Author Topic: Zero Fee index funds at fidelity?  (Read 4257 times)

CoffeeR

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Re: Zero Fee index funds at fidelity?
« Reply #50 on: August 07, 2018, 11:04:40 AM »
Maybe there is a catch, but it is not clear to me why so many assume there is. Supermarkets and other stores have for a long time sold loss-leaders to lure a person into the store (the catch). On average, it works, but there is nothing preventing someone from going into the store just to purchase the loss-leaders. Yes, going to the supermarket and purchasing this "loss-leader" may not yet be an option (don't know), but we are closer to this than ever before.

I also do not see a 0% expense as a floor to fees. I think they could go negative.

I believe this is good a development and I am happy Fidelity is doing this. The prices for mutual funds have come way *way* down from when I started investing. Vanguard gets most of the credit for this, but I'll take the competition from any place it comes and if someone wants to leap frog Vanguard I'll cheer them on all the way.

I have no current plans of use these zero expense funds, but my institutional Fidelity funds came down in price as part of the roll out, so I'm happy.
« Last Edit: August 07, 2018, 05:03:40 PM by CoffeeR »

HeadedWest2029

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Re: Zero Fee index funds at fidelity?
« Reply #51 on: August 07, 2018, 11:35:54 AM »
Here's where I think there is legitimate gripe (maybe).  If you can only get these funds thru Fidelity Go, which has an underlying advsiory fee of .35% (I don't have Fidelity so maybe someone can chime in if that's still accurate), then it seems somewhat sketchy to put out a bunch of press releases with the headline focusing on "zero-fee".  It's not untrue, but a little cagey IMO when VTI with .04% and no required advsiory fee is still cheaper overall.  I could be wrong though
But yes, still cheering on the trend of low expense passive 
« Last Edit: August 07, 2018, 11:40:15 AM by HeadedWest2029 »

protostache

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Re: Zero Fee index funds at fidelity?
« Reply #52 on: August 07, 2018, 11:46:10 AM »
Here's where I think there is legitimate gripe (maybe).  If you can only get these funds thru Fidelity Go, which has an underlying advsiory fee of .35% (I don't have Fidelity so maybe someone can chime in if that's still accurate), then it seems somewhat sketchy to put out a bunch of press releases with the headline focusing on "zero-fee".  It's not untrue, but a little cagey IMO when VTI with .04% and no required advsiory fee is still cheaper overall.  I could be wrong though
But yes, still cheering on the trend of low expense passive

Definitely not accurate. I just put an order in (and then cancelled it) for one of these funds in my ordinary taxable account. No warnings or errors of any sort.

HeadedWest2029

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Re: Zero Fee index funds at fidelity?
« Reply #53 on: August 07, 2018, 11:56:22 AM »
Good to know.  Has anyone else been able to get these thru a non-Fidelity account? Or are they exclusive to Fidelity accounts?

Tyler

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Re: Zero Fee index funds at fidelity?
« Reply #54 on: August 07, 2018, 12:01:14 PM »
Definitely not accurate. I just put an order in (and then cancelled it) for one of these funds in my ordinary taxable account. No warnings or errors of any sort.

+1.  Didn't place the order, but I checked my own account and they're clearly available to normal Fidelity investors. 

Here's what Fideilty says in the FZROX prospectus:

Quote
Shares of the fund are available only to individual retail investors who purchase their shares through a Fidelity brokerage account, including retail non-retirement accounts, retail retirement accounts (traditional, Roth and SEP Individual Retirement Accounts (IRAs)), health savings accounts (HSAs), and stock plan services accounts.

So you do have to purchase them through a Fidelity brokerage account, but the claim that they're only available to fee-based accounts appears to be false. 
« Last Edit: August 07, 2018, 02:55:42 PM by Tyler »

CoffeeR

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Re: Zero Fee index funds at fidelity?
« Reply #55 on: August 07, 2018, 12:07:26 PM »
A Morningstar arcticle on the new funds for those that might be interested.

https://www.morningstar.com/articles/877443/what-fidelitys-nocost-index-funds-mean-for-investo.html

Shade00

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Re: Zero Fee index funds at fidelity?
« Reply #56 on: August 07, 2018, 03:40:18 PM »
I'm still looking for some more info on these funds, but assuming they track roughly the same, I can't see any reason not to sell off ITOT in my Roth IRA and buy FZROX.

tralfamadorian

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Re: Zero Fee index funds at fidelity?
« Reply #57 on: August 08, 2018, 06:31:50 AM »
I tried to move into FZILX today in my 401(k) and it said "Fund closed to new investments."

I saw the same with my solo 401k. I donít mind that Fidelity is only offering a fee free fund for accounts that have some type of income generation for them but I am irritated that they included me in the spam email that made it seem otherwise.

LAGuy

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Re: Zero Fee index funds at fidelity?
« Reply #58 on: August 09, 2018, 07:24:55 AM »
As mentioned earlier, I bought both of these funds in my Fidelity IRA. Nothing special about it and I don't pay them for any other services. Didn't have any problems.

chasesfish

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Re: Zero Fee index funds at fidelity?
« Reply #59 on: August 09, 2018, 09:21:22 AM »
I'm still looking for some more info on these funds, but assuming they track roughly the same, I can't see any reason not to sell off ITOT in my Roth IRA and buy FZROX.

Fidelity's disclosures say they can charge 0.01 to 0.03 per share of ITOT sold depending on the holding period.  I probably wouldn't sell it for the new fund as that amount owed will shrink over time.

Tyler

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Re: Zero Fee index funds at fidelity?
« Reply #60 on: August 09, 2018, 09:50:16 AM »
Fidelity's disclosures say they can charge 0.01 to 0.03 per share of ITOT sold depending on the holding period.  I probably wouldn't sell it for the new fund as that amount owed will shrink over time.

To be clear, that's a standard fee mandated by the SEC that all brokerages collect.  Vanguard calls it a "securities transaction fee".  And it's per $1000, not per share.  That works out to an average fee of about 0.002% per sell order, and depending on your situation could be well worth it to reduce your annual fees by quite a bit more than that. 

https://www.sec.gov/fast-answers/answerssec31htm.html

https://www.bogleheads.org/forum/viewtopic.php?t=212346
« Last Edit: August 09, 2018, 10:04:39 AM by Tyler »

dkb140

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Re: Zero Fee index funds at fidelity?
« Reply #61 on: August 13, 2018, 02:52:10 PM »
No catch that I could find. Only risk I saw was up to 20% in cash and them following their own index.

If they make a few bucks off lending out stocks to option buyers, I don't see how that affects us. 0.0% looks like a winner to me!

I doubt any 401k plans offer the fund directly, but you might be able to get it inside a 401k if your plan offers a Brokeragelink option. I moved a good chunk of my Roth IRA at Fidelity to FZROX & FZILX!

Retire-Canada

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Re: Zero Fee index funds at fidelity?
« Reply #62 on: August 13, 2018, 07:11:10 PM »
If they make a few bucks off lending out stocks to option buyers, I don't see how that affects us. 0.0% looks like a winner to me!

Since Vanguard doesn't report their security lending impact [that I am aware of] on actual MERs how close do you think the low cost Vanguard funds are to these Fidelity funds?

Hargrove

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Re: Zero Fee index funds at fidelity?
« Reply #63 on: August 13, 2018, 09:18:09 PM »
No catch that I could find. Only risk I saw was up to 20% in cash and them following their own index.

That's a pretty damn big risk. I'd wait to learn what the cash component is - 20% cash is a comically bad deal next to a Vanguard expense ratio.

https://www.nytimes.com/2018/08/10/business/fidelity-mutual-funds-fees.html

They didn't see much either, other than cross selling - but I'd bet the story is in the cash component.

ysette9

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Re: Zero Fee index funds at fidelity?
« Reply #64 on: August 13, 2018, 09:25:15 PM »
I liked the discussion the White Coat Investor had on these zero fee funds.

https://www.whitecoatinvestor.com/expense-ratios/

LAGuy

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Re: Zero Fee index funds at fidelity?
« Reply #65 on: August 13, 2018, 09:42:30 PM »
No catch that I could find. Only risk I saw was up to 20% in cash and them following their own index.

That's a pretty damn big risk. I'd wait to learn what the cash component is - 20% cash is a comically bad deal next to a Vanguard expense ratio.

https://www.nytimes.com/2018/08/10/business/fidelity-mutual-funds-fees.html

They didn't see much either, other than cross selling - but I'd bet the story is in the cash component.

This is pretty much boiler plate in all of the total market index funds. Schwab, Fidelity, Vanguard, etc.

Hargrove

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Re: Zero Fee index funds at fidelity?
« Reply #66 on: August 14, 2018, 05:06:25 AM »
No catch that I could find. Only risk I saw was up to 20% in cash and them following their own index.

That's a pretty damn big risk. I'd wait to learn what the cash component is - 20% cash is a comically bad deal next to a Vanguard expense ratio.

https://www.nytimes.com/2018/08/10/business/fidelity-mutual-funds-fees.html

They didn't see much either, other than cross selling - but I'd bet the story is in the cash component.

This is pretty much boiler plate in all of the total market index funds. Schwab, Fidelity, Vanguard, etc.

Maybe the disclaimer is boilerplate, but real results are much, much better than 20% in any fund worth having. Almost nobody here would accept hanging out 20% of a sizeable portfolio in cash.

http://quote.morningstar.com/fund-filing/Annual-Report/2017/12/31/t.aspx?t=VTSAX&ft=N-CSR&d=270d78d8129d352032f09f6a8308846a

0.2% short-term reserve. Thanks Vanguard.

CoffeeR

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Re: Zero Fee index funds at fidelity?
« Reply #67 on: August 14, 2018, 05:45:01 AM »
Maybe the disclaimer is boilerplate, but real results are much, much better than 20% in any fund worth having. Almost nobody here would accept hanging out 20% of a sizeable portfolio in cash.

http://quote.morningstar.com/fund-filing/Annual-Report/2017/12/31/t.aspx?t=VTSAX&ft=N-CSR&d=270d78d8129d352032f09f6a8308846a

0.2% short-term reserve. Thanks Vanguard.
An equivalent established index fund at Fidelity would be FSTVX. Currently "Cash & Net Other Assets" are at -0.1%.

https://fundresearch.fidelity.com/mutual-funds/fees-and-prices/315911800

(Check the Monthly Fact Sheet).

Hargrove

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Re: Zero Fee index funds at fidelity?
« Reply #68 on: August 14, 2018, 06:00:40 AM »
Not sure how they went negative, but, hey, great!

The important thing really is to check the cash amounts on your own with any fund.

There is no such thing as an equivalent fund to a new, zero-fee fund. Half the people in the 401k I mentioned earlier have 10% in cash at John Hancock because they didn't read the fact sheet, which is sometimes what the companies are hoping for. People here are right to be suspicious of a free fund - this is the sort of thing they should check.

I don't carry garlic to ward off Fidelity - they, Schwab, and Vanguard are all quite competitive now. I'm just saying everyone should read the fine print.

Car Jack

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Re: Zero Fee index funds at fidelity?
« Reply #69 on: August 14, 2018, 08:38:58 AM »
A few observations:

FSTVX dropped to 0.015%, so even if you don't do anything (and hold this already), you're saving money.  FZROX does not follow the same index as FSTVX, so they won't likely give you the exact same returns.

I have exactly one good fund in my 401k.  FUSEX (S&P 500) and it just dropped its ER to 0.015%.

I split my US equity position at Fidelity last week.  Half staying in FSTVX (total US market) and half into FZROX (zero ER similar).

I'm not scared that these funds don't follow exactly the same index.  I understand they're different.  I hold SCHB and VTI as well.  To me, they're all heavily weighted large cap US index funds. 

I am absolutely sure that Abigail Johnson would not let any fund be a loser to the company.  They are pretty aggressive in securities lending and make money doing that.  You want to short a stock?  You pay a fee to Abby.  I pay zero ER.  Everybody happy.

HipGnosis

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Re: Zero Fee index funds at fidelity?
« Reply #70 on: August 14, 2018, 09:21:14 AM »
I've been with Fidelity for years.
ETF trades are almost free.
There are index ETFs (which is what I trade).
The name of the fees have changed over the years.  Now it's listed as "account assessment fee".
My last few were $0.27 - $1.20 per sell transaction.

OurTown

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Re: Zero Fee index funds at fidelity?
« Reply #71 on: August 15, 2018, 12:59:36 PM »
Zero is a great number.  Thanks, Fidelity!  As other posters have noted, they have dropped ERs on a number of index funds, and have eliminated minimum initial investment requirements on a number of funds as well.

Car Jack

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Re: Zero Fee index funds at fidelity?
« Reply #72 on: August 15, 2018, 01:19:52 PM »
I'd like to mention that even for people who are not paying attention to their accounts, they're potentially saving money.  Since I know that 401k accounts don't always follow the ERs of brokerage accounts, I decided to update my investment spreadsheet.  Everywhere that I hold either total US market OR S&P 500 shares with Fidelity, my ER dropped to 0.015%.  I noticed my Fidelity total bond fund ER dropped to 0.025% as well.  Since there's no access to FZROX in my 401k, it was nice to see my S&P dropped to 0.015%.  Overall, with a $2.3MM portfolio, my formerly low $805 a year total fee dropped to $510.99.  I have seen people poo poo that kind of percentage savings.  I'll take an extra $300 anytime.

OurTown

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Re: Zero Fee index funds at fidelity?
« Reply #73 on: August 15, 2018, 02:30:58 PM »
Wow, $2.3 million!  Nice job. 

Radagast

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Re: Zero Fee index funds at fidelity?
« Reply #74 on: August 15, 2018, 02:53:52 PM »
https://fundresearch.fidelity.com/mutual-funds/summary/315911800
So, looking at Fidelity Total Stock Market Premium Class, I see that over the past year it has precisely matched its index, with both returning 14.79% after expenses. This is in spite of the fact that FSTVX had an expense ratio of 0.035% during that year. Does a new, lower expense ratio mean that FSTVX will now lead its index by 0.02% for the next year? Because I would find that very concerning, with a race to "pay investors more" for owning a passive index. But I do not expect that to happen. I think the most likely result of the new, lower expense ratios is that FSTVX will continue to match its index after expenses.

I do not think these new lower expenses are a change for the worse. I think they are not any change at all.

Car Jack

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Re: Zero Fee index funds at fidelity?
« Reply #75 on: August 16, 2018, 06:44:48 AM »
Remember that all the brokerages make good money lending out securities that YOU own.  There's where they're making their money.  The ER is just icing on the cake.  As others have mentioned, there's no reason why ERs have to be positive.  They can become negative and start looking like bank interest.  Think about it......what do banks do with money you put in them?  They look for ways to make YOUR money earn THEM more than they pay you in interest.  Maybe they're buying stocks.  Maybe they're originating mortgages.  Maybe they're making porn and collecting the online fees.  I don't see a difference with the brokerages.  It's about time they pay me to hold my money instead of me paying them.

SilverAg47

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Re: Zero Fee index funds at fidelity?
« Reply #76 on: August 16, 2018, 04:25:11 PM »
Bloomberg vid on Fidelity:  https://www.youtube.com/watch?v=GtgCZq1UU2Y

At 2 min into the video, they show a chart and the guy explains that an ETF like ITOT has a negative actual cost to hold when you factor in the profit from securities lending, some of which goes to the investor (they put the total cost at -0.03).  I really had no idea that a company like BlackRock would share in the securities lending profit.  So could an ETF like ITOT (3 basis pts) be better than a mutual fund like FZROX (0 basis pts) because of this?  I know there are other factors than just the overall cost of an index or mutual fund, but a negative 0.03 seems quite good.

« Last Edit: August 16, 2018, 04:26:42 PM by SilverAg47 »

effigy98

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Re: Zero Fee index funds at fidelity?
« Reply #77 on: August 16, 2018, 05:12:28 PM »
I tried to move into FZILX today in my 401(k) and it said "Fund closed to new investments."

Tried today, I got the same result in my brokerage link.

effigy98

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Re: Zero Fee index funds at fidelity?
« Reply #78 on: August 16, 2018, 05:19:02 PM »
Bloomberg vid on Fidelity:  https://www.youtube.com/watch?v=GtgCZq1UU2Y

At 2 min into the video, they show a chart and the guy explains that an ETF like ITOT has a negative actual cost to hold when you factor in the profit from securities lending, some of which goes to the investor (they put the total cost at -0.03).  I really had no idea that a company like BlackRock would share in the securities lending profit.  So could an ETF like ITOT (3 basis pts) be better than a mutual fund like FZROX (0 basis pts) because of this?  I know there are other factors than just the overall cost of an index or mutual fund, but a negative 0.03 seems quite good.

Interesting. I have been using ITOT for a few years now, did not realize it had a negative fee. Out of the free trade fidelity ETFs, I prefer DGRO for this part of my asset allocation and have recently switched even with the .08 fee.

HipGnosis

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Re: Zero Fee index funds at fidelity?
« Reply #79 on: August 16, 2018, 09:14:54 PM »
Interesting. I have been using ITOT for a few years now, did not realize it had a negative fee. Out of the free trade fidelity ETFs, I prefer DGRO for this part of my asset allocation and have recently switched even with the .08 fee.
What's your justification for the switch and fee??

Bayou Dweller

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Re: Zero Fee index funds at fidelity?
« Reply #80 on: August 17, 2018, 06:49:59 AM »
I tried to move into FZILX today in my 401(k) and it said "Fund closed to new investments."

Tried today, I got the same result in my brokerage link.

Weird. I just moved some money into both FZROX and FZILX. This was in a Roth and an HSA, no issues. However - I was already invested in FZROX since inception. But not FZILX, so probably doesn't have anything to do with it really.

SilverAg47

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Re: Zero Fee index funds at fidelity?
« Reply #81 on: August 17, 2018, 01:49:16 PM »
I tried to move into FZILX today in my 401(k) and it said "Fund closed to new investments."

FYI, both of the new Zero funds are not available in 401k plans.  This is the case for either a Solo 401k or a 401k through an employer.  This is based on a phone call with someone who I deemed as a knowledge rep.  He also stated that he didn't see that rule changing in the near future either.

effigy98

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Re: Zero Fee index funds at fidelity?
« Reply #82 on: August 17, 2018, 01:54:18 PM »
Interesting. I have been using ITOT for a few years now, did not realize it had a negative fee. Out of the free trade fidelity ETFs, I prefer DGRO for this part of my asset allocation and have recently switched even with the .08 fee.
What's your justification for the switch and fee??

DGRO and it's older brother SDY have beat the total market and it is a more defensive which I prefer. I really like ITOT still, I just prefer DGRO now as it filters out FANG type stocks which have burned me in the past.

aspiringnomad

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Re: Zero Fee index funds at fidelity?
« Reply #83 on: August 17, 2018, 02:40:36 PM »
Personal Capital is a great and easy way to track both the annual expenses you pay and the amount of cash held by the ETFs you hold.