If the s&p500 did .95% today, why did my s&p500 mutual fund, FXAIX, only do .60%?
Thank you in advance!
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I’m guessing because the data gets reported and posted a day later than it actually happens
Hey Roman!
Good question! The answer isn’t super obvious but I think I know why. For starters, you’re not crazy. If you look at this performance of FXAIX vs the S&P 500, they are usually in lockstep within 0.01% each day, but on 12/10 it did underperform by about 0.23% as shown in this google finance screenshot:
I believe the answer comes down to one word: Dividends! Over the course of the year the companies held inside the FXAIX mutual fund pay dividends. The fund collects that cash and reinvests it internally. Those dividends and the growth of the reinvested shares is reflected in the share price of FXAIX. But the fund doesn’t keep the dividends forever. FXAIX happens to have a quarterly dividend schedule. Once a quarter, the fund pays out the accumulated dividends from all the companies with in back to the owners of FXAIX. That of course costs a lot of money and that payout is reflected as a drop in the share price of FXAIX.
So on this day 12/10/21 while the share price underperformed by about 0.23% you got a dividend of $0.583 per share. On that day the share price was $163.33. So you got cash making up about 0.35% that day!
You can see FXAIX’s dividend history here:
https://fundresearch.fidelity.com/mutual-funds/fees-and-prices/315911750
Hope that makes sense?!
Wow yeah that makes a lot of sense. You’re the best thank you
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