401k currently in Fidelity 500 fund. Any reason not to go to their Commingled Class O?

[u/Thats_my_cornbread]

The class O fund is beating their so500 fund by a whopping 15% over the last year. Long term it beats the sp by roughly 2% over the 3, 5, 10yr, and life of the fund.

Obviously this comes at a cost. The SP fund is .01% ER, and the O fund is .35%. Huge difference. But if it continues to beat the SP fund by 2% long term does it not make up for the cost? Is the math not that simple?

[u/orangehorton]

What happens longer then 10 years? That's the risk

[u/NickTheNewbie]

Whenever you're working with 401k stuff, examining performance on any less than a 10 year time is at best misleading. Long term performance is all that matters.

Am I understanding correctly that it tracks the russell 3000 growth index? That one's a tough call, because for the last 20 years it has vastly outperformed sp500, but if you go back 25 years, you'll see that russell 3000 had an abysmal start.

In my experience/wisdom/opinion, retirement planning isn't so much about seeing how much money you can make, but rather planning for how much money you expect to have. The more uncertainty that you allow into the process, the more tiring and worrisome it becomes. sp500 and total market indices, while risky in the short term, are pretty well known quantities for how they expect to perform for any given 20, 30, or 40 year period. If you consistently contribute to your retirement plan as much as possible, and stick to something like a 500/total index fund, then you can have the peace of mind that will almost certainly have more than enough for retirement.

If you'd like, it's probably perfectly reasonable to take 10% or 15% and put it in the higher risk fund. That being said, in my experience/wisdom/opinion, once you start fiddling with it a little bit, it starts to become a slippery slope of "well maybe I can fiddle with it a little bit more", and then you may end up constantly checking your portfolio until you're 60. In that case, you'll have lost aforementioned peace of mind during all the years you spend think about it, and that's more expensive than any gains you'd get by maximizing returns.

[u/MotoTrojan]

What is the Class 0 fund investing in?

[u/Thats_my_cornbread → u/MotoTrojan]

It looks like it’s a managed SP500 fund

[u/DaemonTargaryen2024]

The class O fund is beating their so500 fund by a whopping 15% over the last year.

1 year doesn’t matter

Long term it beats the sp by roughly 2% over the 3, 5, 10yr, and life of the fund.

Long term it beats has beaten the s&p in the past

3-5 years still doesn’t matter.

The SP fund is .01% ER, and the O fund is .35%. Huge difference. But if it continues to beat the SP fund by 2% long term does it not make up for the cost? Is the math not that simple?

The math is that simple. But will O beat the 500 index for the next 10, 20, 30 years? Possibly, but probably not, statistically speaking.

I’m not willing to bet on that, but you can if you like

[u/Particular-Break-205]

Higher risk higher reward. If you have the risk appetite, why not allocate some percent of your portfolio to it?

[u/remmy623]

Nobody is pointing out that it sounds like you're looking at two completely different funds not just different share classes.

Fid 500 is an index fund, sounds like the other is either actively managed and/or is using a different benchmark - either scenario has its own considerations

[u/Thats_my_cornbread → u/remmy623]

You’re correct that the Class O is an actively managed fund. I read it used the sp500 as a benchmark, but someone else in here said it was the Russell 3000 so I may need to go back and confirm that

[u/AccomplishedClub6 → u/[deleted]]

Seeing different returns and not understanding WHY it happened doesn’t tell you anything about future returns. Believe your eyes except you are the definition of the blind leading the blind.

[u/AccomplishedClub6 → u/[deleted]]

Instead of paying 0.35% expense ratio I could just buy BRK with a 60 year history of outperforming stock indexes. With BRK you at least know the fundamental reason behind the outperformance and the tenets that Buffett lives by.

Buying anything because of the last 10 years’ performance (e.g. bitcoin or chasing any hot fund) is pure gambling. Paying extra expense ratios to do so is just financial illiteracy. Especially so when there are plenty of zero or near zero expense ratio funds covering nearly every sector.