Vanguard vs. Fidelity funds

[NewDay1]

I'm hearing some companies switching their 401K plans - swapping out Vanguard funds for Fidelity funds - as Fidelity is lowering fees to become more competitive with Vanguard.

Anyone experiencing this, or switching their personal investments from Vanguard to Fidelity for this reason?

[terran]

Most of our investments are with Fidelity for simplicity since our employer plans are there, but the employer plans are actually invested in Vanguard funds despite being at Fidelity. I would be comfortable with either or both Vanguard or Fidelity.

Here's a good source for equivalents of Vanguard funds available at Fidelity: https://www.bogleheads.org/wiki/Fidelity

[dragoncar]

Not even just fidelity.  I’ve gotten two separate changes in providers (from different former employers) in the last month so something is amiss.  Never had a change in administrator before in the last couple decades.

One does have a lot of fidelity options as replacements for vanguard options.  To me, it’s annoying that they can swap this stuff out at all.  Some of the more exotic funds (which I don’t use) were swapped for some BS life strategy fund.  I would be really pissed if I was counting on some specific active fund that got hosed.

One of the accounts now charges like $30/year in records fees regardless of account value.  This is in addition to the regular ER... they just decided to break out records fees because it’s more fair or something

Has regulation recently changed to encourage employees to change their administrators?

Honestly it seems short sighted to switch to fidelity right now.  I have a feeling vanguard will respond to the price pressures. 

[MustacheAndaHalf]

When you have 0.01% differences in expense ratios of two index funds, it isn't always the cheaper one that has the best performance.  For example, VTI (expense ratio 0.04%) beats SCHB (expense ratio 0.03%) slightly.  Both are total stock market index funds.  But that's a bit of a nitpick either way.

Fidelity, Schwab, iShares and Vanguard total stock market index funds/ETFs should all perform about the same.

[seattlecyclone]

The competition in the industry is driving everyone to lower their fees. That's a great thing for us investors. I'm still on "team Vanguard" because I think their unique ownership structure is more likely to make them keep their fees low for the long term, even if index funds go out of style and stop being something management sees as a worthwhile loss leader.

Long-term fees are a big deal in a taxable account where switching from one provider to another can be extremely costly, but are less important in a retirement account. You can always switch your funds tax-free in those accounts if Fidelity or Schwab ever decide to start making money off their index funds again.

[Huskie87]

Be careful, the lowest fee fund isn't always best.  Take Fidelity ZERO funds for example, they're free!  Except that they intentionally hold excess which creates a drag on performance, and net of fees they underperform Vanguard.  Vanguard isn't a for-profit company like Fidelity or Schwab, they're a mutual.  If low-cost indexing is your thing, you can't go wrong with Vanguard.

[Car Jack]

Be careful, the lowest fee fund isn't always best.  Take Fidelity ZERO funds for example, they're free!  Except that they intentionally hold excess which creates a drag on performance, and net of fees they underperform Vanguard.  Vanguard isn't a for-profit company like Fidelity or Schwab, they're a mutual.  If low-cost indexing is your thing, you can't go wrong with Vanguard.

I hold many "total US stock" funds and ETFs.  Sorry, but thus far, FZROX has edged out all of my other investments.  By pennies, but the statement that they're somehow dragging isn't correct.  Time periods are going to matter.  I watch both of my Fidelity funds, FZROX and FSKAX along with SCHB, VTI and SPTM.  The differences between any of them is a big "who cares?".

To the OP, I would not have any problems with swaps between good Vanguard and good Fidelity funds.  Be happy you're not stuck with Mass Mutual or NY Life funds.

[Huskie87]

Be careful, the lowest fee fund isn't always best.  Take Fidelity ZERO funds for example, they're free!  Except that they intentionally hold excess which creates a drag on performance, and net of fees they underperform Vanguard.  Vanguard isn't a for-profit company like Fidelity or Schwab, they're a mutual.  If low-cost indexing is your thing, you can't go wrong with Vanguard.

I hold many "total US stock" funds and ETFs.  Sorry, but thus far, FZROX has edged out all of my other investments.  By pennies, but the statement that they're somehow dragging isn't correct.  Time periods are going to matter.  I watch both of my Fidelity funds, FZROX and FSKAX along with SCHB, VTI and SPTM.  The differences between any of them is a big "who cares?".

To the OP, I would not have any problems with swaps between good Vanguard and good Fidelity funds.  Be happy you're not stuck with Mass Mutual or NY Life funds.

$10,000 invested in FZROX on 8/2/2018 when the product was created has turned into $10,625.75.  Same investment into VTI is now $10,696.31.  Investing with Vanguard would have made you an extra $70.56 in less than a year.  $70 on a $10,000 investment is 70 basis points.  If you project earning somewhere around 6%/year in retirement, an extra 0.70% will have a significant difference on outcomes.

The difference is the cash holding, this gap will only grow over time.

*EDIT - my apologies, I'm wrong on this one.  The data above is accurate, but the majority of the outperformance occurred on the first day.  Something to do with Fidelity's trading on the first day I'm sure.  FZROX only has 0.29% in cash, and has performed relatively in-line with VTI after that first day, $8 of outperformance for Vanguard.  Watch out though, they aren't all the same.  FZILX, the international version, has 6.07% in cash.

[MustacheAndaHalf]

FZROX and VTI look equivalent to me over the past 3 quarters.  If you view the performance data for FZROX on Morningstar, you can compare it to VTI on that screen:
http://performance.morningstar.com/fund/performance-return.action?t=FZROX

In 2018 Q3, FZROX lost -14.31% while VTI lost -14.20%.  So FZROX was -0.11% behind in the first quarter, and then only ahead of VTI by +0.01% in 2018 Q4.  In 2019 Q1 they are exactly tied.

Maybe the story changes when Morningstar fills in 2019 Q2 data, but right now it looks like VTI performed +0.10% better than FZROX over 9 months.

[Tyler durden]

Both are great shops and you can’t go wrong with either

If there is a fidelity anywhere near you I’d give the nod to them. Sometimes you just want to be able to sit down with someone even if it’s just a service issue. You can’t do that at vanguard

[Car Jack]

Be careful, the lowest fee fund isn't always best.  Take Fidelity ZERO funds for example, they're free!  Except that they intentionally hold excess which creates a drag on performance, and net of fees they underperform Vanguard.  Vanguard isn't a for-profit company like Fidelity or Schwab, they're a mutual.  If low-cost indexing is your thing, you can't go wrong with Vanguard.

I hold many "total US stock" funds and ETFs.  Sorry, but thus far, FZROX has edged out all of my other investments.  By pennies, but the statement that they're somehow dragging isn't correct.  Time periods are going to matter.  I watch both of my Fidelity funds, FZROX and FSKAX along with SCHB, VTI and SPTM.  The differences between any of them is a big "who cares?".

To the OP, I would not have any problems with swaps between good Vanguard and good Fidelity funds.  Be happy you're not stuck with Mass Mutual or NY Life funds.

$10,000 invested in FZROX on 8/2/2018 when the product was created has turned into $10,625.75.  Same investment into VTI is now $10,696.31.  Investing with Vanguard would have made you an extra $70.56 in less than a year.  $70 on a $10,000 investment is 70 basis points.  If you project earning somewhere around 6%/year in retirement, an extra 0.70% will have a significant difference on outcomes.

The difference is the cash holding, this gap will only grow over time.

*EDIT - my apologies, I'm wrong on this one.  The data above is accurate, but the majority of the outperformance occurred on the first day.  Something to do with Fidelity's trading on the first day I'm sure.  FZROX only has 0.29% in cash, and has performed relatively in-line with VTI after that first day, $8 of outperformance for Vanguard.  Watch out though, they aren't all the same.  FZILX, the international version, has 6.07% in cash.

I decided to do a little experiment and so I split my equity position at Fidelity on August 6th of last year.  As of yesterday (Fidelity doesn't update until about 7:30pm eastern following the trading day):

FSKAX:  $326,306.28
FZROX:  $326,458.02

So like I said....time periods matter.  It's my understanding (I haven't actually checked) that FZROX dropped a bunch in its first couple days.  I'm keeping both positions as from what I see in real life, in my own account (rollover IRA), it really doesn't matter and any "drag" is meaningless in the actual numbers.  Going forward, what's going to happen?  I'd tell you but my crystal ball is down for a new timing belt today.