Fidelity Files for Four Fidelity ZERO℠ Funds (0.00% ER)

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jhfenton
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Fidelity Files for Four Fidelity ZERO℠ Funds (0.00% ER)

Post by jhfenton » Wed Aug 01, 2018 9:12 am

[Title was "Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Fidelity has filed for two additional funds, available on September 18, 2018:
- Fidelity® ZERO Extended Market Index Fund
- Fidelity® ZERO Large Cap Index Fund

See this post (Page 15)

--admin LadyGeek]


I saw someone tweet about, but I can't find any other news: Fidelity ZERO℠ Funds (Zero Expense Ratio Offering)

There are two funds included in the filing:

Fund Name Ticker
Fidelity ZERO℠ International Index Fund FZILX
Fidelity ZERO℠ Total Market Index Fund FZROX

The international fund includes developed and emerging markets.

Availability will apparently be limited to direct Fidelity customers:
Shares of the fund are available only to individual retail investors who purchase their shares through a Fidelity brokerage account, including retail non-retirement accounts, retail retirement accounts (traditional, Roth and SEP Individual Retirement Accounts (IRAs)), health savings accounts (HSAs), and stock plan services accounts.
No word in the filing on whether there are any further limitations, such as their only being available in AUM-based accounts.

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Blueskies123
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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by Blueskies123 » Wed Aug 01, 2018 9:15 am

It was inevitable. Fido will still make money lending out shares for the shorts and I am sure they have other ways of making money. No one at Fido will be homeless.

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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by marcopolo » Wed Aug 01, 2018 9:19 am

jhfenton wrote:
Wed Aug 01, 2018 9:12 am
I saw someone tweet about, but I can't find any other news: Fidelity ZERO℠ Funds (Zero Expense Ratio Offering)

There are two funds included in the filing:

Fund Name Ticker
Fidelity ZERO℠ International Index Fund FZILX
Fidelity ZERO℠ Total Market Index Fund FZROX

The international fund includes developed and emerging markets.

Availability will apparently be limited to direct Fidelity customers:
Shares of the fund are available only to individual retail investors who purchase their shares through a Fidelity brokerage account, including retail non-retirement accounts, retail retirement accounts (traditional, Roth and SEP Individual Retirement Accounts (IRAs)), health savings accounts (HSAs), and stock plan services accounts.
No word in the filing on whether there are any further limitations, such as their only being available in AUM-based accounts.
I wish they had simply dropped the ER of their existing funds (FSTVX and FSIVX) to ZERO. The large capital gains I have will likely prevent me from taking advantage of the lower ERs on these new funds.
Once in a while you get shown the light, in the strangest of places if you look at it right.

MichCPA
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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by MichCPA » Wed Aug 01, 2018 10:11 am

A couple pages in it says "There is no purchase minimum for shares of the fund offered in this prospectus."

Is that right? Its hard to believe there will first dollar 0 ER funds. Not that I would complain.

TIAX
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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by TIAX » Wed Aug 01, 2018 10:22 am

Interesting. Was this in response to Vanguard's announcement of 1,800 commission-free ETFs? Here's an article on the Fidelity zero funds. Also from the article:
Significantly reduced and simplified pricing on existing Fidelity index mutual funds . . . With this action, 100 percent of Fidelity’s stock and bond index mutual funds and sector ETFs will have total net expenses lower than all of Vanguard’s comparable funds that are available to individuals, advisors and institutional investors.
The article also notes $0 fees including wire fees.

As the prospectus notes, one of the principal investment strategies is "Lending securities to earn income for the fund." And since the Fidelity TSM fund earns between 4 and 5 bp from securities lending, this is nothing more than marketing.
Last edited by TIAX on Wed Aug 01, 2018 10:40 am, edited 6 times in total.

Whakamole
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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by Whakamole » Wed Aug 01, 2018 10:28 am

International:
Normally investing at least 80% of assets in securities included in the Fidelity Global ex U.S. Index℠ and in depository receipts representing securities included in the index. The Fidelity Global ex U.S. Index℠ is a float-adjusted market capitalization-weighted index designed to reflect the performance of non-U.S. large- and mid-cap stocks.
Domestic:
Normally investing at least 80% of its assets in common stocks included in the Fidelity U.S. Total Investable Market Index℠, which is a float-adjusted market capitalization-weighted index designed to reflect the performance of the U.S. equity market, including large-, mid- and small-capitalization stocks.
Note International doesn't have small-caps. Portfolio Visualizer shows almost no difference between VTIAX (total international w/small caps) and VFWAX (global w/o small caps) over the past 6 years.

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New Fidelity Fund 0.00 ER

Post by navyitaly » Wed Aug 01, 2018 10:52 am


SelfEmployed123
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Re: New Fidelity Fund 0.00 ER

Post by SelfEmployed123 » Wed Aug 01, 2018 10:56 am

Wow. I understand there has been a race to the bottom for a while, but this seems unsustainable. I mean...they've gotta keep the lights and their computer servers running, right? I suppose they are trying to get people in the door and then will plan on selling them more expensive funds.

What's next, a negative ER fund?
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Re: New Fidelity Fund 0.00 ER

Post by Darth Xanadu » Wed Aug 01, 2018 10:59 am

FZROX is the ticker for total market but I don't see the details available yet on Fidelity.
"A courageous teacher, failure is."

tenkuky
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Re: New Fidelity Fund 0.00 ER

Post by tenkuky » Wed Aug 01, 2018 11:04 am

More info will be available Aug 3.
https://www.fidelity.com/why-fidelity/pricing-fees
Would be curious if it makes sense to exchange out of current total US and total international with Fidelity for these.
Will wait to see the holdings, etc.
Also, wonder if this is limited (like premium) to over 10K investment.
And it seems to be only in taxable/brokerage, so not sure if will be offered through IRAs or BrokerageLinked 401K/403b.

jminv
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Re: New Fidelity Fund 0.00 ER

Post by jminv » Wed Aug 01, 2018 11:08 am

SelfEmployed123 wrote:
Wed Aug 01, 2018 10:56 am
Wow. I understand there has been a race to the bottom for a while, but this seems unsustainable. I mean...they've gotta keep the lights and their computer servers running, right? I suppose they are trying to get people in the door and then will plan on selling them more expensive funds.

What's next, a negative ER fund?
Yes, a negative ER ETF is likely at some point since they can earn revenue through securities lending.

It would sort of make sense to have all the ETFs at 0 ER to draw in clients and keep them there since ERs will no longer be a reason to switch. Then they can make their real money by charging for personal wealth advisers, robo advisement, selling annuities, etc.

Howard Donnelly
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Fidelity one-ups Vanguard and iShares, becoming first company to offer a no-fee index fund

Post by Howard Donnelly » Wed Aug 01, 2018 11:16 am

Hot off the press:

"Fidelity one-ups Vanguard and iShares, becoming first company to offer a no-fee index fund"
https://www.cnbc.com/2018/08/01/fidelit ... -fund.html

Thoughts?

averageJoe576
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Re: New Fidelity Fund 0.00 ER

Post by averageJoe576 » Wed Aug 01, 2018 11:16 am

tenkuky wrote:
Wed Aug 01, 2018 11:04 am
More info will be available Aug 3.
https://www.fidelity.com/why-fidelity/pricing-fees
Would be curious if it makes sense to exchange out of current total US and total international with Fidelity for these.
Will wait to see the holdings, etc.
Also, wonder if this is limited (like premium) to over 10K investment.
And it seems to be only in taxable/brokerage, so not sure if will be offered through IRAs or BrokerageLinked 401K/403b.
The chance of minimum balance requirement is ZERO because there will be ZERO minimum investments in Fidelity's new ZERO Index Funds.

Sorry, this businesswire article says ZERO 31 times.

"Zero account minimums and Zero account fees apply to retail brokerage accounts only."
"All Fidelity funds with investment minimums of $10k or less, and in stock and bond index fund classes with minimums of $100 million or less, now have zero minimums."

Couldn't find any mention of the terms "retirement" "401K" etc.
Last edited by averageJoe576 on Wed Aug 01, 2018 11:18 am, edited 1 time in total.

Nate79
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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by Nate79 » Wed Aug 01, 2018 11:17 am

TIAX wrote:
Wed Aug 01, 2018 10:22 am
Interesting. Was this in response to Vanguard's announcement of 1,800 commission-free ETFs? Here's an article on the Fidelity zero funds. Also from the article:
Significantly reduced and simplified pricing on existing Fidelity index mutual funds . . . With this action, 100 percent of Fidelity’s stock and bond index mutual funds and sector ETFs will have total net expenses lower than all of Vanguard’s comparable funds that are available to individuals, advisors and institutional investors.
The article also notes $0 fees including wire fees.

As the prospectus notes, one of the principal investment strategies is "Lending securities to earn income for the fund." And since the Fidelity TSM fund earns between 4 and 5 bp from securities lending, this is nothing more than marketing.
My understanding is that Lending security income is not included in ER. If these funds have a quoted 0% ER then you would add on top of that the income earned from securities lending giving these funds a negative ER.

Iridium
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Re: New Fidelity Fund 0.00 ER

Post by Iridium » Wed Aug 01, 2018 11:18 am

Going to be zero minimums. They also dropped the ER significantly on many of their index funds. Info on their site: https://www.fidelity.com/mutual-funds/i ... ndex-funds

Your move, Schwab.

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Re: New Fidelity Fund 0.00 ER

Post by bosocal » Wed Aug 01, 2018 11:18 am

tenkuky wrote:
Wed Aug 01, 2018 11:04 am
More info will be available Aug 3.
https://www.fidelity.com/why-fidelity/pricing-fees
Would be curious if it makes sense to exchange out of current total US and total international with Fidelity for these.
Will wait to see the holdings, etc.
Also, wonder if this is limited (like premium) to over 10K investment.
And it seems to be only in taxable/brokerage, so not sure if will be offered through IRAs or BrokerageLinked 401K/403b.
As a Fidelity customer I just checked and it appears they are no longer having a minimum for any of there mutual funds including this and they have dramatically slashed all there fees. Example total international(FTIGX) went from .17 yesterday to .06 today.

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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by bosocal » Wed Aug 01, 2018 11:24 am

MichCPA wrote:
Wed Aug 01, 2018 10:11 am
A couple pages in it says "There is no purchase minimum for shares of the fund offered in this prospectus."

Is that right? Its hard to believe there will first dollar 0 ER funds. Not that I would complain.
I was just on the Fidelity website and spoke with someone there and this does seem to be true, not only for there ZERO mutual funds, but for all Fidelity Mutual Funds now. Plus they have severely slashed all the fees on existing MF. FTIGX(Total International) has gone from .17 yesterday to .06 today.

gips
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Re: New Fidelity Fund 0.00 ER

Post by gips » Wed Aug 01, 2018 11:29 am

while consulting for a large asset mgr I threw around the idea of starting my own funds with a zero er. If the fund's aum grew large enough and the IT footprint used newer technologies, it looked viable through sec lending revenue and offering other services to investors. One of the premises was that we could build a low-cost, nimble infrastructure while incumbent firms had relatively expensive, unwieldy platforms. It's really impressive to see fidelity do this.

MnD
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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by MnD » Wed Aug 01, 2018 11:35 am

Good for them :beer

Fidelity also announced that it is lowering fees on other core mutual funds by an average of 35 percent and will charge no investment minimums to access the lower and no-fee funds. Expense ratios will go as low as 0.015 percent, Fidelity said, and it specifically compared its new pricing to Schwab and Vanguard portfolios and brokerage account policies in its release, claiming it will now offer lower fees than all of Vanguard's comparable funds and 9 out of 10 comparable Schwab funds.

https://www.cnbc.com/2018/08/01/fidelit ... -fund.html

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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by Nate79 » Wed Aug 01, 2018 11:39 am

I really see this as direct response to Schwab offering lowest ER in the industry and low investment minimums.

SelfEmployed123
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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by SelfEmployed123 » Wed Aug 01, 2018 11:42 am

bosocal wrote:
Wed Aug 01, 2018 11:24 am
MichCPA wrote:
Wed Aug 01, 2018 10:11 am
A couple pages in it says "There is no purchase minimum for shares of the fund offered in this prospectus."

Is that right? Its hard to believe there will first dollar 0 ER funds. Not that I would complain.
I was just on the Fidelity website and spoke with someone there and this does seem to be true, not only for there ZERO mutual funds, but for all Fidelity Mutual Funds now. Plus they have severely slashed all the fees on existing MF. FTIGX(Total International) has gone from .17 yesterday to .06 today.
FSTVX (Fidelity Total Stock Market Index Fund) ER has also been slashed from 0.035% yesterday to 0.015% today.
"Get what you can, and what you get hold, 'Tis the stone that will turn all your lead into gold." | -Benjamin Franklin

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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by triceratop » Wed Aug 01, 2018 11:43 am

I merged several duplicate topics into this first one by jhfenton (the system orders by time).

(Me personally I would still not use the funds; for tax reasons and because I'm not receiving the full rewards of the risks they take with my money in securities lending)
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

informal guide
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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by informal guide » Wed Aug 01, 2018 11:45 am

One interesting part of the Fidelity press release is as follows:

" industry’s first self-indexed mutual fund..."

meaning that Fidelity will itself create the index to which the new funds will be managed. This is different than the major index funds today, which track externally created indexes, such as the S&P 500. How will this self-indexed index be created and managed and how will that differ from existing indexes?

My understanding is that the index funds today have to pay a fee of some sort to the index providers (e.g., S&P). Fidelity will not incur this expense.

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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by Darth Xanadu » Wed Aug 01, 2018 11:49 am

informal guide wrote:
Wed Aug 01, 2018 11:45 am
One interesting part of the Fidelity press release is as follows:

" industry’s first self-indexed mutual fund..."

meaning that Fidelity will itself create the index to which the new funds will be managed. This is different than the major index funds today, which track externally created indexes, such as the S&P 500. How will this self-indexed index be created and managed and how will that differ from existing indexes?

My understanding is that the index funds today have to pay a fee of some sort to the index providers (e.g., S&P). Fidelity will not incur this expense.
Good question.

Separately, I presume there is no longer the need for distinction between Investor Class and Premium Class if the minimums are all going away (and assuming holdings remain the same).
"A courageous teacher, failure is."

zrail
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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by zrail » Wed Aug 01, 2018 11:50 am

How will this self-indexed index be created and managed and how will that differ from existing indexes?
The indexing methodology is linked from Fidelity's info page. It seems pretty straightforward.

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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by Meaty » Wed Aug 01, 2018 11:54 am

Any indication when Vanguard will follow suit? It’s a pain to transfer companies but this would be worth it
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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by Whakamole » Wed Aug 01, 2018 11:55 am

SelfEmployed123 wrote:
Wed Aug 01, 2018 11:42 am
bosocal wrote:
Wed Aug 01, 2018 11:24 am
MichCPA wrote:
Wed Aug 01, 2018 10:11 am
A couple pages in it says "There is no purchase minimum for shares of the fund offered in this prospectus."

Is that right? Its hard to believe there will first dollar 0 ER funds. Not that I would complain.
I was just on the Fidelity website and spoke with someone there and this does seem to be true, not only for there ZERO mutual funds, but for all Fidelity Mutual Funds now. Plus they have severely slashed all the fees on existing MF. FTIGX(Total International) has gone from .17 yesterday to .06 today.
FSTVX (Fidelity Total Stock Market Index Fund) ER has also been slashed from 0.035% yesterday to 0.015% today.
FSITX (Fidelity Total Bond) ER went from 4.5bp to 2.5bp as well. Between this and FTIPX, my portfolio's ER has gone down considerably.

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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by Nate79 » Wed Aug 01, 2018 11:57 am

informal guide wrote:
Wed Aug 01, 2018 11:45 am
One interesting part of the Fidelity press release is as follows:

" industry’s first self-indexed mutual fund..."

meaning that Fidelity will itself create the index to which the new funds will be managed. This is different than the major index funds today, which track externally created indexes, such as the S&P 500. How will this self-indexed index be created and managed and how will that differ from existing indexes?

My understanding is that the index funds today have to pay a fee of some sort to the index providers (e.g., S&P). Fidelity will not incur this expense.
Yes, they follow Fidelity indexes. You can find the name of the index they follow in the SEC filing in the OP. I know that Schwab does this also for some funds.

lostdog
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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by lostdog » Wed Aug 01, 2018 11:58 am

Do you think Vanguard will respond? Is it even possible for Vanguard to offer zero ER?

Will these two funds be just as tax efficient?
Last edited by lostdog on Wed Aug 01, 2018 12:01 pm, edited 1 time in total.

HEDGEFUNDIE
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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by HEDGEFUNDIE » Wed Aug 01, 2018 11:58 am

triceratop wrote:
Wed Aug 01, 2018 11:43 am
I merged several duplicate topics into this first one by jhfenton (the system orders by time).

(Me personally I would still not use the funds; for tax reasons and because I'm not receiving the full rewards of the risks they take with my money in securities lending)
Vanguard does securities lending as well, they just pass the profits to the funds in the form of lower ER, which if you think about it makes these Fidelity 0 ER funds even more impressive.

"Securities lending: Key considerations - The Vanguard Group": https://personal.vanguard.com/pdf/ISGSL.pdf

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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by jhfenton » Wed Aug 01, 2018 12:03 pm

HEDGEFUNDIE wrote:
Wed Aug 01, 2018 11:58 am
triceratop wrote:
Wed Aug 01, 2018 11:43 am
I merged several duplicate topics into this first one by jhfenton (the system orders by time).

(Me personally I would still not use the funds; for tax reasons and because I'm not receiving the full rewards of the risks they take with my money in securities lending)
Vanguard does securities lending as well, they just pass the profits to the funds in the form of lower ER, which if you think about it makes these Fidelity 0 ER funds even more impressive.

"Securities lending: Key considerations - The Vanguard Group": https://personal.vanguard.com/pdf/ISGSL.pdf
Vanguard does not pass the securities lending profits to funds in the form of lower ER. Vanguard passes the entire profits of security lending to each fund in the form of higher return that is invisible to ER. Funds are not allowed to credit securities lending revenue against the ER. There are already Vanguard funds that beat their indices due to securities lending revenue.

I don't know what share of securities lending Fidelity will be paying to these funds.

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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by Nate79 » Wed Aug 01, 2018 12:05 pm

lostdog wrote:
Wed Aug 01, 2018 11:58 am
Do you think Vanguard will respond? Is it even possible for Vanguard to offer zero ER?
I do not think it is possible for Vanguard to play this game as their funds are offered at cost. The primary cost by far for Vanguard funds is classified as "Management and Administrative" costs. These management costs as I understand are paid to Vanguard by the fund to management the funds and the accounts thru a service agreement at Vanguard's cost of operations.

student
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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by student » Wed Aug 01, 2018 12:07 pm

zrail wrote:
Wed Aug 01, 2018 11:50 am
How will this self-indexed index be created and managed and how will that differ from existing indexes?
The indexing methodology is linked from Fidelity's info page. It seems pretty straightforward.
Thanks. So the index for total market is very similar to the Russell 3000.

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Re: New Fidelity Fund 0.00 ER

Post by aristotelian » Wed Aug 01, 2018 12:08 pm

SelfEmployed123 wrote:
Wed Aug 01, 2018 10:56 am
Wow. I understand there has been a race to the bottom for a while, but this seems unsustainable. I mean...they've gotta keep the lights and their computer servers running, right? I suppose they are trying to get people in the door and then will plan on selling them more expensive funds.

What's next, a negative ER fund?
Zero ER plus a transfer bonus?

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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by Dottie57 » Wed Aug 01, 2018 12:10 pm

I just don’t want Fidelity to stop having great service and a good web presence. And I don’t want them to go out of business.

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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by lostdog » Wed Aug 01, 2018 12:10 pm

Vanguard and Ishares squirming in their seats right now?

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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by bosocal » Wed Aug 01, 2018 12:12 pm

Darth Xanadu wrote:
Wed Aug 01, 2018 11:49 am
informal guide wrote:
Wed Aug 01, 2018 11:45 am
One interesting part of the Fidelity press release is as follows:

" industry’s first self-indexed mutual fund..."

meaning that Fidelity will itself create the index to which the new funds will be managed. This is different than the major index funds today, which track externally created indexes, such as the S&P 500. How will this self-indexed index be created and managed and how will that differ from existing indexes?

My understanding is that the index funds today have to pay a fee of some sort to the index providers (e.g., S&P). Fidelity will not incur this expense.
Good question.

Separately, I presume there is no longer the need for distinction between Investor Class and Premium Class if the minimums are all going away (and assuming holdings remain the same).
Yes I just got off the phone with Fidelity and they are creating new Mutual Funds that basically do away with the Investor and premium classes. If you hold those mutual funds currently, they will automatically get switched over to the new ones sometime soon.

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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by lostdog » Wed Aug 01, 2018 12:14 pm

So I can track the world index with these two funds at ZERO cost? This is actually pretty amazing.

I guess what will be up in the air is tax efficiency.

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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by triceratop » Wed Aug 01, 2018 12:15 pm

lostdog wrote:
Wed Aug 01, 2018 11:58 am
Do you think Vanguard will respond? Is it even possible for Vanguard to offer zero ER?

Will these two funds be just as tax efficient?
They're Fidelity mutual funds so it's unlikely they'll be as efficient as Vanguard mutual funds or ETFs (incl. non-Vanguard).
lostdog wrote:
Wed Aug 01, 2018 12:14 pm
So I can track the world index with these two funds at ZERO cost? This is actually pretty amazing.

I guess what will be up in the air is tax efficiency.
After securities lending at Vanguard you already almost could. But now "cost" becomes relative to risk. How much risk do you want to take in securities lending vs excess return?
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by student » Wed Aug 01, 2018 12:15 pm

Dottie57 wrote:
Wed Aug 01, 2018 12:10 pm
I just don’t want Fidelity to stop having great service and a good web presence. And I don’t want them to go out of business.
Me too. If they have to reduce cost, I am afraid they may take it away from service. I don't want them to be Spirit Airlines of mutual fund companies.

rgs92
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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by rgs92 » Wed Aug 01, 2018 12:18 pm

Maybe this will reduce the ER of their funds that use total stock market index funds within them, like their Freedom Index Funds or 4-in-1...

Daitokuji
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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by Daitokuji » Wed Aug 01, 2018 12:19 pm

So what's the catch? And how would this compare to VTI/VTSAX? I have most of my money in VTI and VXUS (total international) and wonder if it would be worth it to switch to Fidelity. I'm paying 0.068% for my current portfolio.

appleshampooid
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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by appleshampooid » Wed Aug 01, 2018 12:21 pm

Nate79 wrote:
Wed Aug 01, 2018 12:05 pm
lostdog wrote:
Wed Aug 01, 2018 11:58 am
Do you think Vanguard will respond? Is it even possible for Vanguard to offer zero ER?
I do not think it is possible for Vanguard to play this game as their funds are offered at cost. The primary cost by far for Vanguard funds is classified as "Management and Administrative" costs. These management costs as I understand are paid to Vanguard by the fund to management the funds and the accounts thru a service agreement at Vanguard's cost of operations.
They could possibly do it on a few select funds (like Fidelity has done) as a loss leader, and keep making money on other funds and products.
"If you aren't unhappy with part of your portfolio, you aren't diversified enough." -rudeboy

Socal77
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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by Socal77 » Wed Aug 01, 2018 12:21 pm

triceratop wrote:
Wed Aug 01, 2018 11:43 am
I merged several duplicate topics into this first one by jhfenton (the system orders by time).

(Me personally I would still not use the funds; for tax reasons and because I'm not receiving the full rewards of the risks they take with my money in securities lending)
Would you elaborate? Thanks

Nate79
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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by Nate79 » Wed Aug 01, 2018 12:23 pm

appleshampooid wrote:
Wed Aug 01, 2018 12:21 pm
Nate79 wrote:
Wed Aug 01, 2018 12:05 pm
lostdog wrote:
Wed Aug 01, 2018 11:58 am
Do you think Vanguard will respond? Is it even possible for Vanguard to offer zero ER?
I do not think it is possible for Vanguard to play this game as their funds are offered at cost. The primary cost by far for Vanguard funds is classified as "Management and Administrative" costs. These management costs as I understand are paid to Vanguard by the fund to management the funds and the accounts thru a service agreement at Vanguard's cost of operations.
They could possibly do it on a few select funds (like Fidelity has done) as a loss leader, and keep making money on other funds and products.
I think the better question is Vanguard allowed to have loss leaders as a mutual fund company in their current structure? In other words are they contractually allowed to charge some funds less than cost and charge other funds more than cost to run the funds?

I doubt but I don't know for sure.

frankmorris
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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by frankmorris » Wed Aug 01, 2018 12:26 pm

First, I'm quite thankful for Bogleheads to be able to come online and instantly read (and participate in) reactions after I read a news story!

Second, does anyone expect any tax implications of owning this Mutual Fund versus a similarly portfolio'd ETF? I don't understand the mechanics fully, but my understanding is that traditionally ETFs are slightly more tax efficient structures.

Third, I share everyone's sentiments that I'll be paying close attention to the response from Schwab & Vanguard, as ultimately I don't see a "no response to competition" as sustainable. The only question is how long it would take.

Fourth, and this is probably a newbie question: One strong advantage to me of an ETF is that, when I go to sell shares, I have some control over limit orders, timing of the sale during the day, etc. - I haven't traded mutual funds before personally, so are there the same options/controls? I'd be concerned that the benefits of lower ERs could be lost by the loss of ability to be more agile in selling/buying those securities rather than just being stuck with whatever the NAV happens to be at the end of the day.

MichCPA
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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by MichCPA » Wed Aug 01, 2018 12:31 pm

bosocal wrote:
Wed Aug 01, 2018 11:24 am
MichCPA wrote:
Wed Aug 01, 2018 10:11 am
A couple pages in it says "There is no purchase minimum for shares of the fund offered in this prospectus."

Is that right? Its hard to believe there will first dollar 0 ER funds. Not that I would complain.
I was just on the Fidelity website and spoke with someone there and this does seem to be true, not only for there ZERO mutual funds, but for all Fidelity Mutual Funds now. Plus they have severely slashed all the fees on existing MF. FTIGX(Total International) has gone from .17 yesterday to .06 today.
Thanks for looking at that. I just moved some stuff around in my 401k and dropped small holdings in a midcap .67 fund for a .045 and a .82 international for a .015 S&P 500. Now all I need is a low cost international fund for my 401k its really the only flaw. For me this is a bigger deal than the Vanguard ETF trade fees being dropped.

rgs92
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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by rgs92 » Wed Aug 01, 2018 12:34 pm

I wish they would also have this for a total bond market fund.
I also wish they would have one for a balanced index fund that is not a target fund. (Or at least with an ER under 5 basis points. They have no such fund. 4-in-1 has too high a stock allocation to qualify.)

lostdog
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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by lostdog » Wed Aug 01, 2018 12:36 pm

frankmorris wrote:
Wed Aug 01, 2018 12:26 pm
First, I'm quite thankful for Bogleheads to be able to come online and instantly read (and participate in) reactions after I read a news story!

Second, does anyone expect any tax implications of owning this Mutual Fund versus a similarly portfolio'd ETF? I don't understand the mechanics fully, but my understanding is that traditionally ETFs are slightly more tax efficient structures.

Third, I share everyone's sentiments that I'll be paying close attention to the response from Schwab & Vanguard, as ultimately I don't see a "no response to competition" as sustainable. The only question is how long it would take.

Fourth, and this is probably a newbie question: One strong advantage to me of an ETF is that, when I go to sell shares, I have some control over limit orders, timing of the sale during the day, etc. - I haven't traded mutual funds before personally, so are there the same options/controls? I'd be concerned that the benefits of lower ERs could be lost by the loss of ability to be more agile in selling/buying those securities rather than just being stuck with whatever the NAV happens to be at the end of the day.
I have exactly the same idea as you. Although I am not sure how Vanguard can respond to this based on their business structure. I am sure Schwab and Ishares will be able to respond.

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triceratop
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Re: Fidelity Files for two Fidelity ZERO℠ Funds (0.00% ER total stock and total international mutual funds)

Post by triceratop » Wed Aug 01, 2018 12:38 pm

Socal77 wrote:
Wed Aug 01, 2018 12:21 pm
triceratop wrote:
Wed Aug 01, 2018 11:43 am
I merged several duplicate topics into this first one by jhfenton (the system orders by time).

(Me personally I would still not use the funds; for tax reasons and because I'm not receiving the full rewards of the risks they take with my money in securities lending)
Would you elaborate? Thanks
Sure. The way securities lending appears to work at Fidelity (using Fidelity Total Stock Market as a guidepost) is that Fidelity takes my investment and buys securities, lends out those securities to others who post collateral for the privilege of having the securities (this is the risky part), and investing the collateral in low-risk investments, with the profits from those investments going to the fund. The low-risk investment in Fidelity's case is the Fidelity Securities Lending Cash Central Fund. However, it's not at all clear what the actual yield on the Fidelity Securities Lending Cash Central Fund is (it was 1.42% as of February 28, the date of the last annual report for Total Stock Market when the 3-month treasury was at 1.65% -- note that the central funds do not charge administrative fees) and how much of that Fidelity takes in pure profit while the risks are borne by those who lend out the securities (us, the investors).
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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