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Duke Economics Working Paper #04-08

Fidelity versus Vanguard: Comparing the Performance of the Two Largest Mutual Fund Families 1

Wei Zheng and Ed Tower

October 25, 2004 draft. Preliminary. Comments invited. Before quoting the paper, please check with the authors to be sure you have the most recent draft. The paper can be found on the Duke Economics Working Paper site with a Google™ search for: Wei Zheng Edward Tower Duke.

Wei Zheng is a graduate student at Duke University . wz3@econ.duke.edu . 919-451-2158.

Edward Tower is a professor of economics at Duke University . tower@econ.duke.edu . 919-332-2264.

Abstract

This paper compares the risk and return of investing in equity mutual funds provided by the world's two largest mutual fund families: Fidelity and Vanguard over a long horizon. We believe this will help guide investors; this study is an example of the calculations that mutual fund companies should facilitate by being required to provide accurate, accessible and free data. Over the entire period 1977 through 2003 both Fidelity's (no load) and Vanguard's diversified U.S. funds out returned the Wilshire 5000 index; Fidelity's portfolio out returned Vanguard's portfolio by 0.62 % per year but under returned it by 0.39 % when risk adjusted.

JEL Classification Codes: G & G2.

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