The fid extd mkt idx is an index tracking small- and mid-capitalization U.S. stocks, excluding those already in the S&P 500. It provides investors with exposure to the broader market beyond large-cap companies.
The index uses a systematic, rules-based methodology to select and weight stocks. It includes approximately 1,600 stocks, covering about 15% of the U.S. equity market capitalization. The index is rebalanced quarterly to maintain its representation of the extended market.
The fid extd mkt idx primarily includes:
These stocks are selected based on their market capitalization and liquidity, ensuring a representative sample of the extended market.
Investors use the fid extd mkt idx to gain exposure to the broader market, including smaller companies that may have higher growth potential but also higher volatility. It is often used as a benchmark for mutual funds and exchange-traded funds (ETFs) that track small- and mid-cap stocks.
One common misconception is that the fid extd mkt idx includes large-cap stocks. However, it explicitly excludes companies in the S&P 500, which are considered large-cap. Another misconception is that the index is limited to micro-cap stocks, but it actually includes a significant number of mid-cap stocks as well.
In my experience, using the fid extd mkt idx as part of a diversified portfolio has helped achieve a balance between growth potential and risk management. The index's focus on smaller companies can provide higher returns during periods of economic growth, while its diversification across sectors can help mitigate risks.
According to Fidelity Investments, the fid extd mkt idx has historically provided higher returns than large-cap indexes, such as the S&P 500, over the long term. This makes it an attractive option for investors seeking to improve their portfolio's growth potential.