Author Topic: Zero Fee index funds at fidelity?  (Read 6192 times)

wirednuke83

  • 5 O'Clock Shadow
  • *
  • Posts: 26
Zero Fee index funds at fidelity?
« on: August 01, 2018, 09:46:59 AM »

FIRE@50

  • Bristles
  • ***
  • Posts: 310
  • Age: 40
  • Location: Maryland
Re: Zero Fee index funds at fidelity?
« Reply #1 on: August 01, 2018, 09:49:26 AM »
There must be a catch right?

wirednuke83

  • 5 O'Clock Shadow
  • *
  • Posts: 26
Re: Zero Fee index funds at fidelity?
« Reply #2 on: August 01, 2018, 09:52:46 AM »
Yea, thats what I'm thinking too. Unless they're just hoping a whole bunch of dumb people hook up to their managed portfolio program to buy the zero fee index fund?

soccerluvof4

  • Magnum Stache
  • ******
  • Posts: 3380
  • Location: Artic Midwest
  • Retired at 50
    • My Journal
Re: Zero Fee index funds at fidelity?
« Reply #3 on: August 01, 2018, 10:55:16 AM »
I'm sure there is some bait and switch to this and or some testing of a sample group that says if they offer this for -0- dollars they will end up with more profits over here for ?$'s...

terran

  • Handlebar Stache
  • *****
  • Posts: 1493
Re: Zero Fee index funds at fidelity?
« Reply #4 on: August 01, 2018, 11:03:29 AM »
Here's an ongoing bogleheads thread with more discussion: https://www.bogleheads.org/forum/viewtopic.php?t=255356

appleshampooid

  • Stubble
  • **
  • Posts: 130
  • Relentless Snacker
Re: Zero Fee index funds at fidelity?
« Reply #5 on: August 01, 2018, 11:07:34 AM »
Interesting. Both mine and my wife's 401(k) plans are through Fidelity. Immediately I am curious if these funds will be added eventually to our available options. Probably not, considering that neither of us have access to even a total stock market fund.

But secondarily, depending on how this shakes out I may consider rolling over my wife's 401(k) to IRAs at Fidelity instead of Vanguard. Which pisses me off to some extent, since I like to keep things as simple as possible by reducing the number of accounts, not increasing.

wirednuke83

  • 5 O'Clock Shadow
  • *
  • Posts: 26
Re: Zero Fee index funds at fidelity?
« Reply #6 on: August 01, 2018, 11:10:25 AM »
It looks like they must have found another way to make a profit. My company's 401k is also through Fidelity, curious to see how it plays out.

appleshampooid

  • Stubble
  • **
  • Posts: 130
  • Relentless Snacker
Re: Zero Fee index funds at fidelity?
« Reply #7 on: August 01, 2018, 11:23:07 AM »
It looks like they must have found another way to make a profit. My company's 401k is also through Fidelity, curious to see how it plays out.
I read that it won't be available in 401(k) plans, only to direct investors. Hearsay at this point since I can't find a link.

I'm not an expert in the behind-the-scenes stuff regarding index funds, but I guess they can make money via securities lending. But Vanguard funds do this as well, and pass the profits through to the fund itself.

Tyler

  • Handlebar Stache
  • *****
  • Posts: 1099
Re: Zero Fee index funds at fidelity?
« Reply #8 on: August 01, 2018, 11:43:31 AM »
I'm not an expert in the behind-the-scenes stuff regarding index funds, but I guess they can make money via securities lending.

Exactly. 

Virtually all index funds already profit in some way from securities lending and they each publicly justify it in different ways.  Fidelity is just upping the ante by not also charging its clients a fee on top of the money they're already making behind the scenes.  I imagine more funds will follow suit and we'll all benefit in the long run.  While I'm personally not a fan of securities lending in general, this is positive news in the overall trend towards lower fees. 
« Last Edit: August 04, 2018, 11:07:38 AM by Tyler »

protostache

  • Pencil Stache
  • ****
  • Posts: 869
Re: Zero Fee index funds at fidelity?
« Reply #9 on: August 01, 2018, 12:19:46 PM »
The most interesting part of this, in my mind, is that they dropped the minimum investment from essentially all of their retail funds and are in the process of removing the distinction between "investor" and "premium" class on their index funds. The only funds that I could find that still had minimums were a handful of their premium class money market funds.

They also dropped expenses on most of their retail index funds. FSTVX is now 0.015%, for example. They haven't dropped on the Four-In-One fund, which is slightly disappointing. It already uses their institutional-class funds which didn't drop expenses (they were already pretty low).

CoffeeR

  • Stubble
  • **
  • Posts: 139
  • Location: Southwest
Re: Zero Fee index funds at fidelity?
« Reply #10 on: August 01, 2018, 12:30:01 PM »
They also dropped expenses on most of their retail index funds. FSTVX is now 0.015%, for example. They haven't dropped on the Four-In-One fund, which is slightly disappointing. It already uses their institutional-class funds which didn't drop expenses (they were already pretty low).
Institutional class fund FSKTX expense ratio went from 3 basis points to 1.5. So, even though it was not listed on list of funds whose expenses had dropped, the expenses did drop on some institutional funds.

Telecaster

  • Handlebar Stache
  • *****
  • Posts: 1318
  • Location: Seattle, WA
Re: Zero Fee index funds at fidelity?
« Reply #11 on: August 01, 2018, 12:44:44 PM »
Fidelity has really emerged as the new Vanguard.  For beginning investors, the lack of a minimum investment is a great thing. 

thd7t

  • Handlebar Stache
  • *****
  • Posts: 1176
Re: Zero Fee index funds at fidelity?
« Reply #12 on: August 01, 2018, 12:51:15 PM »
I suspect that getting people in the door by eliminating the nominal fee on a low cost product probably saves them advertising money in the long run. 

WGH

  • 5 O'Clock Shadow
  • *
  • Posts: 96
Re: Zero Fee index funds at fidelity?
« Reply #13 on: August 01, 2018, 12:53:04 PM »
So this will end up better than VTI and it's .04% expense ratio in a Roth IRA correct? Or is there something else I am missing?

I thought ETFs were the least expensive index route in an IRA but if this truly has a 0.0% expense ratio then I might need to switch.

wirednuke83

  • 5 O'Clock Shadow
  • *
  • Posts: 26
Re: Zero Fee index funds at fidelity?
« Reply #14 on: August 01, 2018, 12:54:17 PM »
Yea, I just started my wife's Roth yesterday at Vanguard, so that's kind of annoying.  On the bright side, my 401k and ROTH are at Fidelity and all the expenses went down substantially.

It might force Vanguard to follow in kind...

Threshkin

  • Pencil Stache
  • ****
  • Posts: 881
  • Location: Colorado
    • My Journal
Re: Zero Fee index funds at fidelity?
« Reply #15 on: August 01, 2018, 03:03:31 PM »
Here is another article on this topic.

Quote
Fidelity one-ups Vanguard, iShares as first fund company to offer a no-fee index fund
Fidelity Investments is introducing two core equity index funds with no management fee, the first mutual funds to be offered without an expense ratio.

https://www.cnbc.com/2018/08/01/fidelity-one-ups-vanguard-first-company-to-offer-no-fee-index-fund.html

I have used Fidelity of many years and still have a about 25% of my portfolio with them, an old employers 401k.

I suspect that the "catch" others in this thread have suspected is that Fidelity hopes to use these funds as loss leaders to lure in new investors and then up-sell additional services.  This business model is what upstarts like Mint, Personal Capital and others use successfully.  If Fidelity wants to compete in the new financial economy they need to change with the times.

Radagast

  • Handlebar Stache
  • *****
  • Posts: 1197
  • Location: West of the Mountains, East of the Sea
Re: Zero Fee index funds at fidelity?
« Reply #16 on: August 01, 2018, 11:34:25 PM »
I'm not that impressed. Fidelity don't work for free, they have just moved their expenses to a riskier and less transparent format (securities lending). Ten years from now you will look back on trailing performance and realize the supposedly lower expense ratio had no effect. In fact, Fidelity will probably stick mostly with large liquid stocks to keep trading costs low, and VTSAX will come out fractionally ahead.

This is not a case where a lower nominal expense ratio will help you. I don't expect it to really hurt you either, just that it won't matter.

boarder42

  • Walrus Stache
  • *******
  • Posts: 7859
Re: Zero Fee index funds at fidelity?
« Reply #17 on: August 02, 2018, 06:40:01 AM »
yep the securities lending is how they are making money.  we'll see how it shakes out but i cant imagine its really going to make a large difference in the long run.  and Vanguard may win.  we're talking minimal fractions of a percent and Vanguard funnels the security lending they do back into the funds performance.

Basically this is a loss leader for Fidelity to lure people in and try to get them in more expensive funds.

CorpRaider

  • Bristles
  • ***
  • Posts: 332
    • The Corpraider Blog
Re: Zero Fee index funds at fidelity?
« Reply #18 on: August 02, 2018, 07:05:19 AM »
I'm not that impressed. Fidelity don't work for free, they have just moved their expenses to a riskier and less transparent format (securities lending). Ten years from now you will look back on trailing performance and realize the supposedly lower expense ratio had no effect. In fact, Fidelity will probably stick mostly with large liquid stocks to keep trading costs low, and VTSAX will come out fractionally ahead.

This is not a case where a lower nominal expense ratio will help you. I don't expect it to really hurt you either, just that it won't matter.

Ditto.  Seems pretty much like a non-event.  I am going to take a look at asset managers who sold off yesterday (apparently) on this.  We will see what happens.
« Last Edit: August 02, 2018, 07:14:23 AM by CorpRaider »

starguru

  • Pencil Stache
  • ****
  • Posts: 717
Re: Zero Fee index funds at fidelity?
« Reply #19 on: August 02, 2018, 07:17:37 AM »
Vanguard funds do something special with distributions to lower tax implications.  If you hold fidelity funds in non tax advantages accounts you will pay higher taxes despite the lower ER.   For large amounts this can be significant.

I have most of my personal funds at fidelity but plan on opening a vanguard account and put all new investments there.


Sent from my iPhone using Tapatalk

capitalninja

  • Stubble
  • **
  • Posts: 102
  • Know what the other guy is making on the deal...
    • Entrepreneur, Investor, Life Advice
Re: Zero Fee index funds at fidelity?
« Reply #20 on: August 02, 2018, 07:22:10 AM »
More competition is never a bad thing. For years, Vanguard was really the only game in town for low cost index funds.  It's good to see Fidelity and Schwab are stepping their game up.

Even if they treat index funds as a loss leader of sorts, it's still wise. It will cause people to open investment accounts with Fidelity where they'll make commissions on stock trades and other services.  Smart on their part.

sherr

  • Pencil Stache
  • ****
  • Posts: 522
  • Age: 33
  • Location: North Carolina
Re: Zero Fee index funds at fidelity?
« Reply #21 on: August 02, 2018, 08:31:40 AM »
I'm not that impressed. Fidelity don't work for free, they have just moved their expenses to a riskier and less transparent format (securities lending). Ten years from now you will look back on trailing performance and realize the supposedly lower expense ratio had no effect. In fact, Fidelity will probably stick mostly with large liquid stocks to keep trading costs low, and VTSAX will come out fractionally ahead.

This is not a case where a lower nominal expense ratio will help you. I don't expect it to really hurt you either, just that it won't matter.

If Fidelity is mostly sticking with larger liquid stocks then it could not possibly be following the same total market index as VTSAX is, right? As long as they are both following the same index they should be identical, right?

I don't disagree that it won't really matter; the fees are already so low that dropping them to zero doesn't make much of a difference.

drudgep

  • 5 O'Clock Shadow
  • *
  • Posts: 64
Re: Zero Fee index funds at fidelity?
« Reply #22 on: August 02, 2018, 10:36:10 AM »
Does securities trading pose a risk to our principle? Any chance that greedy folks can lose our money by trading the money we give for the index and wasting it?

terran

  • Handlebar Stache
  • *****
  • Posts: 1493
Re: Zero Fee index funds at fidelity?
« Reply #23 on: August 02, 2018, 10:37:30 AM »
I'm not that impressed. Fidelity don't work for free, they have just moved their expenses to a riskier and less transparent format (securities lending). Ten years from now you will look back on trailing performance and realize the supposedly lower expense ratio had no effect. In fact, Fidelity will probably stick mostly with large liquid stocks to keep trading costs low, and VTSAX will come out fractionally ahead.

This is not a case where a lower nominal expense ratio will help you. I don't expect it to really hurt you either, just that it won't matter.

If Fidelity is mostly sticking with larger liquid stocks then it could not possibly be following the same total market index as VTSAX is, right? As long as they are both following the same index they should be identical, right?

I don't disagree that it won't really matter; the fees are already so low that dropping them to zero doesn't make much of a difference.

I don't necessarily agree with Radagast's suggestion that Fidelity will only use larger stocks, but they won't follow the same index. VTSAX currently follows the CRSP US Total Market Index (according to the footnotes here: https://investor.vanguard.com/mutual-funds/profile/VTSAX) which they pay a fee to license. Fidelity plans to save money by creating their own index (no licensing fee), but that does mean you need to trust that they'll design the index in the way they say they will (such that it follows the total US stock market).

pecunia

  • Pencil Stache
  • ****
  • Posts: 524
Re: Zero Fee index funds at fidelity?
« Reply #24 on: August 02, 2018, 10:54:10 AM »
I think they've been doing the loss leader thing a while.  I was thinking of going to Vanguard, but there seems to be little advantage.

https://www.fidelity.com/mutual-funds/investing-ideas/index-funds

I may still go back to Vanguard because as it has been explained the customer is the owner whereas Fidelity is owned by someone else.  Fidelity must serve the owner and the customer.  With Vanguard, they are one and the same and I like that.

In my present situation, I have an available Fidelity office to help me whereas the help from Vanguard is more limited.  This is part of the reason that they can keep their costs down.

chasesfish

  • Handlebar Stache
  • *****
  • Posts: 2443
  • Age: 36
  • Location: Texas
    • Years in the making, I created a journal!
Re: Zero Fee index funds at fidelity?
« Reply #25 on: August 03, 2018, 05:53:41 AM »
I'm a big Fidelity fan, had them for years.  If you can tolerate an occasional marketing email and saying no to their managed portfolios when you need help, its a great platform

max9505672

  • Stubble
  • **
  • Posts: 240
Re: Zero Fee index funds at fidelity?
« Reply #26 on: August 03, 2018, 06:05:01 AM »
PTF

Timodeus

  • Stubble
  • **
  • Posts: 136
Re: Zero Fee index funds at fidelity?
« Reply #27 on: August 03, 2018, 06:45:31 AM »
I have some major reservations about this fund as compared to Vanguard's who I think has the better business model and is well worth the higher minimums and slightly larger expense ratios.

My major issues with these two funds are that they are tracking an index Fidelity has chosen themselves, not one set up externally like most index funds. VTSAX uses the one from the Center for Research in Security Prices which I think is even better than a commercially driven index. Also, as people have alluded to, I believe Vanguard has a proprietary method for reducing capital gains distributions in their mutual funds by funneling the gains to the ETF of the same index since they are technically different classes of the same fund (like Investor vs Admiral class). Lastly, I just took a quick peak at the prospectus and as others have said they will be lending securities. What I found interesting though is that Fidelity's prospectus specifically listed Securities Lending Risk while Vanguard's did not. Are they going to be lending in a way that increases the risk relative to Vanguard's index fund?

That said, I only really use my Fidelity Brokerage for company stock programs and cash back from Fidelity's credit card which eventually I was hoping to replace. But I think I might take a stab at these funds when I get my next deposit, why not, they have 0% minimums which is awesome, especially for new investors.

Samsam

  • Bristles
  • ***
  • Posts: 272
  • Location: Charlotte
Re: Zero Fee index funds at fidelity?
« Reply #28 on: August 03, 2018, 06:52:35 AM »
Glad I found this thread.  Found an email this morning from fidelity with this:
Introduced two index mutual funds (FZROX and FZILX) with a zero expense ratio^2

2 - As of August 3, 2018 the Fidelity ZERO Total Market Index Fund (FZROX) and Fidelity ZERO International Index Fund (FZILX) are available to individual retail investors who purchase their shares through a Fidelity brokerage account.

Has anyone bought any yet?

protostache

  • Pencil Stache
  • ****
  • Posts: 869
Re: Zero Fee index funds at fidelity?
« Reply #29 on: August 03, 2018, 08:10:53 AM »
I don't buy the whole "Vanguard has a better business model" thing. Vanguard has a deeply weird business structure that's only legal because of a series of SEC special rulings. It's not a non-profit. It's not a mutual company by any conventional definition. It's almost completely opaque (a real mutual company would release annual reports for the entire enterprise to it's members). It's very strange and I don't think it warrants praise.

At this point Vanguard doesn't have much going for it compared to the other gigantic retail houses other than inertia. Their expenses are higher, their minimums are higher, their customer service is by most accounts worse, their platform is old and difficult to use. Fidelity and Schwab are better in every regard and their motivations are relatively transparent.

tralfamadorian

  • Pencil Stache
  • ****
  • Posts: 903
Re: Zero Fee index funds at fidelity?
« Reply #30 on: August 03, 2018, 08:58:51 AM »
Received this email this am as well. I only have a solo 401k with them and the email said that the new no fee funds were available in my account. Iím going to play around with it later today to see if thatís true.

Timodeus

  • Stubble
  • **
  • Posts: 136
Re: Zero Fee index funds at fidelity?
« Reply #31 on: August 03, 2018, 11:36:25 AM »
I don't buy the whole "Vanguard has a better business model" thing. Vanguard has a deeply weird business structure that's only legal because of a series of SEC special rulings. It's not a non-profit. It's not a mutual company by any conventional definition. It's almost completely opaque (a real mutual company would release annual reports for the entire enterprise to it's members). It's very strange and I don't think it warrants praise.

At this point Vanguard doesn't have much going for it compared to the other gigantic retail houses other than inertia. Their expenses are higher, their minimums are higher, their customer service is by most accounts worse, their platform is old and difficult to use. Fidelity and Schwab are better in every regard and their motivations are relatively transparent.

Fidelity et al. are only in a race to the bottom for expense ratios because of Vanguard's "weird" business model. It has sufficiently eaten into their profits to make them become competitive for an increasingly cost conscious investor. Vanguard directly or indirectly has saved investors billions in fees. Some of your criticisms are valid but I think Vanguard's motivations are pretty clear and transparent, even without Bogle at the helm (no pun intended).  I know it must be hard for some people to understand how an organization would do something without the #1 desire being profit, but that's not a reason to withhold praise for an organization that has probably saved you a nice sum of money.

capitalninja

  • Stubble
  • **
  • Posts: 102
  • Know what the other guy is making on the deal...
    • Entrepreneur, Investor, Life Advice
Re: Zero Fee index funds at fidelity?
« Reply #32 on: August 03, 2018, 02:44:05 PM »
All of my index funds are from Vanguard. I'm sure you can do well with Fidelity's offerings too. Assuming the fees are the same, the performance should be pretty much all else being equal.

politenessman

  • 5 O'Clock Shadow
  • *
  • Posts: 64
  • Location: Longmont CO
    • My Journal
Re: Zero Fee index funds at fidelity?
« Reply #33 on: August 03, 2018, 03:04:00 PM »
I have all my investment accounts with Fidelity - I started with my company 401K in there and in the interests of simplicity, I kept everything with Fidelity. I notice that FUSVX is now considerably cheaper on the expenses @ 0.015%
Last week it was 0.03%

teltic

  • Stubble
  • **
  • Posts: 136
Re: Zero Fee index funds at fidelity?
« Reply #34 on: August 03, 2018, 03:34:51 PM »
I started with Fidelity, but later opened a vanguard account because everyone told me how low their expense ratios are.

I was a rookie opening 2 accounts, and have been slowly selling off my vanguard account to switch into Fidelity.  I value simplicity, my company 401k is through fidelity, so I'm stuck with fidelity.

I thought I was going to pay more in fees using fidelity, but after reading the announcement and other index's they have... It looks like Fidelity I lower in cost on 9 of the 10 index funds!


Overall I'm happy to hear that consolidating my accounts doesn't mean I'm losing out on cheap indexs.

MustacheAndaHalf

  • Handlebar Stache
  • *****
  • Posts: 1260
Re: Zero Fee index funds at fidelity?
« Reply #35 on: August 04, 2018, 02:48:46 AM »
There isn't much data about FZROX on morningstar.com, but it does show 0.0% management fees and lists no expense waiver:
http://financials.morningstar.com/fund/expense.html?t=FZROX

If the fund was a "loss leader", Fidelity would pay some of the costs, and that shows up as an "expense waiver".  Either morningstar's data is incomplete, or Fidelity plans to make a profit despite the 0.00% expense ratio.

boarder42

  • Walrus Stache
  • *******
  • Posts: 7859
Re: Zero Fee index funds at fidelity?
« Reply #36 on: August 04, 2018, 04:42:28 AM »
I started with Fidelity, but later opened a vanguard account because everyone told me how low their expense ratios are.

I was a rookie opening 2 accounts, and have been slowly selling off my vanguard account to switch into Fidelity.  I value simplicity, my company 401k is through fidelity, so I'm stuck with fidelity.

I thought I was going to pay more in fees using fidelity, but after reading the announcement and other index's they have... It looks like Fidelity I lower in cost on 9 of the 10 index funds!


Overall I'm happy to hear that consolidating my accounts doesn't mean I'm losing out on cheap indexs.

It's all relative. At vanguard when they lease securities that money goes back to the investor. Also who knows what the makeup of these funds will be. They could be less diversified and heavier on the stocks that Fido knows they can lease.

Tyler

  • Handlebar Stache
  • *****
  • Posts: 1099
Re: Zero Fee index funds at fidelity?
« Reply #37 on: August 04, 2018, 09:50:09 AM »
It's all relative. At vanguard when they lease securities that money goes back to the investor. Also who knows what the makeup of these funds will be. They could be less diversified and heavier on the stocks that Fido knows they can lease.

Fidelity has apparently confirmed that this is a loss leading plan for them and they receive no revenue from securities lending in their new funds.
http://citywireusa.com/professional-buyer/news/no-money-no-problem-how-fidelity-can-cash-in-on-free-funds/a1143805

Regarding the company selection, here's what they say in the FZROX prospectus:

Quote
Normally investing at least 80% of its assets in common stocks included in the Fidelity U.S. Total Investable Market Index, which is a float-adjusted market capitalization-weighted index designed to reflect the performance of the U.S. equity market, including large-, mid- and small-capitalization stocks.  Using statistical sampling techniques based on such factors as capitalization, industry exposures, dividend yield, price/earnings (P/E) ratio, price/book (P/B) ratio, and earnings growth to attempt to replicate the returns of the Fidelity U.S. Total Investable Market Index℠ using a smaller number of securities.

So it's a custom Fidelity index tracking the total US market that both eliminates fees paid to outside index providers and reduces internal trading fees by managing the company count.  Practically speaking, I expect that means the large cap holdings will be exactly as you'd expect, the mid and small caps will be a little more selective, and the overall performance will be very similar to any other total market fund.  But we'll see.
« Last Edit: August 04, 2018, 02:37:56 PM by Tyler »

dabighen

  • 5 O'Clock Shadow
  • *
  • Posts: 16
Re: Zero Fee index funds at fidelity?
« Reply #38 on: August 04, 2018, 05:41:01 PM »
This is huge.  I think we can all agree that removing barriers (investment minimums) are a fantastic way to get people started early who may not have the money nor the balls to start with $3,000 (or $1,000 with no choices)

COEE

  • Pencil Stache
  • ****
  • Posts: 500
Re: Zero Fee index funds at fidelity?
« Reply #39 on: August 04, 2018, 09:29:01 PM »
In a somewhat related topic - Fidelity also announced that they were reducing many of the ER of their funds - some drastically.
https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/mutual-funds/Fidelity-lower-expense-ratios-index-mf_FAQs.pdf

It does appear that my 401k was somewhat effected.  I hold FSEVX in my 401k.  So the ER dropped on it by 2.5 bp.  Pretty much a non event.

What's more interesting to me is that I have been thinking about rolling over my 401k from a previous employer to my current employer's Fidelity 401k.  However, there's a "management fee" on all of the funds effectively doubling the ER of the available funds.  So now it's cheaper for me to move them to a Fidelity tIRA because the ER are lower and I don't have gigantic minimums to get access to those low ERs.  But here's the catch - doing so (401k to tIRA rollover) will cause me headaches when doing backdoor roth because I'll have to keep track of the pre-tax vs post-tax ratios and pay additional taxes (while in a high tax bracket) on the pre-tax portion - which I don't want.

I wonder if my company will have any leverage to remove the "management fee" from the 401k.  With the latest announcement.  I'll have to mention it to HR.

sol

  • Walrus Stache
  • *******
  • Posts: 7211
  • Age: 41
  • Location: Pacific Northwest
Re: Zero Fee index funds at fidelity?
« Reply #40 on: August 04, 2018, 09:37:14 PM »
Has anyone looked at the actual historical performance of the vg vs the fido total market funds?  I mean absolute returns, not compared to their respective benchmarks.  Seems silly to get worked up about lowering the ER by 0.015 if one of them has been averaging 0.1% higher than the other, for what is supposed to be an equivalent investment.
« Last Edit: August 04, 2018, 11:21:31 PM by sol »

Radagast

  • Handlebar Stache
  • *****
  • Posts: 1197
  • Location: West of the Mountains, East of the Sea
Re: Zero Fee index funds at fidelity?
« Reply #41 on: August 04, 2018, 11:02:28 PM »
I have, and VTSAX did better than FTSVX over the maximum common length, the last 10 years, last 5 years, last 3 years, last year, year to date, and last three months compared to the existing Fidelity total market index, despite both in theory being total market indices and Fidelity having a lower expense ratio. At this level, expense ratio is not a primary consideration. After taxes VTSAX would have done even better. I expect something similar to happen with the new fund: it will trail VTSAX by a consistent and perhaps insignificant amount, because the expense ratio is just advertising. For the international funds, the countries they actually invest in will make a far greater difference in outcome than the expense ratio even decades later.

https://quotes.morningstar.com/chart/fund/chart.action?t=FSTVX&region=usa&culture=en-US&dataParams=%7B%22zoomKey%22%3A9%2C%22version%22%3A%22US%22%2C%22showNav%22%3Atrue%2C%22defaultShowName%22%3A%22name%22%2C%22mainSettingId%22%3A%22main%22%2C%22navSettingId%22%3A%22nav%22%2C%22benchmarkSettingId%22%3A%22benchmark%22%2C%22sliderBgSettingId%22%3A%22sliderBg%22%2C%22volumeSettingId%22%3A%22volume%22%2C%22defaultBenchmark%22%3Afalse%2C%22id%22%3A%22FOUSA05CL6%7CFOUSA00L83%22%2C%22type%22%3A%22FO%7CFO%22%2C%22region%22%3A%22USA%22%2C%22name%22%3A%22XNAS%3AFSTVX%7CXNAS%3AVTSAX%22%2C%22baseCurrency%22%3A%22USD%22%2C%22defaultBenchmarks%22%3A%5B%22%22%2C%22%22%5D%2C%22chartType%22%3A%22growth%22%2C%22startDay%22%3A%2208%2F04%2F2008%22%2C%22endDay%22%3A%2208%2F04%2F2018%22%2C%22chartWidth%22%3A955%2C%22SMA%22%3A%5B%5D%7D

Hargrove

  • Pencil Stache
  • ****
  • Posts: 706
Re: Zero Fee index funds at fidelity?
« Reply #42 on: August 05, 2018, 01:57:02 AM »
I'm curious what the "cash" investment percentage might be with these funds.

The John Hancock trick (a 401k I'm sadly stuck with for now) is lower fees than Vanguard for four times the money held in cash. All my JH investments are in Vanguard, but they still soak a .8 or .9% "advisory fee."

MustacheAndaHalf

  • Handlebar Stache
  • *****
  • Posts: 1260
Re: Zero Fee index funds at fidelity?
« Reply #43 on: August 05, 2018, 02:05:30 AM »
... VTSAX did better than FTSVX over the maximum common length, the last 10 years, last 5 years, last 3 years, last year, year to date, and last three months compared to the existing Fidelity total market ...
I compared the individual performance pages on morningstar, and it looks like less than +0.05% performance per year.  When compounded over 20 years, that's less than 1% total.

Slowtraveler

  • 5 O'Clock Shadow
  • *
  • Posts: 18
Re: Zero Fee index funds at fidelity?
« Reply #44 on: August 05, 2018, 02:14:24 AM »
I wrote a C++ program a couple years back thatcompares the 2 main Vanguard and Fidelity us index fund over 100 various starting points and ending points lasting at least a year. It takes all the dividends, reinvests them at the price, I downloaded the Excel from Yahoo data. Surprising to me, Fidelity won out most time periods.

I can post the program if anybody wants to see it.

LAGuy

  • Bristles
  • ***
  • Posts: 304
  • Age: 44
  • Location: Los Angeles
Re: Zero Fee index funds at fidelity?
« Reply #45 on: August 05, 2018, 11:31:32 AM »
I already keep my IRA funds from previous employer 401k's at Fidelity. And I already had it split between the two precursors to these funds (FSTVX and FSGDX), so I just swapped them out today. The fees were already really low, wonder if they'll just phase out those 2 older funds. This change might save me like a hundred bucks a year though. The real prize is the zero fee international. That mutual fund also includes emerging markets, so these two funds alone can really serve as your entire stock allocation for worldwide exposure should you choose to do so.

Exflyboy

  • Walrus Stache
  • *******
  • Posts: 5507
  • Age: 57
  • Location: Corvallis, Oregon
  • Expat Brit living in the New World..:)
Re: Zero Fee index funds at fidelity?
« Reply #46 on: August 05, 2018, 12:20:43 PM »
For those thinking about rolling a 401k into an IRA. Remember that in the event of a lawsuit your "retirement funds" are protected. IRA's have the same protection but not in all states.

So if you live in an unprotected state (or might move to one at some point) then your IRAs are open to litigation loss... The more money you have the bigger the target you are.

Threshkin

  • Pencil Stache
  • ****
  • Posts: 881
  • Location: Colorado
    • My Journal
Re: Zero Fee index funds at fidelity?
« Reply #47 on: August 05, 2018, 01:33:39 PM »
Has anyone looked at the actual historical performance of the vg vs the fido total market funds?  I mean absolute returns, not compared to their respective benchmarks.  Seems silly to get worked up about lowering the ER by 0.015 if one of them has been averaging 0.1% higher than the other, for what is supposed to be an equivalent investment.

Very good point Sol.  It is easy to get hung up on reducing fees when ultimately net return is what matters.  Lower fees are good but if they are coupled with lower returns you lose.

HeadedWest2029

  • Stubble
  • **
  • Posts: 132
Re: Zero Fee index funds at fidelity?
« Reply #48 on: August 07, 2018, 10:28:52 AM »
RE: there has to be a catch. 
"will be available free to selected investors in certain fee-based accounts"

I was hoping this would be available via Robinhood or Vanguard (it's not), but seems like it must be in a Fidelity account and only an account where you are already paying some sort of fee like their robo service.  Still, another nice option, but feels like to me they're shuffling the chairs a bit

http://citywireusa.com/professional-buyer/news/fidelity-unveils-13-no-fee-funds-but-theres-a-catch/a1110074

Telecaster

  • Handlebar Stache
  • *****
  • Posts: 1318
  • Location: Seattle, WA
Re: Zero Fee index funds at fidelity?
« Reply #49 on: August 07, 2018, 10:47:34 AM »
I tried to move into FZILX today in my 401(k) and it said "Fund closed to new investments."