I’ve looked online and compared the 10 year history of Fidelity’s S&P 500 (FXAIX) to their TDIF 2060 (FDKLX) and it seems that the FXAIX has outperformed the FDKLX by a noticeable amount (~$6,000). I think I am confusing myself, but isn’t the S&P 500 within the TDIF?
Would it make sense to buy both the FXAIX and the FDKLX or is it redundant?
Hi @hterry7!
It’s a good question - one that a lot of people have been asking recently. The S&P 500 is made up of large U.S. companies. Target Date Funds are much more diversified. In addition to owning large U.S. companies, they own small U.S. companies, international companies, and bonds. Over the last 10 years, large U.S. companies have outperformed almost everything. Will this continue over the next handful of years? Unfortunately, no one knows. We did have a post (please see below) just over a year ago that shows a chart of U.S. stocks vs International stocks - it shows how they take turns outperforming, but timing this is not possible.
I hope this is helpful! Let us know if there are any other questions!!