In this work we compare electrochemical cycling stability of Fe containing Li rich phase Li1.2Ni0.13Fe0.13Mn0.54O2 (Fe–Li rich) with the well-known Co containing Li rich composition Li1.2Ni0.13Co0.13Mn0.54O2 (Co–Li rich). During the first charge, the activation plateau corresponding to removal of Li2O from the structure is smaller (removal of 0.6 Li) in the case of Fe–Li rich compared to Co–Li rich composition (0.8 Li removal). Consequently, the Fe compound shows better capacity retention; for example, after 100 cycles Fe–Li rich compound exhibits 20% capacity degradation where as it is about 40% in the case of Co–Li rich phase. The electrochemical and microscopy studies support the fact that compared to Co–Li rich compound, the Fe–Li rich composition display smaller voltage decay and reduced spinel conversion. XPS studies on charged/discharged Fe–Li rich samples show participation of Fe+3/Fe+4 redox during electrochemical cycling which is further supported by our first principles calculations. Also the temperature dependent magnetic studies on charge-discharged samples of Fe–Li rich compound point out that magnetic behavior is sensitive to cation oxidation states and Ni/Li disorder.