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I received this letter from Fidelity this morning. Interesting that they are now saying that some major index funds may not be diversified investments. What can you do about it? Invest your portfolio in other funds such as fixed income, international, value, or small cap?
Index Fund Policy Changes
Dear Shareholder,
Effective November 10, 2025, the “Principal Investment Strategies” and “Principal
Investment Risks” sections of the prospectus of each index fund shown in the table
below was modified to indicate that the fund may operate as a non-diversified fund, as
defined under the Investment Company Act of 1940, to the approximate extent the
index is non-diversified.
A non-diversified fund may invest a greater portion of its assets in securities of a smaller
number of individual issuers than a diversified fund. As a result, changes in the market
value of a single investment could cause greater fluctuations in share price than would
occur in a more diversified fund.
Shareholder approval will not be sought when a fund crosses from diversified to non
diversified status due to changes in the relative market capitalization or index weighting
of one or more index constituents.
Please see each fund’s prospectus for additional information.
Fund
Index
Fidelity 500 Index Fund
Fidelity SAI U.S. Large Cap Index Fund
S&P 500 Index
S&P 500 Index
VIP Index 500 Portfolio
Fidelity Total Market Index Fund
S&P 500 Index
Dow Jones U.S. Total Stock Market Index
Series Total Market Index Fund
Dow Jones U.S. Total Stock Market Index
Sincerely,
Fidelity Investments
We use VT Vanguard Total World. My indexing question is why don’t “Total World” indexes actually include all nine investing grids and be the Total World instead of being so large cap dominant
VT follows FTSE Global All Cap Index and the index itself is dominated by large growth companies (the index is designed with market capitalization weighting factor). VT composition is made with over 9,000 stocks, covering all 9 Morningstar style box but not equally. It reflects the world of tradable stocks as it is: the top 10 growth companies dominate the index, and a thin long tail of mid-cap and small-cap stocks; hence, market concentration.
Thank you for the clearer explanation of VT. It does make sense. I’m curious as to what the long term outcome would be if all nine groups were equally weighted 🤔
YW. I am equally curious. Invesco S&P 500 Equal Weight ETF (RSP) is the most famous for being the anti – concentration ETF (looking at you SPY, VOO and other cap-weighted S&P 500 indices). In up years, RSP trails badly behind SPY (2023 SPY up 26%, RSP up 14%). One down year 2022, it suffered less (-12% vs SPY -18%). RSP covers all top 500 companies, but none is allowed to win.