2 Misleading Fidelity Target Date Funds

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MathIsMyWayr
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2 Misleading Fidelity Target Date Funds

Post by MathIsMyWayr » Sat Sep 07, 2019 4:05 pm

There is an interesting article on two misleading Fidelity Target Date Funds.
https://www.marketwatch.com/story/targe ... yptr=yahoo
One is a set of passive index funds and the other active funds with much higher ERs. Some of them are over 1%. My former Megacorp unfortunately uses the expensive active funds. Fund selection of large employers' 401(k) plans is usually excellent, but not always so. Every investor is on his own.

livesoft
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Re: 2 Misleading Fidelity Target Date Funds

Post by livesoft » Sat Sep 07, 2019 4:11 pm

This is rather well-known around bogleheads.org.

I will say that Fidelity does make more money from the actively-managed funds. In a 401(k) Fidelity would charge the company more money to use the index version and less money to use the actively-managed version. Thus a company trying to pay the lowest fees to have a 401(k) plan might will select the actively-managed Freedom funds. The alternative might be to charge employees higher fees to participate in the 401(k) plan. I'm not saying that happens in all Fidelity run 401(k) plans, but I am sure it happens in some of them.
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MathIsMyWayr
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Re: 2 Misleading Fidelity Target Date Funds

Post by MathIsMyWayr » Sat Sep 07, 2019 4:22 pm

livesoft wrote:
Sat Sep 07, 2019 4:11 pm
This is rather well-known around bogleheads.org.

I will say that Fidelity does make more money from the actively-managed funds. In a 401(k) Fidelity would charge the company more money to use the index version and less money to use the actively-managed version. Thus a company trying to pay the lowest fees to have a 401(k) plan might will select the actively-managed Freedom funds. The alternative might be to charge employees higher fees to participate in the 401(k) plan. I'm not saying that happens in all Fidelity run 401(k) plans, but I am sure it happens in some of them.
If I had known this from day one, my NW now may have a fighting chance against livesoft's.

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Re: 2 Misleading Fidelity Target Date Funds

Post by noraz123 » Sat Sep 07, 2019 4:28 pm

MathIsMyWayr wrote:
Sat Sep 07, 2019 4:22 pm
livesoft wrote:
Sat Sep 07, 2019 4:11 pm
This is rather well-known around bogleheads.org.

I will say that Fidelity does make more money from the actively-managed funds. In a 401(k) Fidelity would charge the company more money to use the index version and less money to use the actively-managed version. Thus a company trying to pay the lowest fees to have a 401(k) plan might will select the actively-managed Freedom funds. The alternative might be to charge employees higher fees to participate in the 401(k) plan. I'm not saying that happens in all Fidelity run 401(k) plans, but I am sure it happens in some of them.
If I had known this from day one, my NW now may have a fighting chance against livesoft's.
I can't comment on livesoft's or your NW. But judging by # of comments posted to Bogleheds, he's got you beat by almost two orders of magnitude. :D

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Re: 2 Misleading Fidelity Target Date Funds

Post by sergio » Sat Sep 07, 2019 4:34 pm

The biggest issue for 95%+ people isn't the difference between a 0.75 ER (Fidelity Freedom Active 2045) vs 0.12 ER (Fidelity Freedom Index 2045), it's getting people to contribute a decent amount, consistently. My mom works for a large hospital and recently an email was sent out encouraging people to contribute to their 401ks - something like 20% of the employees aren't contributing at all, not even to the (very generous) match.

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Re: 2 Misleading Fidelity Target Date Funds

Post by oldcomputerguy » Sat Sep 07, 2019 4:43 pm

While I agree with the basic premise of Mr. Merriman's article (namely, that actively-managed funds typically have a higher ER and so higher costs to the investor), I think that the title of the Morningstar article ("Why do these two nearly identical Fidelity funds have such different performance?") is somewhat misleading.

A quick perusal of these two funds (FDEWX and FNSDX) on the Fidelity web site shows that they are nowhere near "identical". Not even "nearly identical".

FDEWX (Fidelity Freedom Index 2055 Fund) contains four holdings:
  • Fidelity Series Total Market Index Fund
  • Fidelity Series Global ex U.S. Index Fund
  • Fidelity Series Bond Index Fund
  • Fidelity Series Long-Term Treasury Bond Index Fund
FNSDX (Fidelity Freedom® 2055 Fund - Class K) contains this incredible mishmash of holdings:
  • Fidelity Series Intrinsic Opportunities Fund
  • Fidelity Series Large Cap Stock Fund
  • Fidelity Series Growth Company Fund
  • Fidelity Series Stock Selector Large Cap Value Fund
  • Fidelity Series Value Discovery Fund
  • Fidelity Series Opportunistic Insights Fund
  • Fidelity Series Blue Chip Growth Fund
  • Fidelity Series Small Cap Opportunities Fund
  • Fidelity Series Large Cap Value Index Fund
  • Fidelity Series All-Sector Equity Fund
  • Fidelity Series Small Cap Discovery Fund
  • Fidelity Series Commodity Strategy Fund
  • Fidelity Series International Growth Fund
  • Fidelity Series International Value Fund
  • Fidelity Series International Small Cap Fund
  • Fidelity Series Overseas Fund
  • Fidelity Series Canada Fund
  • Fidelity Series Emerging Markets Opportunities Fund
  • Fidelity Series Emerging Markets Fund
  • Fidelity Series Investment Grade Bond Fund
  • Fidelity Series Long-Term Treasury Bond Index Fund
  • Fidelity Series Inflation-Protected Bond Index Fund
  • Fidelity Series High Income Fund
  • Fidelity Series Floating Rate High Income Fund
  • Fidelity Series International Credit Fund
  • Fidelity Series Emerging Markets Debt Fund
  • Fidelity Series Real Estate Income Fund
  • Fidelity Series Government Money Market Fund
  • Fidelity Series Short-Term Credit Fund
  • Fidelity Cash Central Fund
plus a smattering of domestic and international equity futures and some individual Treasury bonds.
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Re: 2 Misleading Fidelity Target Date Funds

Post by sport » Sat Sep 07, 2019 4:50 pm

One thing to pay attention to with target date funds is whether or not the ER is in addition to the individual fund ERs. At Vanguard there is no addition ER for funds-of-funds. I cannot speak about Fidelity.

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Re: 2 Misleading Fidelity Target Date Funds

Post by PhilosophyAndrew » Sat Sep 07, 2019 5:56 pm

OP, in what ways are these funds “misleading”?

Yes, potential investors should take care to understand the differences between the two families of funds, but your characterization of them seems hyperbolic.

Andy.

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Re: 2 Misleading Fidelity Target Date Funds

Post by MathIsMyWayr » Sat Sep 07, 2019 6:55 pm

PhilosophyAndrew wrote:
Sat Sep 07, 2019 5:56 pm
OP, in what ways are these funds “misleading”?

Yes, potential investors should take care to understand the differences between the two families of funds, but your characterization of them seems hyperbolic.

Andy.
Target Date funds are the default choice in many employers' retirement plans. Many first time enrollees and unsophisticated investors choose them with a naive belief that everybody in their plan puts plan participants' interest first. Giving similar names and hitting them with high fees is beyond conscience. Jack Bogle's emotional statement, "Money managers always want more...But it is not right for this business", about high investment fees in retirement accounts in "The Retirement Gamble" still rings in my ears. I also had all the employer's 401(k) money in one of the high ER target day fund over 10 years.
https://www.pbs.org/video/frontline-retirement-gamble/

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Re: 2 Misleading Fidelity Target Date Funds

Post by livesoft » Sat Sep 07, 2019 7:03 pm

It would be unusual I think for a 401(k) to have BOTH Fidelity Freedom funds and Fidelity Freedom Index funds. That is, 401(k) participants are unlikely to have a choice. May I ask if you actually have a choice?

I believe it is true that when setting up a plan Fidelity may not tell the company that it has Freedom Index funds. It is up to the company reps to become knowledgeable on these things and negotiate the best deal for the employer and perhaps the employees.

Let me give a hypothetical example: Is it better to offer Freedom funds and not charge $100 a year to employees or charge $100 a year to employees and offer Freedom Index funds. Let's assume that separate index funds (Total US, Total Int'l, Total Bond) are offered in either case at no additional charge.
Last edited by livesoft on Sat Sep 07, 2019 7:09 pm, edited 1 time in total.
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Re: 2 Misleading Fidelity Target Date Funds

Post by PhilosophyAndrew » Sat Sep 07, 2019 7:09 pm

MathIsMyWayr wrote:
Sat Sep 07, 2019 6:55 pm
PhilosophyAndrew wrote:
Sat Sep 07, 2019 5:56 pm
OP, in what ways are these funds “misleading”?

Yes, potential investors should take care to understand the differences between the two families of funds, but your characterization of them seems hyperbolic.

Andy.
Target Date funds are the default choice in many employers' retirement plans. Many first time enrollees and unsophisticated investors choose them with a naive belief that everybody in their plan puts plan participants' interest first. Giving similar names and hitting them with high fees is beyond conscience. Jack Bogle's emotional statement, "Money managers always want more...But it is not right for this business", about high investment fees in retirement accounts in "The Retirement Gamble" still rings in my ears. I also had all the employer's 401(k) money in one of the high ER target day fund over 10 years.
https://www.pbs.org/video/frontline-retirement-gamble/
I agree naive investors would be well-served by greater financial literacy, but I still don’t understand what you believe is misleading about these two fund families much less (and even greater hyperbole) “beyond consience.”


I understand that there are two families of funds, one that is actively managed and one that is not,’with each family of funds having reasonable ERs for their management types.

I understand why BH would recommend choosing the lower-ER index fund family, and I understand that many investors have not heard this recommendation and might not understand its rationale without further education.

I do not understand exactly shocks your conscience here, and I would love for you to say more about what you have in mind.

Andy.

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Re: 2 Misleading Fidelity Target Date Funds

Post by MathIsMyWayr » Sat Sep 07, 2019 11:21 pm

PhilosophyAndrew wrote:
Sat Sep 07, 2019 7:09 pm
MathIsMyWayr wrote:
Sat Sep 07, 2019 6:55 pm
PhilosophyAndrew wrote:
Sat Sep 07, 2019 5:56 pm
OP, in what ways are these funds “misleading”?

Yes, potential investors should take care to understand the differences between the two families of funds, but your characterization of them seems hyperbolic.

Andy.
Target Date funds are the default choice in many employers' retirement plans. Many first time enrollees and unsophisticated investors choose them with a naive belief that everybody in their plan puts plan participants' interest first. Giving similar names and hitting them with high fees is beyond conscience. Jack Bogle's emotional statement, "Money managers always want more...But it is not right for this business", about high investment fees in retirement accounts in "The Retirement Gamble" still rings in my ears. I also had all the employer's 401(k) money in one of the high ER target day fund over 10 years.
https://www.pbs.org/video/frontline-retirement-gamble/
I agree naive investors would be well-served by greater financial literacy, but I still don’t understand what you believe is misleading about these two fund families much less (and even greater hyperbole) “beyond consience.”


I understand that there are two families of funds, one that is actively managed and one that is not,’with each family of funds having reasonable ERs for their management types.

I understand why BH would recommend choosing the lower-ER index fund family, and I understand that many investors have not heard this recommendation and might not understand its rationale without further education.

I do not understand exactly shocks your conscience here, and I would love for you to say more about what you have in mind.

Andy.
Well, the video with the link above tells better than I will be able to.

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Re: 2 Misleading Fidelity Target Date Funds

Post by PhilosophyAndrew » Sun Sep 08, 2019 11:18 am

I’ve seen the Frontline piece, but remain unclear about how it applies to these two families of Fidelity funds.

Perhaps any company’s offering an actively-managed fund shocks your conscience, but if so that seems a general complaint you have about the industry and has nothing to do with deceptive behavior by Fidelity. Tonyoyrnmind, alre all active funds mired in deception, even ones that many financially-literate Boglrheads knowingly choose to invest in, for example some muni funds, the Wellington and Wellesley funds, TIAA-CREF’s real estate fund.

The title you provided this thread also confuses me: It suggests that there is something deceptive about Fidelity’s index target date funds. If so, what exactly?

I understand you prefer that Fidelity would offer no actively-managed funds. But it seems a stretch to conclude that their doing is is deceptive or is unconscionable.

It sounds like you are upset that your employer offered the actively managed funds in its 401k fund and are disappointed that you chose to invest in them. I sympathize, but neither this not the Frontline program seem to justify your harsh criticism of these two Fidelity fund families. (If you had paid large front or back loads or had paid an egregious ER or AUM fee, you would have a stronger case. But this wasn’t the case, was it?)

What am I missing?


Andy.

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Re: 2 Misleading Fidelity Target Date Funds

Post by tibbitts » Sun Sep 08, 2019 11:45 am

I'm not seeing anything objectionable here. I invest in some of the active funds in the list.

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Re: 2 Misleading Fidelity Target Date Funds

Post by cherijoh » Sun Sep 08, 2019 11:56 am

PhilosophyAndrew wrote:
Sun Sep 08, 2019 11:18 am
The title you provided this thread also confuses me: It suggests that there is something deceptive about Fidelity’s index target date funds. If so, what exactly?

I understand you prefer that Fidelity would offer no actively-managed funds. But it seems a stretch to conclude that their doing is is deceptive or is unconscionable.

It sounds like you are upset that your employer offered the actively managed funds in its 401k fund and are disappointed that you chose to invest in them. I sympathize, but neither this not the Frontline program seem to justify your harsh criticism of these two Fidelity fund families. (If you had paid large front or back loads or had paid an egregious ER or AUM fee, you would have a stronger case. But this wasn’t the case, was it?)

What am I missing?


Andy.
I agree with Andy. Deceptive suggests that they were trying to hide something. For instance, when company offering actively managed funds with loads ignores the load when they compare their funds' performance to an index, that is deceptive IMO. A normal investor would assume that if they invested $10K that the comparison would be based on investing $10K in the index - not $9450 (assuming a 5.5% load).

But if someone fails to do basic due diligence on the funds in which they are investing, I wouldn't blame it on the mutual fund company offering the actively-managed funds.

The employer does bear responsibility for offering reasonable choices, however. My former employer offered funds with ERs up to 1% with the vast majority in the 0.4 - 0.6% range. But they also offered institutional class VG index funds and Blackrock TR index funds (with ER of 0.08%), so I could honestly say that I had good choices, even though there were poor ones as well.

OP, did your plan offer any index fund choices at all?

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Re: 2 Misleading Fidelity Target Date Funds

Post by bostondan » Sun Sep 08, 2019 11:58 am

PhilosophyAndrew wrote:
Sun Sep 08, 2019 11:18 am
I’ve seen the Frontline piece, but remain unclear about how it applies to these two families of Fidelity funds.

Perhaps any company’s offering an actively-managed fund shocks your conscience, but if so that seems a general complaint you have about the industry and has nothing to do with deceptive behavior by Fidelity. Tonyoyrnmind, alre all active funds mired in deception, even ones that many financially-literate Boglrheads knowingly choose to invest in, for example some muni funds, the Wellington and Wellesley funds, TIAA-CREF’s real estate fund.

The title you provided this thread also confuses me: It suggests that there is something deceptive about Fidelity’s index target date funds. If so, what exactly?

I understand you prefer that Fidelity would offer no actively-managed funds. But it seems a stretch to conclude that their doing is is deceptive or is unconscionable.

It sounds like you are upset that your employer offered the actively managed funds in its 401k fund and are disappointed that you chose to invest in them. I sympathize, but neither this not the Frontline program seem to justify your harsh criticism of these two Fidelity fund families. (If you had paid large front or back loads or had paid an egregious ER or AUM fee, you would have a stronger case. But this wasn’t the case, was it?)

What am I missing?


Andy.
I mostly agree. However, I recall something sketchy when I first tried using the Fidelity index-based target-date funds. I tried searching the Fidelity website for the index version and it brought me to the non-index version automatically. I almost invested in the wrong one because it was so misleading how it navigated there. I then Googled the index version and similarly had a hard time getting to it.

I eventually invested in the correct fund, and now don't use target date funds at all, but I could easily see how someone could have fallen into Fidelity's trap of redirecting people away from the index version.

I usually recommend Vanguard to people over Fidelity because it is less booby-trapped. It's much harder to accidentally do something stupid at Vanguard, though obviously possible at both companies. I recommend Fidelity to people who have any complexity to their finances and that I think are able to avoid being upsold, because the customer service at Fidelity has always been outstanding. To be fair, I am in the private wealth management group (or whatever it is called), so I get immediate service and the people are probably better who help me. It amazed me they let me have this status given that my all-in ER is 0.03% despite having a substantial amount of money with them.
“There may be times when we are powerless to prevent injustice, but there must never be a time when we fail to protest.” - Elie Wiesel

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Re: 2 Misleading Fidelity Target Date Funds

Post by heyyou » Sun Sep 08, 2019 12:45 pm

I've avoided Fidelity for the past four decades, due to their offering index funds with Advisor shares carrying a .25% annual kickback to the sellers/fee based advisors who were already charging other fees. The extra fee, long term, seemed deceptive since it was hidden and not related to the costs of buying or fund maintenance.
What is pertinent to this thread is how Fidelity was willing to take advantage of poorly informed investors.

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Re: 2 Misleading Fidelity Target Date Funds

Post by student » Sun Sep 08, 2019 1:53 pm

PhilosophyAndrew wrote:
Sun Sep 08, 2019 11:18 am
I’ve seen the Frontline piece, but remain unclear about how it applies to these two families of Fidelity funds.

Perhaps any company’s offering an actively-managed fund shocks your conscience, but if so that seems a general complaint you have about the industry and has nothing to do with deceptive behavior by Fidelity. Tonyoyrnmind, alre all active funds mired in deception, even ones that many financially-literate Boglrheads knowingly choose to invest in, for example some muni funds, the Wellington and Wellesley funds, TIAA-CREF’s real estate fund.

The title you provided this thread also confuses me: It suggests that there is something deceptive about Fidelity’s index target date funds. If so, what exactly?

I understand you prefer that Fidelity would offer no actively-managed funds. But it seems a stretch to conclude that their doing is is deceptive or is unconscionable.

It sounds like you are upset that your employer offered the actively managed funds in its 401k fund and are disappointed that you chose to invest in them. I sympathize, but neither this not the Frontline program seem to justify your harsh criticism of these two Fidelity fund families. (If you had paid large front or back loads or had paid an egregious ER or AUM fee, you would have a stronger case. But this wasn’t the case, was it?)

What am I missing?


Andy.
I agree with you.

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Re: 2 Misleading Fidelity Target Date Funds

Post by student » Sun Sep 08, 2019 2:00 pm

heyyou wrote:
Sun Sep 08, 2019 12:45 pm
I've avoided Fidelity for the past four decades, due to their offering index funds with Advisor shares carrying a .25% annual kickback to the sellers/fee based advisors who were already charging other fees. The extra fee, long term, seemed deceptive since it was hidden and not related to the costs of buying or fund maintenance.
What is pertinent to this thread is how Fidelity was willing to take advantage of poorly informed investors.
I don't understand regarding the index funds with Advisor shares carrying a 0.25* annual kickback compliant. My understanding is Fidelity charges you x% and the arrangement is for Fidelity to give part of the fee back to the advisor. Is my understanding not correct? If x is given, how is it hidden. This is also how many fund supermarkets work. You can buy company A's no-load mutual funds from Schwab because company A gives Schwab a cut. If there is a deceptive party, it is your advisor.

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Re: 2 Misleading Fidelity Target Date Funds

Post by student » Sun Sep 08, 2019 2:08 pm

bostondan wrote:
Sun Sep 08, 2019 11:58 am
PhilosophyAndrew wrote:
Sun Sep 08, 2019 11:18 am
I’ve seen the Frontline piece, but remain unclear about how it applies to these two families of Fidelity funds.

Perhaps any company’s offering an actively-managed fund shocks your conscience, but if so that seems a general complaint you have about the industry and has nothing to do with deceptive behavior by Fidelity. Tonyoyrnmind, alre all active funds mired in deception, even ones that many financially-literate Boglrheads knowingly choose to invest in, for example some muni funds, the Wellington and Wellesley funds, TIAA-CREF’s real estate fund.

The title you provided this thread also confuses me: It suggests that there is something deceptive about Fidelity’s index target date funds. If so, what exactly?

I understand you prefer that Fidelity would offer no actively-managed funds. But it seems a stretch to conclude that their doing is is deceptive or is unconscionable.

It sounds like you are upset that your employer offered the actively managed funds in its 401k fund and are disappointed that you chose to invest in them. I sympathize, but neither this not the Frontline program seem to justify your harsh criticism of these two Fidelity fund families. (If you had paid large front or back loads or had paid an egregious ER or AUM fee, you would have a stronger case. But this wasn’t the case, was it?)

What am I missing?


Andy.
I mostly agree. However, I recall something sketchy when I first tried using the Fidelity index-based target-date funds. I tried searching the Fidelity website for the index version and it brought me to the non-index version automatically. I almost invested in the wrong one because it was so misleading how it navigated there. I then Googled the index version and similarly had a hard time getting to it.

I eventually invested in the correct fund, and now don't use target date funds at all, but I could easily see how someone could have fallen into Fidelity's trap of redirecting people away from the index version.

I usually recommend Vanguard to people over Fidelity because it is less booby-trapped. It's much harder to accidentally do something stupid at Vanguard, though obviously possible at both companies. I recommend Fidelity to people who have any complexity to their finances and that I think are able to avoid being upsold, because the customer service at Fidelity has always been outstanding. To be fair, I am in the private wealth management group (or whatever it is called), so I get immediate service and the people are probably better who help me. It amazed me they let me have this status given that my all-in ER is 0.03% despite having a substantial amount of money with them.
I recall that Fidelity did not promote its index target fund a few years ago. However, I was always able to get to it if I searched for something along the line of "2030 target index fund." I just took a look at its website, I went to https://www.fidelity.com/fund-screener/ ... By=F&ntf=N to research all Fidelity funds. I chose index under fund management approach, and target date index funds were right there.

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Re: 2 Misleading Fidelity Target Date Funds

Post by heyyou » Sun Sep 08, 2019 2:37 pm

@ student
The Fidelity shares were just labeled with a letter, the extra fee was only obvious when digging deep enough to compare fund expenses to the other share classes. The advisor did not explain that his choice of index fund shares had an additional steady fee. My complaint is that Fidelity aided the advisor, at my expense, by offering those shares, when identical, less expensive share class funds were available from Fido.

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Re: 2 Misleading Fidelity Target Date Funds

Post by nedsaid » Sun Sep 08, 2019 6:08 pm

I would not get too worked up over this. I have owned both versions of the Fidelity Freedom 2025 fund, the active and passive versions, now I own the passive version. For one thing, 401(k) plans will often qualify for a discount on the expense ratios. Secondly, I had noticed that the active version of the Freedom 2025 fund was actually outperforming the passive version by a hair. Haven't checked this recently but my guess is that the performance of the two are pretty similar. T. Rowe Price runs active Target Date funds that are very highly regarded. All that being said, I would prefer the passive version of the Freedom funds as expense ratios and not performance are guaranteed. The active version of the Freedom Funds have performed well enough that they are not a disaster.
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Re: 2 Misleading Fidelity Target Date Funds

Post by student » Wed Sep 11, 2019 9:15 am

heyyou wrote:
Sun Sep 08, 2019 2:37 pm
@ student
The Fidelity shares were just labeled with a letter, the extra fee was only obvious when digging deep enough to compare fund expenses to the other share classes. The advisor did not explain that his choice of index fund shares had an additional steady fee. My complaint is that Fidelity aided the advisor, at my expense, by offering those shares, when identical, less expensive share class funds were available from Fido.
I would say you were wronged by the advisor, not Fidelity. To me, a good advisor should explain to his/her clients regarding fund expenses. One question that one should ask an advisor is how he/she is compensated and whether he/she is a fiduciary. The advisor is supposed to offer a service for a fee, the fee can be an explicit amount paid by you, a "kickback" from fund companies, or a combination of both. Ultimately, the client has to pay. Personally, I think (and you have probably found out now) it is not worth it to have an advisor in most cases.

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Re: 2 Misleading Fidelity Target Date Funds

Post by student » Wed Sep 11, 2019 9:16 am

nedsaid wrote:
Sun Sep 08, 2019 6:08 pm
I would not get too worked up over this. I have owned both versions of the Fidelity Freedom 2025 fund, the active and passive versions, now I own the passive version. For one thing, 401(k) plans will often qualify for a discount on the expense ratios. Secondly, I had noticed that the active version of the Freedom 2025 fund was actually outperforming the passive version by a hair. Haven't checked this recently but my guess is that the performance of the two are pretty similar. T. Rowe Price runs active Target Date funds that are very highly regarded. All that being said, I would prefer the passive version of the Freedom funds as expense ratios and not performance are guaranteed. The active version of the Freedom Funds have performed well enough that they are not a disaster.
+1.

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Re: 2 Misleading Fidelity Target Date Funds

Post by mervinj7 » Wed Sep 11, 2019 10:11 am

MathIsMyWayr wrote:
Sat Sep 07, 2019 4:22 pm
If I had known this from day one, my NW now may have a fighting chance against livesoft's.
Just curious, did you actually quantify the performance difference since math is your way? I used to own the 2050 active fund while my wife had access to the 2050 freedom index version. There was very little actual difference in performance even after six years.

https://www.fidelity.com/fund-screener/ ... EX%2CFDEWX

https://www.fidelity.com/fund-screener/ ... HX%2CFIPFX

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Re: 2 Misleading Fidelity Target Date Funds

Post by wolf359 » Wed Sep 11, 2019 11:03 am

bostondan wrote:
Sun Sep 08, 2019 11:58 am
PhilosophyAndrew wrote:
Sun Sep 08, 2019 11:18 am
I’ve seen the Frontline piece, but remain unclear about how it applies to these two families of Fidelity funds.

Perhaps any company’s offering an actively-managed fund shocks your conscience, but if so that seems a general complaint you have about the industry and has nothing to do with deceptive behavior by Fidelity. Tonyoyrnmind, alre all active funds mired in deception, even ones that many financially-literate Boglrheads knowingly choose to invest in, for example some muni funds, the Wellington and Wellesley funds, TIAA-CREF’s real estate fund.

The title you provided this thread also confuses me: It suggests that there is something deceptive about Fidelity’s index target date funds. If so, what exactly?

I understand you prefer that Fidelity would offer no actively-managed funds. But it seems a stretch to conclude that their doing is is deceptive or is unconscionable.

It sounds like you are upset that your employer offered the actively managed funds in its 401k fund and are disappointed that you chose to invest in them. I sympathize, but neither this not the Frontline program seem to justify your harsh criticism of these two Fidelity fund families. (If you had paid large front or back loads or had paid an egregious ER or AUM fee, you would have a stronger case. But this wasn’t the case, was it?)

What am I missing?


Andy.
I mostly agree. However, I recall something sketchy when I first tried using the Fidelity index-based target-date funds. I tried searching the Fidelity website for the index version and it brought me to the non-index version automatically. I almost invested in the wrong one because it was so misleading how it navigated there. I then Googled the index version and similarly had a hard time getting to it.

I eventually invested in the correct fund, and now don't use target date funds at all, but I could easily see how someone could have fallen into Fidelity's trap of redirecting people away from the index version.

I usually recommend Vanguard to people over Fidelity because it is less booby-trapped. It's much harder to accidentally do something stupid at Vanguard, though obviously possible at both companies. I recommend Fidelity to people who have any complexity to their finances and that I think are able to avoid being upsold, because the customer service at Fidelity has always been outstanding. To be fair, I am in the private wealth management group (or whatever it is called), so I get immediate service and the people are probably better who help me. It amazed me they let me have this status given that my all-in ER is 0.03% despite having a substantial amount of money with them.
+1

I had this experience on the Fidelity website as well. It's changed now. If you search for the index version they will at least provide it, but they will list the non-index version first on the page.

Also, if you searched for "index fund" they used to provide materials praising how Fidelity index fund implementation was good, then provide a list of actively traded mutual funds. Actual index funds only showed up if you asked for them by name. This has changed as well. Searching for index funds still gets some of the same responses, but the zero funds do get listed.

If you know what you want, Fidelity will give it to you. If you don't, you may end up with an actively traded fund. Is that misleading?

bck63
Posts: 579
Joined: Fri Sep 28, 2018 4:59 pm

Re: 2 Misleading Fidelity Target Date Funds

Post by bck63 » Wed Sep 11, 2019 11:16 am

student wrote:
Sun Sep 08, 2019 2:08 pm
bostondan wrote:
Sun Sep 08, 2019 11:58 am
PhilosophyAndrew wrote:
Sun Sep 08, 2019 11:18 am
I’ve seen the Frontline piece, but remain unclear about how it applies to these two families of Fidelity funds.

Perhaps any company’s offering an actively-managed fund shocks your conscience, but if so that seems a general complaint you have about the industry and has nothing to do with deceptive behavior by Fidelity. Tonyoyrnmind, alre all active funds mired in deception, even ones that many financially-literate Boglrheads knowingly choose to invest in, for example some muni funds, the Wellington and Wellesley funds, TIAA-CREF’s real estate fund.

The title you provided this thread also confuses me: It suggests that there is something deceptive about Fidelity’s index target date funds. If so, what exactly?

I understand you prefer that Fidelity would offer no actively-managed funds. But it seems a stretch to conclude that their doing is is deceptive or is unconscionable.

It sounds like you are upset that your employer offered the actively managed funds in its 401k fund and are disappointed that you chose to invest in them. I sympathize, but neither this not the Frontline program seem to justify your harsh criticism of these two Fidelity fund families. (If you had paid large front or back loads or had paid an egregious ER or AUM fee, you would have a stronger case. But this wasn’t the case, was it?)

What am I missing?


Andy.
I mostly agree. However, I recall something sketchy when I first tried using the Fidelity index-based target-date funds. I tried searching the Fidelity website for the index version and it brought me to the non-index version automatically. I almost invested in the wrong one because it was so misleading how it navigated there. I then Googled the index version and similarly had a hard time getting to it.

I eventually invested in the correct fund, and now don't use target date funds at all, but I could easily see how someone could have fallen into Fidelity's trap of redirecting people away from the index version.

I usually recommend Vanguard to people over Fidelity because it is less booby-trapped. It's much harder to accidentally do something stupid at Vanguard, though obviously possible at both companies. I recommend Fidelity to people who have any complexity to their finances and that I think are able to avoid being upsold, because the customer service at Fidelity has always been outstanding. To be fair, I am in the private wealth management group (or whatever it is called), so I get immediate service and the people are probably better who help me. It amazed me they let me have this status given that my all-in ER is 0.03% despite having a substantial amount of money with them.
I recall that Fidelity did not promote its index target fund a few years ago. However, I was always able to get to it if I searched for something along the line of "2030 target index fund." I just took a look at its website, I went to https://www.fidelity.com/fund-screener/ ... By=F&ntf=N to research all Fidelity funds. I chose index under fund management approach, and target date index funds were right there.
Fidelity (no doubt purposely) makes the target date funds more difficult to find. End of story. This is not even a debatable issue. I invest in the 2025 index fund and it was not easy to find. If Fidelity didn’t care which target fund you use, they would have the target index funds listed among the other index funds! Many people have expressed the same concern. So as I said the issue really isn’t worth further serious discussion. Glad you were one of the only people who were able to find them easily.

student
Posts: 3755
Joined: Fri Apr 03, 2015 6:58 am

Re: 2 Misleading Fidelity Target Date Funds

Post by student » Wed Sep 11, 2019 11:26 am

wolf359 wrote:
Wed Sep 11, 2019 11:03 am
bostondan wrote:
Sun Sep 08, 2019 11:58 am
PhilosophyAndrew wrote:
Sun Sep 08, 2019 11:18 am
I’ve seen the Frontline piece, but remain unclear about how it applies to these two families of Fidelity funds.

Perhaps any company’s offering an actively-managed fund shocks your conscience, but if so that seems a general complaint you have about the industry and has nothing to do with deceptive behavior by Fidelity. Tonyoyrnmind, alre all active funds mired in deception, even ones that many financially-literate Boglrheads knowingly choose to invest in, for example some muni funds, the Wellington and Wellesley funds, TIAA-CREF’s real estate fund.

The title you provided this thread also confuses me: It suggests that there is something deceptive about Fidelity’s index target date funds. If so, what exactly?

I understand you prefer that Fidelity would offer no actively-managed funds. But it seems a stretch to conclude that their doing is is deceptive or is unconscionable.

It sounds like you are upset that your employer offered the actively managed funds in its 401k fund and are disappointed that you chose to invest in them. I sympathize, but neither this not the Frontline program seem to justify your harsh criticism of these two Fidelity fund families. (If you had paid large front or back loads or had paid an egregious ER or AUM fee, you would have a stronger case. But this wasn’t the case, was it?)

What am I missing?


Andy.
I mostly agree. However, I recall something sketchy when I first tried using the Fidelity index-based target-date funds. I tried searching the Fidelity website for the index version and it brought me to the non-index version automatically. I almost invested in the wrong one because it was so misleading how it navigated there. I then Googled the index version and similarly had a hard time getting to it.

I eventually invested in the correct fund, and now don't use target date funds at all, but I could easily see how someone could have fallen into Fidelity's trap of redirecting people away from the index version.

I usually recommend Vanguard to people over Fidelity because it is less booby-trapped. It's much harder to accidentally do something stupid at Vanguard, though obviously possible at both companies. I recommend Fidelity to people who have any complexity to their finances and that I think are able to avoid being upsold, because the customer service at Fidelity has always been outstanding. To be fair, I am in the private wealth management group (or whatever it is called), so I get immediate service and the people are probably better who help me. It amazed me they let me have this status given that my all-in ER is 0.03% despite having a substantial amount of money with them.
+1

I had this experience on the Fidelity website as well. It's changed now. If you search for the index version they will at least provide it, but they will list the non-index version first on the page.

Also, if you searched for "index fund" they used to provide materials praising how Fidelity index fund implementation was good, then provide a list of actively traded mutual funds. Actual index funds only showed up if you asked for them by name. This has changed as well. Searching for index funds still gets some of the same responses, but the zero funds do get listed.

If you know what you want, Fidelity will give it to you. If you don't, you may end up with an actively traded fund. Is that misleading?
No. I do not think so. I typed "target date index funds" in the search box. The first few links are about mutual funds in general, I click on one to get to general mutual fund page. https://www.fidelity.com/mutual-funds/f ... electTab=6 I clicked on the index tab, and it gives me a list of sample index funds. I click on the link "Research all Fidelity Index Funds" and it listed everything.

student
Posts: 3755
Joined: Fri Apr 03, 2015 6:58 am

Re: 2 Misleading Fidelity Target Date Funds

Post by student » Wed Sep 11, 2019 11:39 am

bck63 wrote:
Wed Sep 11, 2019 11:16 am
student wrote:
Sun Sep 08, 2019 2:08 pm
bostondan wrote:
Sun Sep 08, 2019 11:58 am
PhilosophyAndrew wrote:
Sun Sep 08, 2019 11:18 am
I’ve seen the Frontline piece, but remain unclear about how it applies to these two families of Fidelity funds.

Perhaps any company’s offering an actively-managed fund shocks your conscience, but if so that seems a general complaint you have about the industry and has nothing to do with deceptive behavior by Fidelity. Tonyoyrnmind, alre all active funds mired in deception, even ones that many financially-literate Boglrheads knowingly choose to invest in, for example some muni funds, the Wellington and Wellesley funds, TIAA-CREF’s real estate fund.

The title you provided this thread also confuses me: It suggests that there is something deceptive about Fidelity’s index target date funds. If so, what exactly?

I understand you prefer that Fidelity would offer no actively-managed funds. But it seems a stretch to conclude that their doing is is deceptive or is unconscionable.

It sounds like you are upset that your employer offered the actively managed funds in its 401k fund and are disappointed that you chose to invest in them. I sympathize, but neither this not the Frontline program seem to justify your harsh criticism of these two Fidelity fund families. (If you had paid large front or back loads or had paid an egregious ER or AUM fee, you would have a stronger case. But this wasn’t the case, was it?)

What am I missing?


Andy.
I mostly agree. However, I recall something sketchy when I first tried using the Fidelity index-based target-date funds. I tried searching the Fidelity website for the index version and it brought me to the non-index version automatically. I almost invested in the wrong one because it was so misleading how it navigated there. I then Googled the index version and similarly had a hard time getting to it.

I eventually invested in the correct fund, and now don't use target date funds at all, but I could easily see how someone could have fallen into Fidelity's trap of redirecting people away from the index version.

I usually recommend Vanguard to people over Fidelity because it is less booby-trapped. It's much harder to accidentally do something stupid at Vanguard, though obviously possible at both companies. I recommend Fidelity to people who have any complexity to their finances and that I think are able to avoid being upsold, because the customer service at Fidelity has always been outstanding. To be fair, I am in the private wealth management group (or whatever it is called), so I get immediate service and the people are probably better who help me. It amazed me they let me have this status given that my all-in ER is 0.03% despite having a substantial amount of money with them.
I recall that Fidelity did not promote its index target fund a few years ago. However, I was always able to get to it if I searched for something along the line of "2030 target index fund." I just took a look at its website, I went to https://www.fidelity.com/fund-screener/ ... By=F&ntf=N to research all Fidelity funds. I chose index under fund management approach, and target date index funds were right there.
Fidelity (no doubt purposely) makes the target date funds more difficult to find. End of story. This is not even a debatable issue. I invest in the 2025 index fund and it was not easy to find. If Fidelity didn’t care which target fund you use, they would have the target index funds listed among the other index funds! Many people have expressed the same concern. So as I said the issue really isn’t worth further serious discussion. Glad you were one of the only people who were able to find them easily.
Fidelity is an mainly active shop. If you however, want index funds, you can get them. I would expect someone who want index funds at Fidelity to go the the page that talks about Fidelity mutual fund https://www.fidelity.com/mutual-funds/f ... electTab=6 then click the index tab, then click the link for all index funds. Is this difficult to find? If one wants to find active funds at Vanguard, is it easy?

bck63
Posts: 579
Joined: Fri Sep 28, 2018 4:59 pm

Re: 2 Misleading Fidelity Target Date Funds

Post by bck63 » Wed Sep 11, 2019 12:01 pm

student wrote:
Wed Sep 11, 2019 11:39 am
Fidelity is an mainly active shop. If you however, want index funds, you can get them. I would expect someone who want index funds at Fidelity to go the the page that talks about Fidelity mutual fund https://www.fidelity.com/mutual-funds/f ... electTab=6 then click the index tab, then click the link for all index funds. Is this difficult to find? If one wants to find active funds at Vanguard, is it easy?
I hear you. And you're right Fidelity's choices are overwhelmingly active. I do use them for all new investing now. As you said, it just takes a little more work. I'm just off to a bad start this morning. Mr. Crabby-head. :happy

Ferdinand2014
Posts: 584
Joined: Mon Dec 17, 2018 6:49 pm

Re: 2 Misleading Fidelity Target Date Funds

Post by Ferdinand2014 » Wed Sep 11, 2019 12:06 pm

sergio wrote:
Sat Sep 07, 2019 4:34 pm
The biggest issue for 95%+ people isn't the difference between a 0.75 ER (Fidelity Freedom Active 2045) vs 0.12 ER (Fidelity Freedom Index 2045), it's getting people to contribute a decent amount, consistently. My mom works for a large hospital and recently an email was sent out encouraging people to contribute to their 401ks - something like 20% of the employees aren't contributing at all, not even to the (very generous) match.
True. Very true. Fees are important. If you don’t save, fees mean nothing.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

Ferdinand2014
Posts: 584
Joined: Mon Dec 17, 2018 6:49 pm

Re: 2 Misleading Fidelity Target Date Funds

Post by Ferdinand2014 » Wed Sep 11, 2019 12:07 pm

bck63 wrote:
Wed Sep 11, 2019 12:01 pm
student wrote:
Wed Sep 11, 2019 11:39 am
Fidelity is an mainly active shop. If you however, want index funds, you can get them. I would expect someone who want index funds at Fidelity to go the the page that talks about Fidelity mutual fund https://www.fidelity.com/mutual-funds/f ... electTab=6 then click the index tab, then click the link for all index funds. Is this difficult to find? If one wants to find active funds at Vanguard, is it easy?
I hear you. And you're right Fidelity's choices are overwhelmingly active. I do use them for all new investing now. As you said, it just takes a little more work. I'm just off to a bad start this morning. Mr. Crabby-head. :happy
Fidelity has 53 low fee passive index funds currently, not including the portfolio of iShare ETF’s. Fidelity actually gives you an index button to click on the mutual fund search engine.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

megabad
Posts: 2382
Joined: Fri Jun 01, 2018 4:00 pm

Re: 2 Misleading Fidelity Target Date Funds

Post by megabad » Wed Sep 11, 2019 1:00 pm

I agree that this is misleading for an individual (likely intentionally so), but individuals should try to educate themselves before making investments so I don't agree that much blame lies on Fidelity. There are countless products that are sold this way (similar names but more expensive versions).

As already mentioned, this has been common knowledge on bogleheads for years. In a 401k plan, the only thing unconscionable would be to blindly select active funds with high expense ratios and expect not to get sued.

Despite the OP's initial statement, I do not agree that "Fund selection of large employers' 401(k) plans is usually excellent". In fact, I find that fund selection at large employers is only marginally better than that of smaller employers. Usually there are 1 or 2 reasonable funds and the rest are complete junk. It is a rare HR/benefits department that actually has the intelligence and power to make reasonable choices across the board.

Individuals should not blindly invest in funds or 401ks or anything else. Fidelity's similar sounding products really have no bearing on this truth.

sport
Posts: 8269
Joined: Tue Feb 27, 2007 3:26 pm
Location: Cleveland, OH

Re: 2 Misleading Fidelity Target Date Funds

Post by sport » Wed Sep 11, 2019 1:11 pm

student wrote:
Wed Sep 11, 2019 11:39 am
If one wants to find active funds at Vanguard, is it easy?
Yes, very easy.

student
Posts: 3755
Joined: Fri Apr 03, 2015 6:58 am

Re: 2 Misleading Fidelity Target Date Funds

Post by student » Wed Sep 11, 2019 1:26 pm

sport wrote:
Wed Sep 11, 2019 1:11 pm
student wrote:
Wed Sep 11, 2019 11:39 am
If one wants to find active funds at Vanguard, is it easy?
Yes, very easy.
Yes. I find it easy too. Same efforts for me to find active funds at Vanguard as compare to finding index funds at Fidelity.

student
Posts: 3755
Joined: Fri Apr 03, 2015 6:58 am

Re: 2 Misleading Fidelity Target Date Funds

Post by student » Wed Sep 11, 2019 1:31 pm

bck63 wrote:
Wed Sep 11, 2019 12:01 pm
student wrote:
Wed Sep 11, 2019 11:39 am
Fidelity is an mainly active shop. If you however, want index funds, you can get them. I would expect someone who want index funds at Fidelity to go the the page that talks about Fidelity mutual fund https://www.fidelity.com/mutual-funds/f ... electTab=6 then click the index tab, then click the link for all index funds. Is this difficult to find? If one wants to find active funds at Vanguard, is it easy?
I hear you. And you're right Fidelity's choices are overwhelmingly active. I do use them for all new investing now. As you said, it just takes a little more work. I'm just off to a bad start this morning. Mr. Crabby-head. :happy
Yes. Bottom line is we have to look out for ourselves. We have to be vigilant. There are many wolves in sheep clothing out there. Fortunately, we have this forum to point us in the right direction.

bck63
Posts: 579
Joined: Fri Sep 28, 2018 4:59 pm

Re: 2 Misleading Fidelity Target Date Funds

Post by bck63 » Wed Sep 11, 2019 2:14 pm

student wrote:
Wed Sep 11, 2019 1:31 pm
bck63 wrote:
Wed Sep 11, 2019 12:01 pm
student wrote:
Wed Sep 11, 2019 11:39 am
Fidelity is an mainly active shop. If you however, want index funds, you can get them. I would expect someone who want index funds at Fidelity to go the the page that talks about Fidelity mutual fund https://www.fidelity.com/mutual-funds/f ... electTab=6 then click the index tab, then click the link for all index funds. Is this difficult to find? If one wants to find active funds at Vanguard, is it easy?
I hear you. And you're right Fidelity's choices are overwhelmingly active. I do use them for all new investing now. As you said, it just takes a little more work. I'm just off to a bad start this morning. Mr. Crabby-head. :happy
Yes. Bottom line is we have to look out for ourselves. We have to be vigilant. There are many wolves in sheep clothing out there. Fortunately, we have this forum to point us in the right direction.
+1

sport
Posts: 8269
Joined: Tue Feb 27, 2007 3:26 pm
Location: Cleveland, OH

Re: 2 Misleading Fidelity Target Date Funds

Post by sport » Wed Sep 11, 2019 2:28 pm

student wrote:
Wed Sep 11, 2019 1:31 pm
Yes. Bottom line is we have to look out for ourselves. We have to be vigilant. There are many wolves in sheep clothing out there. Fortunately, we have this forum to point us in the right direction.
That is all well and good for us Bogleheads. However, what will happen when we are no longer able to manage our financial accounts due to infirmity or our passing? Will our successors/heirs be sufficiently sophisticated to avoid Fidelity's traps? I feel much more comfortable that Vanguard will not try to take advantage of them. Younger investors may not think about these situations as them seem so far in the future. Older investors, however, tend to be more aware of these considerations.

student
Posts: 3755
Joined: Fri Apr 03, 2015 6:58 am

Re: 2 Misleading Fidelity Target Date Funds

Post by student » Wed Sep 11, 2019 2:50 pm

sport wrote:
Wed Sep 11, 2019 2:28 pm
student wrote:
Wed Sep 11, 2019 1:31 pm
Yes. Bottom line is we have to look out for ourselves. We have to be vigilant. There are many wolves in sheep clothing out there. Fortunately, we have this forum to point us in the right direction.
That is all well and good for us Bogleheads. However, what will happen when we are no longer able to manage our financial accounts due to infirmity or our passing? Will our successors/heirs be sufficiently sophisticated to avoid Fidelity's traps? I feel much more comfortable that Vanguard will not try to take advantage of them. Younger investors may not think about these situations as them seem so far in the future. Older investors, however, tend to be more aware of these considerations.
I guess you have to "train" your heirs. :happy
Last edited by student on Wed Sep 11, 2019 2:50 pm, edited 1 time in total.

deikel
Posts: 778
Joined: Sat Jan 25, 2014 7:13 pm

Re: 2 Misleading Fidelity Target Date Funds

Post by deikel » Wed Sep 11, 2019 2:50 pm

student wrote:
Wed Sep 11, 2019 1:26 pm
sport wrote:
Wed Sep 11, 2019 1:11 pm
student wrote:
Wed Sep 11, 2019 11:39 am
If one wants to find active funds at Vanguard, is it easy?
Yes, very easy.
Yes. I find it easy too. Same efforts for me to find active funds at Vanguard as compare to finding index funds at Fidelity.
agreed, but the more alarming part is that this forum steers people to Vanguard claiming some advantage of Vanguard over other places that simple does not matter (or doe snot exist) to investors

Both Fido and Vanguard have index funds and actively managed (too high fee) funds. If you read the Bogleheads you wold not believe that to be the case

The biggest difference I notice is the vastly different website style and that can work for you or not. Literally everything else I have experience between the two seems identical (forms, phone support, logical set up of trades ect).
Everything you read in this post is my personal opinion. If you disagree with this disclaimer, please un-read the text immediately and destroy any copy or remembrance of it.

deikel
Posts: 778
Joined: Sat Jan 25, 2014 7:13 pm

Re: 2 Misleading Fidelity Target Date Funds

Post by deikel » Wed Sep 11, 2019 2:52 pm

sergio wrote:
Sat Sep 07, 2019 4:34 pm
The biggest issue for 95%+ people isn't the difference between a 0.75 ER (Fidelity Freedom Active 2045) vs 0.12 ER (Fidelity Freedom Index 2045), it's getting people to contribute a decent amount, consistently. My mom works for a large hospital and recently an email was sent out encouraging people to contribute to their 401ks - something like 20% of the employees aren't contributing at all, not even to the (very generous) match.
This, a thousand times this....it boggles (bogles?) the mind...free money on the table
Everything you read in this post is my personal opinion. If you disagree with this disclaimer, please un-read the text immediately and destroy any copy or remembrance of it.

deikel
Posts: 778
Joined: Sat Jan 25, 2014 7:13 pm

Re: 2 Misleading Fidelity Target Date Funds

Post by deikel » Wed Sep 11, 2019 2:57 pm

PhilosophyAndrew wrote:
Sun Sep 08, 2019 11:18 am
I’ve seen the Frontline piece, but remain unclear about how it applies to these two families of Fidelity funds.

Perhaps any company’s offering an actively-managed fund shocks your conscience, but if so that seems a general complaint you have about the industry and has nothing to do with deceptive behavior by Fidelity. Tonyoyrnmind, alre all active funds mired in deception, even ones that many financially-literate Boglrheads knowingly choose to invest in, for example some muni funds, the Wellington and Wellesley funds, TIAA-CREF’s real estate fund.

The title you provided this thread also confuses me: It suggests that there is something deceptive about Fidelity’s index target date funds. If so, what exactly?

I understand you prefer that Fidelity would offer no actively-managed funds. But it seems a stretch to conclude that their doing is is deceptive or is unconscionable.

It sounds like you are upset that your employer offered the actively managed funds in its 401k fund and are disappointed that you chose to invest in them. I sympathize, but neither this not the Frontline program seem to justify your harsh criticism of these two Fidelity fund families. (If you had paid large front or back loads or had paid an egregious ER or AUM fee, you would have a stronger case. But this wasn’t the case, was it?)

What am I missing?


Andy.

+1

Its even in the name, I mean one says active, the other says index...how much more clear could it be?

Just because it has a date in its name does not make it low fee....neither are the Vanguards ones by the way -they are lower, but they charge a fee for using the underlying index funds...for really no reason/service at all.
Everything you read in this post is my personal opinion. If you disagree with this disclaimer, please un-read the text immediately and destroy any copy or remembrance of it.

TropikThunder
Posts: 1692
Joined: Sun Apr 03, 2016 5:41 pm

Re: 2 Misleading Fidelity Target Date Funds

Post by TropikThunder » Wed Sep 11, 2019 3:02 pm

deikel wrote:
Wed Sep 11, 2019 2:57 pm
Just because it has a date in its name does not make it low fee....neither are the Vanguards ones by the way -they are lower, but they charge a fee for using the underlying index funds...for really no reason/service at all.
It’s not for no reason, it’s for automatically rebalancing for you. That’s a service that understandably comes at a cost. If you don’t want to pay the extra 7 or 8 bp for rebalancing you can alway do it yourself with the individual funds.

sport
Posts: 8269
Joined: Tue Feb 27, 2007 3:26 pm
Location: Cleveland, OH

Re: 2 Misleading Fidelity Target Date Funds

Post by sport » Wed Sep 11, 2019 3:03 pm

deikel wrote:
Wed Sep 11, 2019 2:57 pm
Just because it has a date in its name does not make it low fee....neither are the Vanguards ones by the way -they are lower, but they charge a fee for using the underlying index funds...for really no reason/service at all.
I believe that Vanguard only charges the fees on the underlying funds, and no extra fee for a fund-of-funds.

This is from the prospectus for one of the Target Funds.

Management Fees None
12b-1 Distribution Fee None
Other Expenses None
Acquired Fund Fees and Expenses 0.12%
Total Annual Fund Operating Expenses 0.12%

student
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Joined: Fri Apr 03, 2015 6:58 am

Re: 2 Misleading Fidelity Target Date Funds

Post by student » Wed Sep 11, 2019 3:14 pm

sport wrote:
Wed Sep 11, 2019 3:03 pm
deikel wrote:
Wed Sep 11, 2019 2:57 pm
Just because it has a date in its name does not make it low fee....neither are the Vanguards ones by the way -they are lower, but they charge a fee for using the underlying index funds...for really no reason/service at all.
I believe that Vanguard only charges the fees on the underlying funds, and no extra fee for a fund-of-funds.
Correct. No additional fee. For example, https://investor.vanguard.com/mutual-fu ... /fees/0695 says "Acquired fund fees & expenses" 0.14%, which seem correct corresponding the underlying fund with the proper weights. (I did not perform the calculation.)

sport
Posts: 8269
Joined: Tue Feb 27, 2007 3:26 pm
Location: Cleveland, OH

Re: 2 Misleading Fidelity Target Date Funds

Post by sport » Wed Sep 11, 2019 3:18 pm

student wrote:
Wed Sep 11, 2019 3:14 pm
sport wrote:
Wed Sep 11, 2019 3:03 pm
deikel wrote:
Wed Sep 11, 2019 2:57 pm
Just because it has a date in its name does not make it low fee....neither are the Vanguards ones by the way -they are lower, but they charge a fee for using the underlying index funds...for really no reason/service at all.
I believe that Vanguard only charges the fees on the underlying funds, and no extra fee for a fund-of-funds.
Correct. No additional fee. For example, https://investor.vanguard.com/mutual-fu ... /fees/0695 says "Acquired fund fees & expenses" 0.14%, which seem correct corresponding the underlying fund with the proper weights. (I did not perform the calculation.)
What is Fidelity's policy on this, for both index and active Freedom Funds?

deikel
Posts: 778
Joined: Sat Jan 25, 2014 7:13 pm

Re: 2 Misleading Fidelity Target Date Funds

Post by deikel » Wed Sep 11, 2019 3:21 pm

TropikThunder wrote:
Wed Sep 11, 2019 3:02 pm
deikel wrote:
Wed Sep 11, 2019 2:57 pm
Just because it has a date in its name does not make it low fee....neither are the Vanguards ones by the way -they are lower, but they charge a fee for using the underlying index funds...for really no reason/service at all.
It’s not for no reason, it’s for automatically rebalancing for you. That’s a service that understandably comes at a cost. If you don’t want to pay the extra 7 or 8 bp for rebalancing you can alway do it yourself with the individual funds.
Its actually more like 0.1% (roughly, since the expenses of the underlying funds vary due to the gliding)

and they don't do it openly and declare it as a fee for a particular service (which I would agree to, although not to that amount), but they do it more hidden by loading up their target date fund with investor shares rather then admirals shares (eg Vanguard Target Retirement 2065 Fund (VLXVX)) both of which are available to you as a public.

So they basically get more fee money charging themselves the higher cost investor fees rather then assuming that their own money volume will easily justify Admiral shares (starting at 3000 investment by the way for the public).
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deikel
Posts: 778
Joined: Sat Jan 25, 2014 7:13 pm

Re: 2 Misleading Fidelity Target Date Funds

Post by deikel » Wed Sep 11, 2019 3:25 pm

student wrote:
Wed Sep 11, 2019 3:14 pm
sport wrote:
Wed Sep 11, 2019 3:03 pm
deikel wrote:
Wed Sep 11, 2019 2:57 pm
Just because it has a date in its name does not make it low fee....neither are the Vanguards ones by the way -they are lower, but they charge a fee for using the underlying index funds...for really no reason/service at all.
I believe that Vanguard only charges the fees on the underlying funds, and no extra fee for a fund-of-funds.
Correct. No additional fee. For example, https://investor.vanguard.com/mutual-fu ... /fees/0695 says "Acquired fund fees & expenses" 0.14%, which seem correct corresponding the underlying fund with the proper weights. (I did not perform the calculation.)
Only half way correct:

Vanguard is loading up their target date fund with investor shares rather then admirals shares (eg Vanguard Target Retirement 2065 Fund (VLXVX)) both of which are available to you as a public.

So they basically get more fee money charging themselves the higher cost investor fees rather then assuming that their own money volume will easily justify Admiral shares (starting at 3000 investment by the way for the public).

Yes, on paper it loos like they don't charge extra for the target fund, but if you do the three fund on your own you can choose Admiral shares and save about 0.1 % on the fees.....

...I don't think that's done in a particularly transparent fashion, nor does it live up to the Boglehead hype of Vanguard looking out the most for its customers IMO
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deikel
Posts: 778
Joined: Sat Jan 25, 2014 7:13 pm

Re: 2 Misleading Fidelity Target Date Funds

Post by deikel » Wed Sep 11, 2019 3:33 pm

sport wrote:
Wed Sep 11, 2019 3:18 pm
student wrote:
Wed Sep 11, 2019 3:14 pm
sport wrote:
Wed Sep 11, 2019 3:03 pm
deikel wrote:
Wed Sep 11, 2019 2:57 pm
Just because it has a date in its name does not make it low fee....neither are the Vanguards ones by the way -they are lower, but they charge a fee for using the underlying index funds...for really no reason/service at all.
I believe that Vanguard only charges the fees on the underlying funds, and no extra fee for a fund-of-funds.
Correct. No additional fee. For example, https://investor.vanguard.com/mutual-fu ... /fees/0695 says "Acquired fund fees & expenses" 0.14%, which seem correct corresponding the underlying fund with the proper weights. (I did not perform the calculation.)
What is Fidelity's policy on this, for both index and active Freedom Funds?
Fidelity adds around 6 bps to it as a true fee, but they do use the lowest fee class as the underlying funds (some of them at 0 fee)- at least the two 2060 funds I just checked worked that way

Which makes it overall the same cost to the enduser (give or take some bps), I just find it more transparent and logical doing it this way.

I have not checked active, no interest in active :happy
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TropikThunder
Posts: 1692
Joined: Sun Apr 03, 2016 5:41 pm

Re: 2 Misleading Fidelity Target Date Funds

Post by TropikThunder » Wed Sep 11, 2019 3:36 pm

deikel wrote:
Wed Sep 11, 2019 3:25 pm
..I don't think that's done in a particularly transparent fashion, nor does it live up to the Boglehead hype of Vanguard looking out the most for its customers IMO
Considering they’ve always used investor shares in TD finds, I don’t see a lack of transparency or anything deceptive. Vanguard’s not perfect, but the things some people complain about these days is frankly silly IMO.

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