The Myth of the Fidelity "Dead Accounts" Study: Debunking Conventional Wisdom and Exploring Portfolio Performance

The Myth of the Fidelity "Dead Accounts" Study: Debunking Conventional Wisdom and Exploring Portfolio Performance

Introduction:

There is a long-standing tale in the financial world that Fidelity conducted a study on the performance of different account types and found that the accounts of deceased individuals yielded the highest returns. However, upon closer examination, it becomes evident that this story is more of a myth than a factual study. In this article, we will debunk the Fidelity "dead accounts" study, challenge conventional wisdom, and delve into the performance of various investment portfolios.

The Fidelity "Dead Accounts" Study: A Myth Debunked:

The narrative surrounding the Fidelity "dead accounts" study suggests that the company analyzed the performance of all accounts and discovered that those belonging to deceased individuals consistently outperformed other strategies. However, this concept raises several questions. How many accounts could Fidelity possibly have in the names of deceased individuals? If Fidelity had identified such accounts, why hadn't they reported them to the appropriate authorities? These doubts ultimately lead us to conclude that the Fidelity "dead accounts" study is more fiction than fact.

Questioning Conventional Wisdom:

When faced with claims that challenge conventional wisdom, it is essential to critically analyze the situation. While the Fidelity study may be debunked, we should still explore the possibility that the conventional wisdom it challenges holds some truth. By doing so, we can gain valuable insights into portfolio performance and investment strategies.

Exploring Portfolio Performance:

To test the performance of different investment portfolios, we utilized Morningstar's portfolio tool. We compared the returns of two portfolios: a simple 60/40 portfolio using Vanguard 500 and Vanguard Total Bond Market, and a Boglehead 3-fund portfolio with Vanguard Total International Stock. By analyzing the annual returns and final values for an initial investment of $100,000, we aimed to uncover any patterns or trends in portfolio performance.

Actionable Advice:

• 1. Diversification is Key: Our analysis revealed that diversified portfolios tend to outperform those with a narrow focus. By allocating investments across various asset classes and geographic regions, investors can reduce risk and potentially achieve better long-term returns.

• 2. Regular Rebalancing: The performance of the portfolios was assessed with different rebalancing frequencies, ranging from monthly to no rebalancing at all. It was evident that regular rebalancing could have a positive impact on portfolio returns. This suggests that investors should periodically review and adjust their portfolio allocations to maintain the desired balance.

• 3. Long-Term Perspective: When evaluating investment strategies, it is crucial to take a long-term perspective. Short-term fluctuations and market noise can often lead to hasty decision-making. By focusing on long-term goals and staying disciplined, investors can navigate market volatility and potentially achieve better overall returns.

Conclusion:

While the Fidelity "dead accounts" study may be a myth, it serves as a reminder to question conventional wisdom and critically analyze claims. By exploring portfolio performance and incorporating actionable advice such as diversification, regular rebalancing, and maintaining a long-term perspective, investors can make informed decisions and potentially enhance their investment outcomes. Remember, the key is to approach investment strategies with a discerning eye and rely on evidence-backed insights rather than unfounded myths.