Who should I open my taxable account with?

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BV3273
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Who should I open my taxable account with?

Post by BV3273 » Sun Jun 23, 2019 9:39 am

I’m all over the place with accounts and would like to consolidate as much as possible. I have both of my kids ESAs with Schwab and my work 401k through Fidelity Net Benefits. My IRA is with Citibank.

I was going to go all Schwab except for my 401k until I stumbled on these 0 fee market index funds with Fidelity.

Namely: FZROX & FZILX - 0 expense ratio

Any thoughts?

livesoft
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Re: Who should I open my taxable account with?

Post by livesoft » Sun Jun 23, 2019 9:43 am

You have been fooled by the zero fee marketing machine. What if the performance was 0.05% lower than a fund that you pay 0.05% expense ratio for? What if the performance is the same, but you pay 0.15% more in taxes every year on the zero-fee funds?
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stan1
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Re: Who should I open my taxable account with?

Post by stan1 » Sun Jun 23, 2019 9:47 am

If you want to use ETFs and get free trades at a national bank:
Merrill Edge (which has a good cash back link to B of A credit card), Chase

If you want to use Fidelity Mutual Funds, some no commission ETFs, and get a free cash management account and a decent credit card:
Fidelity

If you want to use Vanguard mutual funds and get free trades on other ETFs:
Vanguard

I think right now there is close to a consensus that Fidelity gives the most benefits with no fees. But that's marketing so it can and will change over time.

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Re: Who should I open my taxable account with?

Post by LadyGeek » Sun Jun 23, 2019 9:51 am

BV3273 - You had a duplicate post which I've removed. I merged the reply into this thread.
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BV3273
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Re: Who should I open my taxable account with?

Post by BV3273 » Sun Jun 23, 2019 10:41 am

Thanks all and sorry for the duplicate post.

Any thoughts on Schwab?

nix4me
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Re: Who should I open my taxable account with?

Post by nix4me » Sun Jun 23, 2019 11:08 am

livesoft wrote:
Sun Jun 23, 2019 9:43 am
You have been fooled by the zero fee marketing machine. What if the performance was 0.05% lower than a fund that you pay 0.05% expense ratio for? What if the performance is the same, but you pay 0.15% more in taxes every year on the zero-fee funds?
This is not true.

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Re: Who should I open my taxable account with?

Post by MotoTrojan » Sun Jun 23, 2019 11:24 am

nix4me wrote:
Sun Jun 23, 2019 11:08 am
livesoft wrote:
Sun Jun 23, 2019 9:43 am
You have been fooled by the zero fee marketing machine. What if the performance was 0.05% lower than a fund that you pay 0.05% expense ratio for? What if the performance is the same, but you pay 0.15% more in taxes every year on the zero-fee funds?
This is not true.
Did livesoft make any statements that could be true or false?

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Re: Who should I open my taxable account with?

Post by Broken Man 1999 » Sun Jun 23, 2019 11:28 am

nix4me wrote:
Sun Jun 23, 2019 11:08 am
livesoft wrote:
Sun Jun 23, 2019 9:43 am
You have been fooled by the zero fee marketing machine. What if the performance was 0.05% lower than a fund that you pay 0.05% expense ratio for? What if the performance is the same, but you pay 0.15% more in taxes every year on the zero-fee funds?
This is not true.
Since the zero funds aren't even one year old, livesoft's "what ifs" are entirely possible. No track record, yet. They might have a good index, might be great. I did buy $1.00 of each fund last year. I was opening up an account for estate purposes, and figured what the heck.

My international holding is worth $1.00, my total market is worth $1.02.

Typically I don't even invest in Vanguard's offerings until they get some $$$$ in the fund, and have a track record.

I will say based on the mutual fund inflows that someone posted a few days ago, Vanguard is still hoovering up $$$ like crazy.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

Luckywon
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Re: Who should I open my taxable account with?

Post by Luckywon » Sun Jun 23, 2019 11:32 am

BV3273 wrote:
Sun Jun 23, 2019 9:39 am
I’m all over the place with accounts and would like to consolidate as much as possible. I have both of my kids ESAs with Schwab and my work 401k through Fidelity Net Benefits. My IRA is with Citibank.

I was going to go all Schwab except for my 401k until I stumbled on these 0 fee market index funds with Fidelity.

Namely: FZROX & FZILX - 0 expense ratio

Any thoughts?
I suggest not purchasing anything in a taxable account that cannot be held at another brokerage. At some point, you may want to change brokerages and if capital gains have occurred in your position, there will be tax consequences to selling. So you will be tethered to that brokerage.
Last edited by Luckywon on Sun Jun 23, 2019 11:54 am, edited 1 time in total.

zlandar
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Re: Who should I open my taxable account with?

Post by zlandar » Sun Jun 23, 2019 11:44 am

If the majority of your brokerage money is going into the two free Fidelity index ETFs it makes sense to go with Fidelity.

CS and Fidelity both have super-cheap index funds but you can't beat zero. I've used Fidelity for 401k and they have good customer service. Never used CS but I've heard good things. I don't think you can go wrong with either.

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Re: Who should I open my taxable account with?

Post by ruralavalon » Sun Jun 23, 2019 11:54 am

BV3273 wrote:
Sun Jun 23, 2019 9:39 am
I’m all over the place with accounts and would like to consolidate as much as possible. I have both of my kids ESAs with Schwab and my work 401k through Fidelity Net Benefits. My IRA is with Citibank.

I was going to go all Schwab except for my 401k until I stumbled on these 0 fee market index funds with Fidelity.

Namely: FZROX & FZILX - 0 expense ratio

Any thoughts?
My usual suggestion for account location and funds is
1) Vanguard,
2) Fidelity, or
3) Schwab
in that order of preference.

I like the convenience of having all retirement/long-term investing accounts at one fund firm. Since your 401k is at Fidelity I suggest placing your other accounts at Fidelity.

I agree with livesoft about the zero fee marketing machine. Don't be fooled, I would not make the Fidelity ZERO funds any part of the decision on where to place my accounts. The Fidelity ZERO funds use entirely new indexes created just for Fidelity, they have no track record in performance, tracking error, tax-efficiency, securities lending, or anything else. I would definitely not buy a Fidelity ZERO fund in a taxable account.
Last edited by ruralavalon on Sun Jun 23, 2019 12:00 pm, edited 1 time in total.
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Taylor Larimore
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Re: Who should I open my taxable account with?

Post by Taylor Larimore » Sun Jun 23, 2019 11:58 am

BV3273 wrote:
Sun Jun 23, 2019 9:39 am
I’m all over the place with accounts and would like to consolidate as much as possible. I have both of my kids ESAs with Schwab and my work 401k through Fidelity Net Benefits. My IRA is with Citibank.

I was going to go all Schwab except for my 401k until I stumbled on these 0 fee market index funds with Fidelity.

Namely: FZROX & FZILX - 0 expense ratio

Any thoughts?
BV3273:

In my opinion, the decision to simplify your portfolio by using the same fund company is far more important than a small difference in expense ratios. Listed below are many of the advantages of using just one fund company:

1. One familiar statement.
2. Less paperwork.
3. Easier tax preparation.
4. Avoidance of low-balance and other small fees.
5. It's much easier to learn only one company's policies, fees, regulations, etc.
6. With larger holdings it may be possible to qualify for lower costs and premium services.
7. Rebalancing and exchanges are easier.
8. Eliminates 3rd party brokerage.
9. A loyal customer is appreciated and usually treated better.
10. Less chance of errors.
11. More free time for ourselves.
12. In event of death or disability, it will be much easier for others.

I suggest you open your account with Vanguard--the only mutual, mutual fund company. The primary reason: In all the other fund companies, portfolio returns to investors are reduced by payments to the owners.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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BV3273
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Re: Who should I open my taxable account with?

Post by BV3273 » Sun Jun 23, 2019 2:18 pm

Thanks all! I like the Vanguard ETFs, but I saw the 0 and it threw me for a loop. No such thing as a free lunch.

I am going to make a decision this week. Most like going to go with Vanguard. I wish I could move the ESAs over but Schwab seems to be the only game in town for that.

NativeTxn
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Re: Who should I open my taxable account with?

Post by NativeTxn » Sun Jun 23, 2019 2:23 pm

I'm in the process of (very likely) making Fidelity my one-stop shop for just about everything other than (1) my 401k, which isn't currently at Fidelity, and (2) 3 accounts at M1 Finance - 1 where the wife and I each picked 5 stocks (10 total, equally weighted) and we throw $50 a month into it for "fun," and the 1 for each of our young daughters where I buy then $100 of Disney stock per month). M1 makes it super easy with (currently) no trading fees, the ability to buy fractional shares, and the fact that they basically try to re-weight with every deposit/trade.

Beyond that, I've got multiple taxable accounts, a Roth for my wife and me, her IRA, and our kids 529s all at Fidelity. I'm also experimenting with Fidelity's CMA coupled with a separate brokerage account that sits in a MMF and acts as overdraft for the CMA. If the tests go smoothly, I'll probably move from BOA/Merrill to Fidelity.

A lot of the reason for that is simplicity and having accounts across as few places as possible, while still serving my/our needs.

With that said, I use the Fidelity Total Stock Market index (FSKAX, 0.015% ER) and the Total International (FTIHX, 0.06% ER) in lieu of the zero cost Fidelity funds. At least for now. Like many others, I'm waiting until the zero fee funds have more of a track record since they designed their own indexes to track. The 0.015% on the total stock market fund is so low (of course, not zero) that I don't think it will make any discernible difference over the next 30 years (in reality, the same likely goes for the 0.06% on the international index). That being said, if the zero fee funds show a strong performance over the next few years compared to the other index funds, I would have no problem considering using those.

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Re: Who should I open my taxable account with?

Post by Jack FFR1846 » Sun Jun 23, 2019 2:25 pm

I'll just leave this here:

I split my equity position at Fidelity on Aug 6 last year, shortly after the start of the zero fund FZROX equally. Today, the balances are (as of Friday's close)....

FSKAX: $320,775.02

FZROX: $320,919.62

That said, I also hold VTI and SPTM at TDAmeritrade, SCHB at Schwab and FXAIX in my 401k at Fidelity.
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02nz
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Re: Who should I open my taxable account with?

Post by 02nz » Sun Jun 23, 2019 2:40 pm

Vanguard index funds (whether as mutual funds or ETFs) are probably the best combination of low cost and tax efficiency out there, but in my experience (and those of more than a few on this forum) Vanguard's brokerage operation is far from the best.

It's not hard to get free trades (on ETFs at least) at the likes of Merrill Edge and Chase, often there are even lucrative bonuses for bringing in a certain amount of money. I moved my taxable and IRAs (mostly in Vanguard ETFs) to Merrill Edge after a series of Vanguard screw-ups, got several hundred dollars in bonuses, and I've been much happier with ME's service versus Vanguard.

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Re: Who should I open my taxable account with?

Post by ruralavalon » Sun Jun 23, 2019 2:54 pm

02nz wrote:
Sun Jun 23, 2019 2:40 pm
Vanguard index funds (whether as mutual funds or ETFs) are probably the best combination of low cost and tax efficiency out there, . . .
I agree
. . . but in my experience (and those of more than a few on this forum) Vanguard's brokerage operation is far from the best.
My experience with Vanguard customer service and brokerage has always been very good. The service in my experience has always been prompt, knowledgeable, courteous and professional.

. . . It's not hard to get free trades (on ETFs at least) at the likes of Merrill Edge and Chase, . .
Vanguard has by far the largest array of no transaction fee Exchange Traded Funds (ETFs). In addition to its own ETFs Vanguard offers roughly 1800 commission free ETFs of other firms including those of Schwab, State Street (SPDR) and BlackRock (iShares). Kiplinger (07/02/2018), "Vanguard to Ditch Commissions on Most ETFs".

. . . often there are even lucrative bonuses for bringing in a certain amount of money. I moved my taxable and IRAs (mostly in Vanguard ETFs) to Merrill Edge after a series of Vanguard screw-ups, got several hundred dollars in bonuses, and I've been much happier with ME's service versus Vanguard.
If unhappy with Vanguard I don't fault the decision to switch to Merrill Edge, which is also a good choice for investing with ETFs. A lot of selection of a brokerage is a matter of personal preference.
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Re: Who should I open my taxable account with?

Post by Gleevec » Sun Jun 23, 2019 4:18 pm

livesoft wrote:
Sun Jun 23, 2019 9:43 am
You have been fooled by the zero fee marketing machine. What if the performance was 0.05% lower than a fund that you pay 0.05% expense ratio for? What if the performance is the same, but you pay 0.15% more in taxes every year on the zero-fee funds?
You have been fooled by the Vanguard index fund marketing machine. What if the performance was 0.5% lower than an active fund fund that you pay 0.5% expense ratio for? What if the performance is the same, but you pay 0.15% more in taxes every year on the Vanguard index funds?

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ruralavalon
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Re: Who should I open my taxable account with?

Post by ruralavalon » Sun Jun 23, 2019 4:55 pm

Jack FFR1846 wrote:
Sun Jun 23, 2019 2:25 pm
I'll just leave this here:

I split my equity position at Fidelity on Aug 6 last year, shortly after the start of the zero fund FZROX equally. Today, the balances are (as of Friday's close)....

FSKAX: $320,775.02

FZROX: $320,919.62

That said, I also hold VTI and SPTM at TDAmeritrade, SCHB at Schwab and FXAIX in my 401k at Fidelity.
Not bad so far in a 10 month test.

A plain vanilla S&P 500 index fund did better. Morningstar, FZROX vs VFIAX.

A 10 month test means little, but is still interesting.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

livesoft
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Re: Who should I open my taxable account with?

Post by livesoft » Sun Jun 23, 2019 5:59 pm

Gleevec wrote:
Sun Jun 23, 2019 4:18 pm
livesoft wrote:
Sun Jun 23, 2019 9:43 am
You have been fooled by the zero fee marketing machine. What if the performance was 0.05% lower than a fund that you pay 0.05% expense ratio for? What if the performance is the same, but you pay 0.15% more in taxes every year on the zero-fee funds?
You have been fooled by the Vanguard index fund marketing machine. What if the performance was 0.5% lower than an active fund fund that you pay 0.5% expense ratio for? What if the performance is the same, but you pay 0.15% more in taxes every year on the Vanguard index funds?
Now you're talking!
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Gleevec
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Re: Who should I open my taxable account with?

Post by Gleevec » Sun Jun 23, 2019 6:01 pm

livesoft wrote:
Sun Jun 23, 2019 5:59 pm
Gleevec wrote:
Sun Jun 23, 2019 4:18 pm
livesoft wrote:
Sun Jun 23, 2019 9:43 am
You have been fooled by the zero fee marketing machine. What if the performance was 0.05% lower than a fund that you pay 0.05% expense ratio for? What if the performance is the same, but you pay 0.15% more in taxes every year on the zero-fee funds?
You have been fooled by the Vanguard index fund marketing machine. What if the performance was 0.5% lower than an active fund fund that you pay 0.5% expense ratio for? What if the performance is the same, but you pay 0.15% more in taxes every year on the Vanguard index funds?
Now you're talking!
I’m just teasing you livesoft, I am a huge fan of you posts, thanks for all you do

livesoft
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Re: Who should I open my taxable account with?

Post by livesoft » Sun Jun 23, 2019 6:07 pm

What?! You didn't think I understood that?
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Re: Who should I open my taxable account with?

Post by CppCoder » Sun Jun 23, 2019 7:25 pm

ruralavalon wrote:
Sun Jun 23, 2019 4:55 pm
Jack FFR1846 wrote:
Sun Jun 23, 2019 2:25 pm
I'll just leave this here:

I split my equity position at Fidelity on Aug 6 last year, shortly after the start of the zero fund FZROX equally. Today, the balances are (as of Friday's close)....

FSKAX: $320,775.02

FZROX: $320,919.62

That said, I also hold VTI and SPTM at TDAmeritrade, SCHB at Schwab and FXAIX in my 401k at Fidelity.
Not bad so far in a 10 month test.

A plain vanilla S&P 500 index fund did better.

A 10 month test means little, but is still interesting.
That's an apples to oranges comparison (to compare FZROX or FSKAX to a plain vanilla S&P 500 index fund). These things are not attempting to track the same market segment. FZROX and FSKAX are total domestic market funds while the S&P 500, as you know, is only about the top 80% of the U.S. market by market cap. This comparison says nothing of the fund qualities, only the asset allocation. For the trailing year, VOO (Vanguard S&P 500 index ETF) has outperformed VTI (Vanguard total U.S. ETF) has significantly outperformed VXF (Vanguard extended market ETF). It's the same effect as above. A fair comparison would be FZROX/FSKAX to VTI/VTSAX.

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Re: Who should I open my taxable account with?

Post by 123 » Sun Jun 23, 2019 8:39 pm

If you decide to go with the zero expense ratio funds at Fidelity for a taxable account you should be aware of the potential consequences. Because of the zero expense ratio those funds might not become available elsewhere (there no margin to pay a "servicing fee" to another brokerage and Fidelity might want to keep the customers). As a result the only way to "Escape" from Fidelity down the road might involve liquidating those "free" funds and paying the capital gains taxes. You might want to leave Fidelity at some point because you might come to prefer the fees/services/incentives of another brokerage (which might might not even currently exist).
The closest helping hand is at the end of your own arm.

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Re: Who should I open my taxable account with?

Post by ruralavalon » Mon Jun 24, 2019 7:28 am

CppCoder wrote:
Sun Jun 23, 2019 7:25 pm
ruralavalon wrote:
Sun Jun 23, 2019 4:55 pm
Jack FFR1846 wrote:
Sun Jun 23, 2019 2:25 pm
I'll just leave this here:

I split my equity position at Fidelity on Aug 6 last year, shortly after the start of the zero fund FZROX equally. Today, the balances are (as of Friday's close)....

FSKAX: $320,775.02

FZROX: $320,919.62

That said, I also hold VTI and SPTM at TDAmeritrade, SCHB at Schwab and FXAIX in my 401k at Fidelity.
Not bad so far in a 10 month test.

A plain vanilla S&P 500 index fund did better.

A 10 month test means little, but is still interesting.
That's an apples to oranges comparison (to compare FZROX or FSKAX to a plain vanilla S&P 500 index fund). These things are not attempting to track the same market segment. FZROX and FSKAX are total domestic market funds while the S&P 500, as you know, is only about the top 80% of the U.S. market by market cap. This comparison says nothing of the fund qualities, only the asset allocation. For the trailing year, VOO (Vanguard S&P 500 index ETF) has outperformed VTI (Vanguard total U.S. ETF) has significantly outperformed VXF (Vanguard extended market ETF). It's the same effect as above. A fair comparison would be FZROX/FSKAX to VTI/VTSAX.
No 10 month comparison means much, fair or unfair.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

wolf359
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Re: Who should I open my taxable account with?

Post by wolf359 » Mon Jun 24, 2019 7:43 am

Gleevec wrote:
Sun Jun 23, 2019 6:01 pm
livesoft wrote:
Sun Jun 23, 2019 5:59 pm
Gleevec wrote:
Sun Jun 23, 2019 4:18 pm
livesoft wrote:
Sun Jun 23, 2019 9:43 am
You have been fooled by the zero fee marketing machine. What if the performance was 0.05% lower than a fund that you pay 0.05% expense ratio for? What if the performance is the same, but you pay 0.15% more in taxes every year on the zero-fee funds?
You have been fooled by the Vanguard index fund marketing machine. What if the performance was 0.5% lower than an active fund fund that you pay 0.5% expense ratio for? What if the performance is the same, but you pay 0.15% more in taxes every year on the Vanguard index funds?
Now you're talking!
I’m just teasing you livesoft, I am a huge fan of you posts, thanks for all you do
I realize you were teasing, but Vanguard does have a tax advantage in a taxable account. I hold both Vanguard and Fidelity accounts, and it annoys me when I get the statement from Fidelity. Vanguard's advantage has to do with a patent on the way they're combining ETFs and mutual funds, so there's no reason to believe it won't also hold true for new funds from Fidelity.

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