonds.
Why This Allocation?
- U.S. Stocks (FLVEX): The 40% allocation gives you substantial exposure to the U.S. market. FLVEX’s value-tilted, enhanced strategy aims for better long-term returns without increased volatility.
- International Stocks (FTIHX): Fidelity’s Total International Index Fund offers comprehensive coverage of developed and emerging markets, ensuring global diversification.
- Bonds (FXNAX): Bonds provide stability, and Fidelity’s U.S. Bond Index Fund offers broad exposure to the U.S. bond market at a low cost, a crucial buffer for market downturns.
How Does It Compare to Vanguard’s 3-Fund Portfolio?
While Vanguard’s 3-fund approach (e.g., VTI, VXUS, and BND) remains popular, Fidelity’s 3-fund version with FLVEX, FTIHX, and FXNAX is competitive, particularly for those already invested in Fidelity. Additionally, the enhanced strategy of FLVEX may appeal to investors interested in a slight value tilt.
Rebalancing and Long-Term Strategy
As with any 3-fund portfolio, rebalancing yearly can help you stay aligned with your risk tolerance. For example, if FLVEX grows significantly, shifting some gains into bonds (FXNAX) can help keep your portfolio balanced without taking on extra risk.
Conclusion
Fidelity’s FLVEX can be a solid substitute for Vanguard’s total market funds in a 3-fund portfolio, especially if you prefer Fidelity’s platform. This approach keeps costs low, offers broad market exposure, and provides a slight value tilt—making it an attractive choice for long-term investors focused on financial independence.
Choosing between Vanguard and Fidelity ultimately comes down to personal preference, access, and whether you value Fidelity’s enhanced indexing approach. If so, Fidelity’s 3-fund portfolio with FLVEX could be an excellent fit.
FAQ
Q: What assets does FLVEX track?
The Fidelity Large Cap Value Enhanced Index Fund (FLVEX) primarily invests in common stocks of large-cap companies that are part of the Russell 1000® Value Index. This index represents the large-cap value segment of the U.S. equity market.
Q: Is FLVEX a good investment?
FLVEX offers exposure to large-cap value stocks, which can be beneficial for investors seeking capital appreciation with a value-oriented approach. However, its expense ratio of 0.39% is higher than some comparable funds, such as the Vanguard Value ETF (VTV), which has an expense ratio of 0.04%. Additionally, FLVEX’s dividend yield has varied over time, with a recent annual dividend of $1.12 per share, yielding 7.81%. As with any investment, it’s important to consider your individual financial goals and risk tolerance.
Q: What is the expense ratio for FLVEX?
The expense ratio for FLVEX is 0.39%.
Q: Does FLVEX pay dividends?
Yes, FLVEX pays dividends. As of November 14, 2023, it had an annual dividend of $1.12 per share, yielding 7.81%.
Q: Is Fidelity better than Vanguard?
Both Fidelity and Vanguard are prominent investment firms, each with its own strengths. Fidelity offers a wide range of investment options, including actively managed funds and robust trading platforms, catering to both passive and active investors. Vanguard is renowned for its low-cost, passive index funds and is particularly favored by long-term, buy-and-hold investors. The choice between the two depends on individual investment preferences, goals, and the specific services one values.
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Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investing involves risks, including the possible loss of principal. Always conduct your own research before making investment decisions.