Net asset values aren't best way to compare funds

I am trying to compare Fidelity Spartan 500 Index with Vanguard 500 Index. Why are the NAVs (net asset values) for these two funds so different? Their expenses and holdings are pretty similar.

It's good to see you are comparison-shopping. But, it turns out, focusing on NAVs won't tell you much about a fund.


A fund's NAV is its "price per share." To calculate NAV, the fund company adds together the underlying value of all the securities in a fund's portfolio, subtracts the fund's expenses and then divides by the number of fund shares.

Armed with a definition of NAV, let's return to the question. As their names suggest, Fidelity Spartan 500 Index (FSMKX) and Vanguard 500 Index (VFINX) are index funds that mimic the S&P; 500. As a result, the funds should own identical stocks and behave nearly identically.


Very different NAVS

But these two funds have very different NAVs. As of the end of June, Fidelity Spartan 500 Index had an NAV of $67.25, while Vanguard 500 Index had an NAV of $90.02. What gives? With its lower NAV, is Fidelity Spartan 500 an inferior performer? Or is Fidelity Spartan 500 Index a better bargain because its NAV is lower?

The answer to both questions is a resounding "no." In fact, the funds' differing NAVs don't mean much of anything. Their NAVs are different because of a couple of logistical issues.

For one thing, the Fidelity Spartan fund and the Vanguard fund started at different times and at different initial NAVs. (There are no set standards for what a fund's starting NAV must be, but $10 is common.)

According to our data, Fidelity Spartan 500 Index began life in 1990 at an initial NAV of $25. Vanguard 500 started way back in 1976 at an NAV of $14.14. Those different starting points will mean that the funds won't necessarily share the same exact NAV at any time.

Different timing

Moreover, a fund's NAV can fall if a fund pays out capital gains. Thus, funds can follow identical strategies - as these two index funds do - but the timing of purchases and sales may not be exactly the same. This can result in one fund paying out a capital gain while the other does not. As a result, the funds' NAVs may differ somewhat.

Instead of using NAVs to compare the two funds' performance, you should use total returns. Total returns give investors a much clearer picture of how two similar funds perform over time.


Over the trailing 10 years through June 30, Vanguard 500 has returned 9.97 percent, while Fidelity Spartan 500 has returned 9.80 percent. Thus the performance difference is actually pretty small - although the Vanguard fund does enjoy a slight lead.

In its early years, the Fidelity fund was somewhat more expensive, which might explain why it has lagged behind the Vanguard 500 fund.

Futures strategy

Moreover, Vanguard 500's manager, Gus Sauter, has managed his fund's small cash stake using futures, which has sometimes helped him to meet - or even beat - his benchmark. Together, these factors have given the Vanguard 500 a small leg up over the Fidelity fund, although both are good, low-cost index options.

In general, investors should focus more on total returns than NAVs when evaluating mutual funds' performance. And, of course, investors should also consider such issues as expenses, manager tenure, investing style, volatility and after-tax results.