

Ask YC: Enhanced Index Funds - chwolfe

Fidelity offers these so called "Enhanced Index Funds" that claim to offer better returns than a traditional Index fund. According to their site, "The funds' managers use computer-aided, quantitative analysis of historical valuation, growth, profitability, and other factors to select a broadly diversified group of stocks that may have the potential to provide a higher total return than that of the benchmark index." Doesn't this defeat the point of an index fund and is more like a traditional mutual fund or am I missing something?
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noodle
the point of an index fund is to buy and hold a specific group of stocks for a
long period. because of this, it means that you don't have to pay much to own
the fund, because its not being actively managed.

enhanced index funds do a little more shifting around, from what i can tell,
and because of that, the expense ratio is higher. based on the (admittedly
cursory) research i did on enhanced index funds, they don't really provide you
any truly better performing stock picks, but they do provide you with some
different ones.

they're slightly more like traditional mutual funds, but only a bit.

edited to add: save your money and just buy normal index funds, unless you
have some serious money and really want to diversify.

