Help me understand Index Fund price drop!

[philli14]

Hi all,

I don't normally keep a close eye on my investments, but logged into Fidelity and happened to notice a big drop that didn't match up with how the market did as a whole. I hold two different indexes at Fidelity, FZROX (total market) and FSPSX (international). On a day where the market was pretty benign (Using S&P as the benchmark), my portfolio took a big hit, bigger than I thought should be reasonable for what I am invested in.

FZROX dropped in price from 11.28 to 11.11 (a drop of 1.51%) and FSPSX dropped from 43.51 to 42.51 (a drop of 2.30%).

Is there a reasonable explanation for this? Anything I should be concerned about? My current best theory is that dividends are set to be paid soon and that the drop accounts for the loss in value secondary to paid out dividends, but I would love correction/confirmation from people much more educated than I am.

Thanks in advance!

[habanero]

dont know about the US but my local ETF quite often shows prices that are out of the sync with the market. It's generally a cockup in my brokers system, it might display a price at which the ETF never traded that day, but it normally normalizes the next day. As opposed to the US my ETF is quite illiquid so it might not even trade on a given day if the market doesn't do anything so there is probably some glitch in the system when the contract never trades and there is no last price to base the reval off.

If you own an ETF from Fideelity tracking the S&P 500 or whatever there is no need to worry. It tracks the market as close to perfectly as you can get and any discrapencies in end-of-day valutation is most likely just some software hickup.

As companies do not pay dividends on the same day and the dividend yield of the S&P 500 is quite low that's unlikely to be the explanation, and regardless the value of an ETF shoudl reflect the underlying securities at any point in time.

As for the international ETF it depends on when the reval is. Markets close at different times around the globe and the data you see might just not be updated.

[ixtap]

If you do the research on the fund through the fidelity links (click on the fund name in your portfolio), you will see that there is an ex dividend date (usually a Friday for all of my funds) and a dividend date (usually three days later). The ex dividend date is the date that the fund starts trading with the dividend removed from the value. However, the dividend is not actually distributed until the dividend date.

That is to say, wait to see what happens Monday. Then you can even click on a fidelity home page link without logging in and scroll through the various funds to see if yours made a Monday distribution.

[Brother Esau]

Mutual funds issue distributions at this time each year (well, other times during the year also). I track my investments with Quicken and before I know about the distribution, I'll see a fund drop by 2 - 4% in a day when the markets are flat or up. After the initial WTF!!! I check with the particular fund and see that they have issued a dividend for the same amount that my fund is down.

[mjr]

Both those funds you mention went ex-dividend on the 13th of December.

[Frankies Girl]

This is completely normal and expected. Happens in April (small) and December (big un) each year. Look at the fund's fees and distributions tab for any fund you hold and it should tell you the last several years' worth of dividend/cap gains distribution percentages and the dates.

They are dropping the individual share price and then buying back in to it, so the price will end up being the same more or less once the dust settles. Just don't panic and think this is some horrible glitch... ;)

If you have dividends/cap gains set to automatically reinvest, they'll repurchase (reinvest) on Monday, at the new lower price per. If you don't, then you'll have cash sitting in your account as of the settlement date (so end of day Monday december 16th). Basic account worth/$ will be the same tho.

And for what it's worth, they always announce this stuff early. They have a banner at the top of the webpage: https://www.fidelity.com/mutual-funds/information/distributions#/?table=actuals

It's not totally accurate as far as the percentages at this time (updated throughout the month), but it can tell you the sell date/settlement date.

Also expect a possible hail mary short term cap gain distribution the last day or two before the end of the year. Doesn't always happen, but is possible.

Not important for anything held inside a tax deferred account, but if you have dividends/cap gains generated in a taxable investment account, you'll need to prepare for that as taxable income generated even if you reinvested it all, and plan accordingly.

[philli14]

This is completely normal and expected. Happens in April (small) and December (big un) each year. Look at the fund's fees and distributions tab for any fund you hold and it should tell you the last several years' worth of dividend/cap gains distribution percentages and the dates.

They are dropping the individual share price and then buying back in to it, so the price will end up being the same more or less once the dust settles. Just don't panic and think this is some horrible glitch... ;)

If you have dividends/cap gains set to automatically reinvest, they'll repurchase (reinvest) on Monday, at the new lower price per. If you don't, then you'll have cash sitting in your account as of the settlement date (so end of day Monday december 16th). Basic account worth/$ will be the same tho.

And for what it's worth, they always announce this stuff early. They have a banner at the top of the webpage: https://www.fidelity.com/mutual-funds/information/distributions#/?table=actuals

It's not totally accurate as far as the percentages at this time (updated throughout the month), but it can tell you the sell date/settlement date.

Also expect a possible hail mary short term cap gain distribution the last day or two before the end of the year. Doesn't always happen, but is possible.

Not important for anything held inside a tax deferred account, but if you have dividends/cap gains generated in a taxable investment account, you'll need to prepare for that as taxable income generated even if you reinvested it all, and plan accordingly.

Great. Thanks to you all for your answers!

[ColoAndy]

That's correct.  Dividends from Fidelity Total market were dropped into my 457 account on Saturday.