[Fidelity Funds Advice]

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Topic Author
portfolio2021
Posts: 27
Joined: Sun Apr 25, 2021 10:17 pm

[Fidelity Funds Advice]

Post by portfolio2021 »

Any opinion on the Fidelity zero expense ratio funds in contrast to Vanguard? This is not meant to be negative to Vanguard in any sense. Just seeking an opinion on the funds.

Thanks

ZERO Total Market Index Fund (FZROX)
ZERO Large Cap Index Fund (FNILX)
ZERO Extended Market Index Fund (FZIPX)
ZERO International Index Fund (FZILX)
123
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Re: No Disrespect To Vanguard

Post by 123 »

The standard observation about the ZERO funds at Fidelity is that you can't transfer them elsewhere if you wanted/need/required to move your account. Not a problem for retirement accounts but its a taxable event if you sell in a non-retirement account.

They are "lean" funds, no 12b-1 fees or anything extra to compensate another broker. Fidelity treats them like a wedding ring. You are hooked.
The closest helping hand is at the end of your own arm.
dukeblue219
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Re: No Disrespect To Vanguard

Post by dukeblue219 »

They also don't technically track the same, full underlying index, so the difference in performance can easily dwarf the difference in ER. That tracking error of course can work in either direction, for or against you.
Da5id
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Re: No Disrespect To Vanguard

Post by Da5id »

Since inception of FZROX, it has slightly underperformed VTI. Portfolio Visualizer shows CAGR for FZROX is 25.93%, for VTI 26.1%. This is not to say VTI is actually better. I'd not have been surprised either way. Just to say that the very small expense ratios difference (0% vs 0.03%) isn't really material. Either would be fine.
tj
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Re: No Disrespect To Vanguard

Post by tj »

Da5id wrote: Fri Apr 30, 2021 9:50 pm Since inception of FZROX, it has slightly underperformed VTI. Portfolio Visualizer shows CAGR for FZROX is 25.93%, for VTI 26.1%. This is not to say VTI is actually better. I'd not have been surprised either way. Just to say that the very small expense ratios difference (0% vs 0.03%) isn't really material. Either would be fine.
Did you adjust the start date so that it starts the date FZROX started holding actual securities vs. when the fund launched and just held cash? if not, it's kind of a pointless comparsion.
Da5id
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Re: No Disrespect To Vanguard

Post by Da5id »

tj wrote: Fri Apr 30, 2021 10:00 pm
Da5id wrote: Fri Apr 30, 2021 9:50 pm Since inception of FZROX, it has slightly underperformed VTI. Portfolio Visualizer shows CAGR for FZROX is 25.93%, for VTI 26.1%. This is not to say VTI is actually better. I'd not have been surprised either way. Just to say that the very small expense ratios difference (0% vs 0.03%) isn't really material. Either would be fine.
Did you adjust the start date so that it starts the date FZROX started holding actual securities vs. when the fund launched and just held cash? if not, it's kind of a pointless comparsion.
I looked at the graph and they completely overlapped within the thickness of the line, so I assume it was legit. No divergence at the beginning. If you know better, go to it.
Topic Author
portfolio2021
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Re: No Disrespect To Vanguard

Post by portfolio2021 »

dukeblue219 wrote: Fri Apr 30, 2021 9:45 pm They also don't technically track the same, full underlying index, so the difference in performance can easily dwarf the difference in ER. That tracking error of course can work in either direction, for or against you.
Good observation. Thanks
Soon2BXProgrammer
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Re: No Disrespect To Vanguard

Post by Soon2BXProgrammer »

123 wrote: Fri Apr 30, 2021 9:39 pm Fidelity treats them like a wedding ring. You are hooked.
This is the reason I only will hold them in a retirement account. I can choose to change my mind later. I will not hold them in a taxable account, I don't want to be restricted to holding them at Fidelity. I also don't want to be subject to their whims of offering a loss leader.
Chartered Financial Consultant (ChFC®), Retirement Income Certified Professional (RICP®) -- I am not your advisor.
tibbitts
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Re: [Fidelity Funds Advice]

Post by tibbitts »

I would (and do) choose the nearly-equivalent and almost-as-inexpensive "regular" index funds at Fidelity.
index2max
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Re: [Fidelity Funds Advice]

Post by index2max »

I read an article recently that the Thrift Savings Plans index funds actually outperformed the respective indices they are designed to track. Blackrock manages them for the government and by lending those stocks out to short sellers are able to squeeze some extra money out of managing those funds.

https://www.wsj.com/articles/SB10001424 ... 2062924114
BlackRock's willingness to manage money for such a minuscule fee shows how profitable index funds can be to run. One reason: Managers earn extra fees by lending some portfolio holdings to hedge funds and other firms that borrow stocks and bonds to execute trading strategies.

Mr. Long says all the TSP funds do securities lending and that the fees are "beneficial" to the funds' returns.

In the exchange-traded funds it runs, BlackRock generally pays 65% of securities-lending fees back to the funds and keeps the rest for itself. Its ETF investors put up with this, but maybe they shouldn't. Rival Vanguard Group pays 100%, while State Street, another ETF giant, pays 85%. Securities-lending revenue at BlackRock totaled $397 million from all clients in 2011, or 4% of its total revenue.
I suppose Fidelity has an even easier chance to make money off of their "zero expense ratio" funds by lending securities to short sellers too because they don't need to pay to license or pull data from the index operators such as Dow Jones, right?

I will be buying into Fidelity's total us stock market zero fund (FZROX) for fun in my HSA, but if I decide to change my money, I'll just buy vanguard's total us stock market ETF instead out of spite :twisted:
Topic Author
portfolio2021
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Re: No Disrespect To Vanguard

Post by portfolio2021 »

Da5id wrote: Fri Apr 30, 2021 9:50 pm Since inception of FZROX, it has slightly underperformed VTI. Portfolio Visualizer shows CAGR for FZROX is 25.93%, for VTI 26.1%. This is not to say VTI is actually better. I'd not have been surprised either way. Just to say that the very small expense ratios difference (0% vs 0.03%) isn't really material. Either would be fine.
Maybe FSKAX be a closer comparison to VTI?
VTI is performing better but FSKAX is slightly cheaper.
criticalmass
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Re: No Disrespect To Vanguard

Post by criticalmass »

portfolio2021 wrote: Fri Apr 30, 2021 10:48 pm
Da5id wrote: Fri Apr 30, 2021 9:50 pm Since inception of FZROX, it has slightly underperformed VTI. Portfolio Visualizer shows CAGR for FZROX is 25.93%, for VTI 26.1%. This is not to say VTI is actually better. I'd not have been surprised either way. Just to say that the very small expense ratios difference (0% vs 0.03%) isn't really material. Either would be fine.
Maybe FSKAX be a closer comparison to VTI?
VTI is performing better but FSKAX is slightly cheaper.
You are comparing a mutual fund with an exchange traded fund.
A better comparison would be FSKAX vs VTSAX.

Personally I like the history and index of FSKAX (or VTSAX) better than the zero fund. But the difference is very small. I would be happy with either Zero or non Zero total stock market index at Fidelity.
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portfolio2021
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Re: No Disrespect To Vanguard

Post by portfolio2021 »

criticalmass wrote: Fri Apr 30, 2021 10:59 pm
portfolio2021 wrote: Fri Apr 30, 2021 10:48 pm
Da5id wrote: Fri Apr 30, 2021 9:50 pm Since inception of FZROX, it has slightly underperformed VTI. Portfolio Visualizer shows CAGR for FZROX is 25.93%, for VTI 26.1%. This is not to say VTI is actually better. I'd not have been surprised either way. Just to say that the very small expense ratios difference (0% vs 0.03%) isn't really material. Either would be fine.
Maybe FSKAX be a closer comparison to VTI?
VTI is performing better but FSKAX is slightly cheaper.
You are comparing a mutual fund with an exchange traded fund.
A better comparison would be FSKAX vs VTSAX.

Personally I like the history and index of FSKAX (or VTSAX) better than the zero fund. But the difference is very small. I would be happy with either Zero or non Zero total stock market index at Fidelity.
Got it. Thanks
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nedsaid
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Re: [Fidelity Funds Advice]

Post by nedsaid »

index2max wrote: Fri Apr 30, 2021 10:39 pm I read an article recently that the Thrift Savings Plans index funds actually outperformed the respective indices they are designed to track.
In the past, Vanguard has done this with a few of their index funds. In effect, if you exactly track the index, your fund is free. If you get a bit of outperformance, that is even better. I am not going to get all riled up over 3 or 4 basis points.
A fool and his money are good for business.
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ruralavalon
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Re: [Fidelity Funds Advice]

Post by ruralavalon »

portfolio2021 wrote: Fri Apr 30, 2021 9:36 pm Any opinion on the Fidelity zero expense ratio funds in contrast to Vanguard? This is not meant to be negative to Vanguard in any sense. Just seeking an opinion on the funds.

Thanks

ZERO Total Market Index Fund (FZROX)
ZERO Large Cap Index Fund (FNILX)
ZERO Extended Market Index Fund (FZIPX)
ZERO International Index Fund (FZILX)
Financial Planning (8/14/2018) "Fidelity Zero vs Vanguard: Which index fund is better?", link. "In my view, the winner is Vanguard. Expense ratios are very important, but Vanguard more than easily offsets its higher fees with much greater tax efficiency, though this wouldn’t be relevant in a tax-deferred or tax-free Roth account. In addition, the portfolio construction is better because it encompasses more of the market."

The Fidelity ZERO funds have so far not actually had better performance. For example, total market index funds compared: Portfolio Visualizer, 2019-2021. Tiny differences in expense ratios seem to be inconsequential.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
index2max
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Re: [Fidelity Funds Advice]

Post by index2max »

nedsaid wrote: Sat May 01, 2021 10:09 am
index2max wrote: Fri Apr 30, 2021 10:39 pm I read an article recently that the Thrift Savings Plans index funds actually outperformed the respective indices they are designed to track.
In the past, Vanguard has done this with a few of their index funds. In effect, if you exactly track the index, your fund is free. If you get a bit of outperformance, that is even better. I am not going to get all riled up over 3 or 4 basis points.
Free for whom? The fund manager or the client?

Regardless, yeah totally. Fretting over a few basis points isn't a big deal. Plus there's no such thing as a free lunch so if Vanguard says they don't want to get into the loss-leader business, then I trust them not to get into marketing shenanigans more than Fidelity. That being said, having a FZROX fund in a no-fee, individual HSA with Fidelity is pretty cool, I guess.
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camillus
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Re: [Fidelity Funds Advice]

Post by camillus »

A few things are more important than the difference in ER in my opinion:

1) Where are you holding the funds? What broker? What account?
2) Do you prefer ETFs or mutual funds?

I rolled from Vanguard to Fidelity for a few reasons involving customer service, nearby brick & mortar storefront, and best in class specialty accounts (HSA, CMA, 529).

In IRAs I hold FSKAX and FTIHX. I don't hold the zero funds because they "feel gimmicky" and I like the philosophical idea of holding more underlying stocks. I could end up being wrong about this, but not by much.

In my taxable, I hold a combination of VTI & VXUS as well as FXAIX (SP500). I want to hold a few things to give myself the opportunity to tax loss harvest. Sometimes I buy ETFs if I end up working on it during trading hours. Sometimes I buy FXAIX as an tax-efficient approximation for total market if I want mutual fund features of scheduled transactions. It's a little bit of a dumping ground.
51% US / 34% ex-US / 15% “bond”
averagedude
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Re: [Fidelity Funds Advice]

Post by averagedude »

Your question is a case of splitting hairs. Over a long period of time, the difference in returns will most likely be less than 20 basis points. Me personally, I went with FSKAX and FTIHX over the zero funds, but I could have made the wrong choice. A coin flip might be a better strategy than doing a deep dive of analyzing the difference between the two.
Topic Author
portfolio2021
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Re: [Fidelity Funds Advice]

Post by portfolio2021 »

ruralavalon wrote: Sat May 01, 2021 11:01 am
portfolio2021 wrote: Fri Apr 30, 2021 9:36 pm Any opinion on the Fidelity zero expense ratio funds in contrast to Vanguard? This is not meant to be negative to Vanguard in any sense. Just seeking an opinion on the funds.

Thanks

ZERO Total Market Index Fund (FZROX)
ZERO Large Cap Index Fund (FNILX)
ZERO Extended Market Index Fund (FZIPX)
ZERO International Index Fund (FZILX)
Financial Planning (8/14/2018) "Fidelity Zero vs Vanguard: Which index fund is better?", link. "In my view, the winner is Vanguard. Expense ratios are very important, but Vanguard more than easily offsets its higher fees with much greater tax efficiency, though this wouldn’t be relevant in a tax-deferred or tax-free Roth account. In addition, the portfolio construction is better because it encompasses more of the market."

The Fidelity ZERO funds have so far not actually had better performance. For example, total market index funds compared: Portfolio Visualizer, 2019-2021. Tiny differences in expense ratios seem to be inconsequential.
Thanks! I will keep an eye on them and follow their returns. Time will tell.
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