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

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
passiveTiger
Posts: 74
Joined: Tue Apr 17, 2018 9:22 pm

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

Post by passiveTiger » Sun Aug 19, 2018 10:32 pm

tj wrote:
Sun Aug 19, 2018 4:33 pm
Tdubs wrote:
Sun Aug 19, 2018 4:17 pm
tj wrote:
Sun Aug 19, 2018 3:09 pm
Tdubs wrote:
Sun Aug 19, 2018 7:35 am
I'm sure it's addressed somewhere in this long thread, but what are the chances of VG following suit? I don't understand how they can withstand conceding the ER high ground long term.

I just transferred my IRAs to VG a couple months ago and have no loyalty to it or taxable account complications in moving on to FIDO. In fact, for my daughter's small IRA, I should do that anyway given the lack of minimums.
I don't see how VG can offer Zero ER funds. How would VG fund it's operations?
I wonder the same about Fidelity. How does VG not keep up with the competition and accept some funds as loss leaders? They will have to restructure how they make money.
Fidelity has plenty of high-profit funds. They can much better afford "loss leaders". Of course, if everyone abandoned the more expensive options, they wouldn't be able to do that.
Despite the good moves of removing minimums, removing the distinctions of share class, and lowering the ERs for existing index funds to those of the lowest ER class (of the previous classes), Fidelity will make up some ground on money market balances.

Vanguard's VMFXX has an ER of 0.11%. It is used as the settlement fund in brokerage accounts that Vanguard is pushing AGGRESSIVELY. They call me every two weeks to "upgrade" to one.

Fidelity uses SPAXX as its settlement fund for its brokerage accounts. The ER is 0.42% - almost four times the ER of Vanguard's brokerage settlement fund.

The Fidelity ZERO funds are only available to Fidelity brokerage accounts, so everyone who wants one will have a brokerage account, and idle cash in those accounts will provide four times the return for Fidelity that it does for Vanguard.

This is the same thing that Schwab does with its SWGXX settlement fund with an ER of 0.61%. That is going on six times the ER of Vanguard's settlement fund.

User avatar
LadyGeek
Site Admin
Posts: 48687
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

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

Post by LadyGeek » Sun Aug 19, 2018 10:52 pm

passiveTiger wrote:
Sun Aug 19, 2018 10:32 pm
The Fidelity ZERO funds are only available to Fidelity brokerage accounts, so everyone who wants one will have a brokerage account, and idle cash in those accounts will provide four times the return for Fidelity that it does for Vanguard.
That would explain the TV commercial I saw during the ABC news today. Since I normally mute the sound during commercials, I only heard the last few seconds. "Fidelity brokerage is all zero..." - at least that's what I remember. I like the green background color. It stands out among the big pharma ads they always show.

BTW, I saw another Fidelity ZERO ad on one of the digital billboard ads on the PA turnpike (near the Willow Grove exit in Philly). It was flipping through the usual stuff and the green caught my eye. I still couldn't read what it said, though.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

Dead Man Walking
Posts: 720
Joined: Wed Nov 07, 2007 6:51 pm

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

Post by Dead Man Walking » Mon Aug 20, 2018 12:29 am

Austintatious wrote:
Sat Aug 11, 2018 8:38 am
Jonathan Clements' Saturday morning perspective on Fidelity's zero funds:

http://www.humbledollar.com/2018/08/low-fidelity/
Clements may have hit the most important aspect of Fidelity's zero push when he pointed out that Fidelity now offers funds at a zero minimum investment. Vanguard's $3,000 minimum ($1,000 for Star fund) may be more than a small investor can afford for an initial investment. Edward Jones and others have had a minimum investment of $250 for years and have hooked initial investors with this low initial investment. Many people stick with what they know once they have taken the plunge.

DMW

Spirit Rider
Posts: 8940
Joined: Fri Mar 02, 2007 2:39 pm

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

Post by Spirit Rider » Mon Aug 20, 2018 12:44 am

passiveTiger wrote:
Sun Aug 19, 2018 10:32 pm
The Fidelity ZERO funds are only available to Fidelity brokerage accounts, so everyone who wants one will have a brokerage account, and idle cash in those accounts will provide four times the return for Fidelity that it does for Vanguard.
The ZERO funds are available in all retail (brokerage, cash management, traditional/SEP/SIMPLE IRA and SE401k) accounts.

Who keeps their cash in the settlement account for more than a few days anyways. I keep mine in FZDXX 1.95%.

passiveTiger
Posts: 74
Joined: Tue Apr 17, 2018 9:22 pm

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

Post by passiveTiger » Mon Aug 20, 2018 4:17 am

Spirit Rider wrote:
Mon Aug 20, 2018 12:44 am
passiveTiger wrote:
Sun Aug 19, 2018 10:32 pm
The Fidelity ZERO funds are only available to Fidelity brokerage accounts, so everyone who wants one will have a brokerage account, and idle cash in those accounts will provide four times the return for Fidelity that it does for Vanguard.
The ZERO funds are available in all retail (brokerage, cash management, traditional/SEP/SIMPLE IRA and SE401k) accounts.

Who keeps their cash in the settlement account for more than a few days anyways. I keep mine in FZDXX 1.95%.
https://www.fidelity.com/mutual-funds/i ... ndex-funds

“Fidelity offers two index funds with a zero expense ratios. Both seek to track Fidelity created indexes, one comprising publicly traded companies in the U.S., and the other developed and emerging international companies. Shares of funds are generally available only to individual retail investors who purchase their shares through a Fidelity brokerage account.

Zero account minimums and Zero account fees apply to retail brokerage accounts only.”

I read that as the zero minimums (and the ZERO funds) only apply to accounts (e.g., IRAs) held in brokerage form and not fund accounts. For example, my IRA at Vanguard is not held in brokerage although Vanguard is REALLY trying to get me to change that.

FZDXX still has a pretty nice haircut of 0.37% ER. Its YTD is 1.08%. $100k minimum.

VMRXX would be the comparable (but not institutional) Vanguard fund available to individuals with a 0.10% ER and a YTD of 1.15%. $5,000 minimum.

I still think idle cash at Fidelity or Schwab is not a good idea for most people. If someone wants to market time for the “big drop,” they will pay a bit to do that.

passiveTiger
Posts: 74
Joined: Tue Apr 17, 2018 9:22 pm

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

Post by passiveTiger » Mon Aug 20, 2018 4:38 am

Dead Man Walking wrote:
Mon Aug 20, 2018 12:29 am
Austintatious wrote:
Sat Aug 11, 2018 8:38 am
Jonathan Clements' Saturday morning perspective on Fidelity's zero funds:

http://www.humbledollar.com/2018/08/low-fidelity/
Clements may have hit the most important aspect of Fidelity's zero push when he pointed out that Fidelity now offers funds at a zero minimum investment. Vanguard's $3,000 minimum ($1,000 for Star fund) may be more than a small investor can afford for an initial investment. Edward Jones and others have had a minimum investment of $250 for years and have hooked initial investors with this low initial investment. Many people stick with what they know once they have taken the plunge.

DMW
Fidelity and Schwab offer great deals for the new investor. Not only do they not need $1,000 or $3,000 to get started, they get lower ERs than comparable Vanguard Admiral Shares with their first dollar as opposed to their ten thousandth.

They can also have a decent allocation with $3 in a three-fund portfolio, a good allocation in three funds with $10, or a pretty precise allocation with $100 in three funds - and all at lower ERs than Admiral Shares.

To do that with Admiral Shares ERs, they would need at least $30,000 for the three funds in equal amounts of $10,000.

sc9182
Posts: 216
Joined: Wed Aug 17, 2016 7:43 pm

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

Post by sc9182 » Mon Aug 20, 2018 6:15 am

passiveTiger wrote:
Mon Aug 20, 2018 4:38 am

Fidelity and Schwab offer great deals for the new investor. Not only do they not need $1,000 or $3,000 to get started, they get lower ERs than comparable Vanguard Admiral Shares with their first dollar as opposed to their ten thousandth.

They can also have a decent allocation with $3 in a three-fund portfolio, a good allocation in three funds with $10, or a pretty precise allocation with $100 in three funds - and all at lower ERs than Admiral Shares.

To do that with Admiral Shares ERs, they would need at least $30,000 for the three funds in equal amounts of $10,000.
Are you saying Bogleheads oft-recommended low-expenses 3-fund portfolio can be better implemented from get go, at Fidelity better than Vanguard or ta Schwab. And you can accomplish this starting with bare minimum balances, and with almost NADA expenses?

You may also be able to build limited choice of your own fund of funds at Fidelity: due to these zero-minimums, nada expenses !?

Now, if you are high net worth types, you may be able to bargain large Brokerage Transfer Incentive from Fidelity (search Earl's transfer bonus BH thread) to further sweeten the pot.

Dunno if this is a strategic move, or loss-leader by Fido, but as a retail investor/customer, you now have the best way to capitalize on this opportunity.

What gives !? Do we expect negative-ER fund choices from Vanguard or others?
Last edited by sc9182 on Mon Aug 20, 2018 6:31 am, edited 1 time in total.

texascat1
Posts: 26
Joined: Thu Nov 06, 2014 8:46 pm

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

Post by texascat1 » Mon Aug 20, 2018 6:30 am

I have a roth ira at Fidelity and I do not have a Fidelity financial adviser. I was able to buy $2.83 of the international zero fund at no transaction cost. That was how much cash was sitting in my Roth unused. You don’t need an advisor to get the funds.

mattsm
Posts: 174
Joined: Mon Jan 11, 2010 10:27 am

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

Post by mattsm » Mon Aug 20, 2018 10:13 am

So, is the consensus it's OK to move into these new funds if you are in other similiar Fidelity funds in tax advantaged accounts?

User avatar
munemaker
Posts: 3527
Joined: Sat Jan 18, 2014 6:14 pm

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

Post by munemaker » Mon Aug 20, 2018 11:15 am

Tdubs wrote:
Sun Aug 19, 2018 4:17 pm
How does VG not keep up with the competition and accept some funds as loss leaders? They will have to restructure how they make money.
Vanguard is stealing business from almost everyone. They have tons of cash pouring in. I don't think they will have to restructure how they make money anytime soon. Perhaps eventually.

User avatar
munemaker
Posts: 3527
Joined: Sat Jan 18, 2014 6:14 pm

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

Post by munemaker » Mon Aug 20, 2018 11:16 am

texascat1 wrote:
Mon Aug 20, 2018 6:30 am
I have a roth ira at Fidelity and I do not have a Fidelity financial adviser. I was able to buy $2.83 of the international zero fund at no transaction cost. That was how much cash was sitting in my Roth unused. You don’t need an advisor to get the funds.
Why would you buy $2.83 of a mutual fund? Seems like a waste of time.

texascat1
Posts: 26
Joined: Thu Nov 06, 2014 8:46 pm

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

Post by texascat1 » Mon Aug 20, 2018 12:51 pm

munemaker wrote:
Mon Aug 20, 2018 11:16 am
texascat1 wrote:
Mon Aug 20, 2018 6:30 am
I have a roth ira at Fidelity and I do not have a Fidelity financial adviser. I was able to buy $2.83 of the international zero fund at no transaction cost. That was how much cash was sitting in my Roth unused. You don’t need an advisor to get the funds.
Why would you buy $2.83 of a mutual fund? Seems like a waste of time.
I had 2.83 in the Fidelity cash equivalent of my Roth after my last trade. I had ordered a fund purchase a few months ago and that amount was left over for some reason. It has been sitting there so I figured why not buy into the new fund with no minimum. It took about three minutes of clicking and presto I was in the Fidelity international zero on the first day of existence with 0.283 share.

User avatar
munemaker
Posts: 3527
Joined: Sat Jan 18, 2014 6:14 pm

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

Post by munemaker » Mon Aug 20, 2018 12:53 pm

texascat1 wrote:
Mon Aug 20, 2018 12:51 pm
munemaker wrote:
Mon Aug 20, 2018 11:16 am
texascat1 wrote:
Mon Aug 20, 2018 6:30 am
I have a roth ira at Fidelity and I do not have a Fidelity financial adviser. I was able to buy $2.83 of the international zero fund at no transaction cost. That was how much cash was sitting in my Roth unused. You don’t need an advisor to get the funds.
Why would you buy $2.83 of a mutual fund? Seems like a waste of time.
I had 2.83 in the Fidelity cash equivalent of my Roth after my last trade. I had ordered a fund purchase a few months ago and that amount was left over for some reason. It has been sitting there so I figured why not buy into the new fund with no minimum. It took about three minutes of clicking and presto I was in the Fidelity international zero on the first day of existence with 0.283 share.
With a 10% return, you will have a gain of a quarter.

User avatar
Barry Barnitz
Wiki Admin
Posts: 3019
Joined: Mon Feb 19, 2007 10:42 pm
Contact:

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

Post by Barry Barnitz » Mon Aug 20, 2018 5:41 pm

Hi:

From ETF.com. Elizabeth Kasner, Are Fidelity’s Free Funds Really Free?, August 18, 2018.
Fund fees are only part of the equation. FactSet ETF Analytics has designed a total annual cost-of-ownership metric that combines tracking difference and trading costs, and also allows for tax impact. Portfolio trading costs and capital gains taxes can often weigh heavily on after-tax mutual fund returns, in this case more heavily than trading spreads do on ETF returns. Vanguard mutual funds are a special case, as they share a portfolio with Vanguard ETFs, and can use some of the ETF advantages to reduce or remove impacts of rebalancing and flows on tracking difference and capital gains charges.
The new Fidelity 0.00% funds will likely cost high-bracket investors between 0.05% and 0.10% for the U.S. fund (FZROX) and about 0.50% for the international fund (FZILX), based on the historical operating costs of parallel Fidelity funds FSTMX and FTIGX. The story might be slightly different in tax-deferred accounts. Without taxes on capital gains, FZROX may be nearly costless, but FZILX will likely still cost around 0.39% per year.
regards,
Image | blb | December Birthday Celebration: Ludwig van Beethoven

sc9182
Posts: 216
Joined: Wed Aug 17, 2016 7:43 pm

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

Post by sc9182 » Mon Aug 20, 2018 6:37 pm

Barry Barnitz wrote:
Mon Aug 20, 2018 5:41 pm
Hi:

From ETF.com. Elizabeth Kasner, Are Fidelity’s Free Funds Really Free?, August 18, 2018.
..
Thinking there is some guesswork on part of the author regarding possible capital gains. Also, this article seems only talking about one side of coin. Author totally missed the Interplay aspect between zero expenses and zero/min minimums.

In that article, not one mention about zero required minimums, or how one can build up position(s) and gains over a period of time.

Most often portfolios build over tme: say a Newly started HSA, or a 529, or a traditional IRA, or an Roth IRA. Would it not be good idear to start to be invested early on, instead of waiting for bit longer until decent cash balance builds in an account (many normal mutual funds have min balance to start/enter position into)?

Even more importantly: what the author totally blindsided on is the interplay involved between no Expense ratios, and Zero/low minimums is: many Brokerage folks who may be starting off with low minimums, are likely to be in in low tax bracket, and the cap gains may be moot point (and actually better, as the right kind generated tax free distributions/growth while in such a low bracket!). If the smaller balances are due to new accounts, see next paragraph, and most likely your cap gains in such Tax deferred/preferred tax acounts may be moot point! now what was Liz saying in that article ? Thanks, but we will get better 'Facts' doing our own research.

BTW, many Bogleheads also likely to experience small/starter account phenomenon, especially when they first eligible/interested-in different type of vehicles such as HSA, or Roth IRA or 529,.or MegaBackdoorRoth401k etc.

As much as we all preach minimal/No investing expenses, low/zero minimum requirement is as important too., thats the most important point this author fail to mention.
Last edited by sc9182 on Thu Aug 30, 2018 3:49 pm, edited 2 times in total.

Clamshell
Posts: 12
Joined: Sun Jul 29, 2018 3:52 pm

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

Post by Clamshell » Mon Aug 20, 2018 6:38 pm

As FZROX gets off the ground will the price be at a premium over the value of its holdings?

camaro327
Posts: 250
Joined: Fri Dec 21, 2012 11:04 am

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

Post by camaro327 » Mon Aug 20, 2018 6:40 pm

That's for ETFs. Mutual Funds are priced at the end of each day. No premium or discount.

gostars
Posts: 439
Joined: Mon Oct 09, 2017 7:53 pm

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

Post by gostars » Mon Aug 20, 2018 11:20 pm

Barry Barnitz wrote:
Mon Aug 20, 2018 5:41 pm
From ETF.com. Elizabeth Kasner, Are Fidelity’s Free Funds Really Free?, August 18, 2018.
The story might be slightly different in tax-deferred accounts. Without taxes on capital gains, FZROX may be nearly costless, but FZILX will likely still cost around 0.39% per year.
I'm calling BS on this article. Random claim that FZILX has a huge cost in a tax-advantaged account with absolutely no explanation in the article of where that comes from? Especially when the fund and the index it tracks are brand new and have no history that can be used to document tracking error or comparison to similar funds? That's well beyond guesswork and straight into complete fabrication.

Jack FFR1846
Posts: 7988
Joined: Tue Dec 31, 2013 7:05 am

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

Post by Jack FFR1846 » Sat Sep 01, 2018 6:51 pm

Friday's close brought my equal initial split to FSTVX and FZROX to:

$1.88 difference between the 2 positions of over $300k each.
Bogle: Smart Beta is stupid

jclear
Posts: 106
Joined: Mon Aug 20, 2018 12:47 am

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

Post by jclear » Sun Sep 02, 2018 4:32 am

Dead Man Walking wrote:
Mon Aug 20, 2018 12:29 am
Austintatious wrote:
Sat Aug 11, 2018 8:38 am
Jonathan Clements' Saturday morning perspective on Fidelity's zero funds:

http://www.humbledollar.com/2018/08/low-fidelity/
Clements may have hit the most important aspect of Fidelity's zero push when he pointed out that Fidelity now offers funds at a zero minimum investment. Vanguard's $3,000 minimum ($1,000 for Star fund) may be more than a small investor can afford for an initial investment. Edward Jones and others have had a minimum investment of $250 for years and have hooked initial investors with this low initial investment. Many people stick with what they know once they have taken the plunge.

DMW
Considering Vanguard is charging fees if people don't sign up for electronic delivery, I think they can afford to reduce all those $3000 minimums to $1000.
It used to be people could sign up for some $3000-minimum fund with $0 but automatic deposits of something like $25 per month. Now that ETFs have taken over did they do away with this? I don't see anything on the web site talking about this option.

User avatar
Mursili
Posts: 84
Joined: Tue May 15, 2012 8:32 pm

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

Post by Mursili » Sun Sep 02, 2018 2:20 pm

Jack FFR1846 wrote:
Sat Sep 01, 2018 6:51 pm
Friday's close brought my equal initial split to FSTVX and FZROX to:

$1.88 difference between the 2 positions of over $300k each.
When did you start this test? Thanks for providing real data about the new fund.
When it comes to havoc, no one wreaks like me! - Dr. Heinz Doofenshmirtz

pharpy
Posts: 2
Joined: Mon Sep 03, 2018 2:22 pm

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

Post by pharpy » Mon Sep 03, 2018 2:29 pm

New to the forum but I am starting my first taxable account and looking into FZROX vs VTSAX.

My question is: does VTSAX's tax efficiency outweigh the the zero expense ratio of FZROX? Is Fidelity likely to transition to the same tax efficiency formula once Vanguard's patent expires?

I have accounts with both Vanguard (ROTH IRA) and Fidelity (401k) already and want to make the best long term choice.

What would you do if you were starting with a brand new taxable??

stlutz
Posts: 4790
Joined: Fri Jan 02, 2009 1:08 am

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

Post by stlutz » Mon Sep 03, 2018 2:49 pm

does VTSAX's tax efficiency outweigh the the zero expense ratio of FZROX? Is Fidelity likely to transition to the same tax efficiency formula once Vanguard's patent expires?
I would prefer better tax efficiency over [possibly] saving .03%. In a taxable account at Fidelity, ITOT (iShares Total US) and IXUS (iShares Total Intl) are better options.

Fidelity will not adopt the dual share class structure that Vanguard uses as the marketing goal of the Zero funds is to get people to open and keep accounts at Fidelity. An ETF can be bought anywhere; these fund they can keep completely under their own umbrella. There is no incentive for Fidelity to subsidize an investor buying an ETF at E*Trade which is what they'd be doing with a zero cost ETF.

HEDGEFUNDIE
Posts: 1000
Joined: Sun Oct 22, 2017 2:06 pm

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

Post by HEDGEFUNDIE » Mon Sep 03, 2018 2:52 pm

pharpy wrote:
Mon Sep 03, 2018 2:29 pm
New to the forum but I am starting my first taxable account and looking into FZROX vs VTSAX.

My question is: does VTSAX's tax efficiency outweigh the the zero expense ratio of FZROX? Is Fidelity likely to transition to the same tax efficiency formula once Vanguard's patent expires?

I have accounts with both Vanguard (ROTH IRA) and Fidelity (401k) already and want to make the best long term choice.

What would you do if you were starting with a brand new taxable??
There is no way to answer this question until we see one year of distributions out of FZROX

UpperNwGuy
Posts: 1135
Joined: Sun Oct 08, 2017 7:16 pm

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

Post by UpperNwGuy » Mon Sep 03, 2018 3:09 pm

stlutz wrote:
Mon Sep 03, 2018 2:49 pm
does VTSAX's tax efficiency outweigh the the zero expense ratio of FZROX? Is Fidelity likely to transition to the same tax efficiency formula once Vanguard's patent expires?
I would prefer better tax efficiency over [possibly] saving .03%. In a taxable account at Fidelity, ITOT (iShares Total US) and IXUS (iShares Total Intl) are better options.

Fidelity will not adopt the dual share class structure that Vanguard uses as the marketing goal of the Zero funds is to get people to open and keep accounts at Fidelity. An ETF can be bought anywhere; these fund they can keep completely under their own umbrella. There is no incentive for Fidelity to subsidize an investor buying an ETF at E*Trade which is what they'd be doing with a zero cost ETF.
We don't know what Fidelity will do when Vanguard's patent expires. Speculation is not helpful.

pharpy
Posts: 2
Joined: Mon Sep 03, 2018 2:22 pm

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

Post by pharpy » Mon Sep 03, 2018 3:12 pm

stlutz wrote:
Mon Sep 03, 2018 2:49 pm
does VTSAX's tax efficiency outweigh the the zero expense ratio of FZROX? Is Fidelity likely to transition to the same tax efficiency formula once Vanguard's patent expires?
I would prefer better tax efficiency over [possibly] saving .03%. In a taxable account at Fidelity, ITOT (iShares Total US) and IXUS (iShares Total Intl) are better options.

Fidelity will not adopt the dual share class structure that Vanguard uses as the marketing goal of the Zero funds is to get people to open and keep accounts at Fidelity. An ETF can be bought anywhere; these fund they can keep completely under their own umbrella. There is no incentive for Fidelity to subsidize an investor buying an ETF at E*Trade which is what they'd be doing with a zero cost ETF.
Got it, that makes sense. If I were to go with Fidelity then I would go for an ETF like ITOT while I can go with a Vanguard mutual fund like VTSAX. The difference is only 0.01 so I'm leaning towards VTSAX since I wont have to buy in whole increments. Is that correct?

tj
Posts: 2208
Joined: Thu Dec 24, 2009 12:10 am

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

Post by tj » Mon Sep 03, 2018 3:18 pm

I just don't think it's going to make that much of a difference. Splitting hairs.

User avatar
ruralavalon
Posts: 14097
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

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

Post by ruralavalon » Mon Sep 03, 2018 6:24 pm

pharpy wrote:
Mon Sep 03, 2018 2:29 pm
New to the forum but I am starting my first taxable account and looking into FZROX vs VTSAX.

My question is: does VTSAX's tax efficiency outweigh the the zero expense ratio of FZROX? Is Fidelity likely to transition to the same tax efficiency formula once Vanguard's patent expires?

I have accounts with both Vanguard (ROTH IRA) and Fidelity (401k) already and want to make the best long term choice.

What would you do if you were starting with a brand new taxable??
We don't have any basis for answering those questions. We just have to wait and see how the Fidelity ZERO fund will perform, how tax-efficient it might be, and whether Fidelity will adopt the Vanguard type fund structure.

I am not going to set up a new taxable account, so I don't have to decide this
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Jack FFR1846
Posts: 7988
Joined: Tue Dec 31, 2013 7:05 am

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

Post by Jack FFR1846 » Mon Sep 03, 2018 6:29 pm

Mursili wrote:
Sun Sep 02, 2018 2:20 pm
Jack FFR1846 wrote:
Sat Sep 01, 2018 6:51 pm
Friday's close brought my equal initial split to FSTVX and FZROX to:

$1.88 difference between the 2 positions of over $300k each.
When did you start this test? Thanks for providing real data about the new fund.
8/9
Bogle: Smart Beta is stupid

User avatar
aj76er
Posts: 595
Joined: Tue Dec 01, 2015 11:34 pm
Location: Portland, OR

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

Post by aj76er » Sun Sep 09, 2018 1:56 pm

Perhaps this was mentioned up-thread, but is there a good metric for when to get into these funds? For example, is now an okay time, or would you wait until AUM reached a minimum threshold (eg $1B). Perhaps wait and see how they track against comparable benchmarks?

Anyway, just curious what others are doing. I'd really like to switch to these funds in my Roth IRA, but don't want to incur any tracking error by jumping in too early
"Buy-and-hold, long-term, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth" - John C. Bogle

User avatar
Leif
Posts: 2493
Joined: Wed Sep 19, 2007 4:15 pm

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

Post by Leif » Sun Sep 09, 2018 6:47 pm

passiveTiger wrote:
Mon Aug 20, 2018 4:17 am
VMRXX would be the comparable (but not institutional) Vanguard fund available to individuals with a 0.10% ER and a YTD of 1.15%. $5,000 minimum.
VMRXX has a $5,000,000 minimum. The investor class, VMMXX, has a $3,000 minimum, and an ER of 0.16%

mervinj7
Posts: 696
Joined: Thu Mar 27, 2014 3:10 pm

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

Post by mervinj7 » Mon Sep 10, 2018 11:07 am

aj76er wrote:
Sun Sep 09, 2018 1:56 pm
Perhaps this was mentioned up-thread, but is there a good metric for when to get into these funds? For example, is now an okay time, or would you wait until AUM reached a minimum threshold (eg $1B). Perhaps wait and see how they track against comparable benchmarks?

Anyway, just curious what others are doing. I'd really like to switch to these funds in my Roth IRA, but don't want to incur any tracking error by jumping in too early
I believe the two ZERO funds have already hit a combined $1B in AUM after their first month. However, my Roth IRA uses FSKAX (Fidelity Total Market) which has $58B in AUM which itself pales in comparision to VTSAX (Vanguard Total Market) which has $725B in AUM, so there's still a long way to go.

https://www.cnbc.com/2018/09/04/fidelit ... llows.html

User avatar
ruralavalon
Posts: 14097
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

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

Post by ruralavalon » Mon Sep 10, 2018 11:18 am

aj76er wrote:
Sun Sep 09, 2018 1:56 pm
Perhaps this was mentioned up-thread, but is there a good metric for when to get into these funds? For example, is now an okay time, or would you wait until AUM reached a minimum threshold (eg $1B). Perhaps wait and see how they track against comparable benchmarks?

Anyway, just curious what others are doing. I'd really like to switch to these funds in my Roth IRA, but don't want to incur any tracking error by jumping in too early
Our accounts are at Vanguard, and we won't be switching.

I suggest waiting 6-12 months, then comparing the new ZERO funds with the current index funds for performance and tracking error. However, in a tax-advantaged account there is little risk in switching now in my opinion. You can always switch back.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

ftobin
Posts: 1023
Joined: Fri Mar 20, 2009 3:28 pm

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

Post by ftobin » Mon Sep 10, 2018 12:58 pm

ruralavalon wrote:
Mon Sep 10, 2018 11:18 am
However, in a tax-advantaged account there is little risk in switching now in my opinion. You can always switch back.
Just to give some perspective on the cost you're incurring for minor savings:

On average, each day you're out of the market while transferring is going to cost you 0.025%/day (assuming 9% uniform avg returns). Out for just two days, and you've already exceeded the cost of VTSAX (admiral) for one year (ER of 0.04%).

You could also end losing or gaining much more than the average of 0.025%/day while out of the market. I'm not sure this risk is worth it.

User avatar
GoldStar
Posts: 601
Joined: Wed May 23, 2018 10:59 am

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

Post by GoldStar » Mon Sep 10, 2018 7:02 pm

ftobin wrote:
Mon Sep 10, 2018 12:58 pm
ruralavalon wrote:
Mon Sep 10, 2018 11:18 am
However, in a tax-advantaged account there is little risk in switching now in my opinion. You can always switch back.
Just to give some perspective on the cost you're incurring for minor savings:

On average, each day you're out of the market while transferring is going to cost you 0.025%/day (assuming 9% uniform avg returns). Out for just two days, and you've already exceeded the cost of VTSAX (admiral) for one year (ER of 0.04%).

You could also end losing or gaining much more than the average of 0.025%/day while out of the market. I'm not sure this risk is worth it.
But you can do a sell/buy moving between funds without being out of the market for any days. That's what I did.

MnD
Posts: 3793
Joined: Mon Jan 14, 2008 12:41 pm

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

Post by MnD » Mon Sep 10, 2018 11:23 pm

passiveTiger wrote:
Sun Aug 19, 2018 10:32 pm
Fidelity uses SPAXX as its settlement fund for its brokerage accounts. The ER is 0.42% - almost four times the ER of Vanguard's brokerage settlement fund.

The Fidelity ZERO funds are only available to Fidelity brokerage accounts, so everyone who wants one will have a brokerage account, and idle cash in those accounts will provide four times the return for Fidelity that it does for Vanguard.

This is the same thing that Schwab does with its SWGXX settlement fund with an ER of 0.61%. That is going on six times the ER of Vanguard's settlement fund.
VMFXX is 1.94%.
My "idle cash" at Schwab is 25% in SWVXX at 1.89% and 75% in very short T-bills at 2.15%. I don't really care what asleep at the wheel investors earn in default sweep accounts at various brokerages. If the less aware at Schwab or Fidelity are paying for all the other goodies like decent customer service or 0.00% or 0.03% ER index funds, then I tip my glass to them. :beer

Nate79
Posts: 3604
Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

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

Post by Nate79 » Mon Sep 10, 2018 11:34 pm

MnD wrote:
Mon Sep 10, 2018 11:23 pm
passiveTiger wrote:
Sun Aug 19, 2018 10:32 pm
Fidelity uses SPAXX as its settlement fund for its brokerage accounts. The ER is 0.42% - almost four times the ER of Vanguard's brokerage settlement fund.

The Fidelity ZERO funds are only available to Fidelity brokerage accounts, so everyone who wants one will have a brokerage account, and idle cash in those accounts will provide four times the return for Fidelity that it does for Vanguard.

This is the same thing that Schwab does with its SWGXX settlement fund with an ER of 0.61%. That is going on six times the ER of Vanguard's settlement fund.
VMFXX is 1.94%.
My "idle cash" at Schwab is 25% in SWVXX at 1.89% and 75% in very short T-bills at 2.15%. I don't really care what asleep at the wheel investors earn in default sweep accounts at various brokerages. If the less aware at Schwab or Fidelity are paying for all the other goodies like decent customer service or 0.00% or 0.03% ER index funds, then I tip my glass to them. :beer
I also use SWVXX. Only minor annoyance is Schwab doesn't allow the automatic sweep into sweep accounts anymore except in international accounts and some other special exceptions. In US it is low yielding FDIC cash for the sweep. But it's not that challenging to log in and buy SWVXX.

ftobin
Posts: 1023
Joined: Fri Mar 20, 2009 3:28 pm

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

Post by ftobin » Tue Sep 11, 2018 12:35 am

GoldStar wrote:
Mon Sep 10, 2018 7:02 pm
But you can do a sell/buy moving between funds without being out of the market for any days. That's what I did.
How are you going to pull this off if the Fidelity fund can only be held at Fidelity, and the Vanguard fund at Vanguard, as Admiral shares must be? You'll have to convert to an instrument that is transferable between brokerages (cash or Investor class shares), which will either leave you less exposed (cash) or cost you a selling fee at Fidelity (Investor class shares).

User avatar
GoldStar
Posts: 601
Joined: Wed May 23, 2018 10:59 am

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

Post by GoldStar » Tue Sep 11, 2018 5:29 am

ftobin wrote:
Tue Sep 11, 2018 12:35 am
GoldStar wrote:
Mon Sep 10, 2018 7:02 pm
But you can do a sell/buy moving between funds without being out of the market for any days. That's what I did.
How are you going to pull this off if the Fidelity fund can only be held at Fidelity, and the Vanguard fund at Vanguard, as Admiral shares must be? You'll have to convert to an instrument that is transferable between brokerages (cash or Investor class shares), which will either leave you less exposed (cash) or cost you a selling fee at Fidelity (Investor class shares).
I was holding other Fidelity funds in a Fidelity account when making the transfer. Not everyone is in Vanguard which is what you seemed to assume when you said moving to ZERO funds in a taxable account would have you out of the market for a day or more.

UpperNwGuy
Posts: 1135
Joined: Sun Oct 08, 2017 7:16 pm

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

Post by UpperNwGuy » Tue Sep 11, 2018 8:06 am

GoldStar wrote:
Tue Sep 11, 2018 5:29 am
ftobin wrote:
Tue Sep 11, 2018 12:35 am
GoldStar wrote:
Mon Sep 10, 2018 7:02 pm
But you can do a sell/buy moving between funds without being out of the market for any days. That's what I did.
How are you going to pull this off if the Fidelity fund can only be held at Fidelity, and the Vanguard fund at Vanguard, as Admiral shares must be? You'll have to convert to an instrument that is transferable between brokerages (cash or Investor class shares), which will either leave you less exposed (cash) or cost you a selling fee at Fidelity (Investor class shares).
I was holding other Fidelity funds in a Fidelity account when making the transfer. Not everyone is in Vanguard which is what you seemed to assume when you said moving to ZERO funds in a taxable account would have you out of the market for a day or more.
Thanks, Goldstar, for pointing this out. My two biggest complaints about this forum are that people assume (a) that everyone is at Vanguard and (b) that everyone has access to tax-advantaged accounts.

ftobin
Posts: 1023
Joined: Fri Mar 20, 2009 3:28 pm

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

Post by ftobin » Tue Sep 11, 2018 9:01 am

GoldStar wrote:
Tue Sep 11, 2018 5:29 am
I was holding other Fidelity funds in a Fidelity account when making the transfer. Not everyone is in Vanguard which is what you seemed to assume when you said moving to ZERO funds in a taxable account would have you out of the market for a day or more.
In my post I explicitly mentioned Admiral classes of Vanguard's Total Stock Market (VTSAX), since that's likely the baseline from which people are comparing. VTSAX, being Admiral, has to be held at Vanguard. I didn't mention anything about the taxability of the account.

User avatar
GoldStar
Posts: 601
Joined: Wed May 23, 2018 10:59 am

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

Post by GoldStar » Tue Sep 11, 2018 10:17 am

ftobin wrote:
Tue Sep 11, 2018 9:01 am
GoldStar wrote:
Tue Sep 11, 2018 5:29 am
I was holding other Fidelity funds in a Fidelity account when making the transfer. Not everyone is in Vanguard which is what you seemed to assume when you said moving to ZERO funds in a taxable account would have you out of the market for a day or more.
In my post I explicitly mentioned Admiral classes of Vanguard's Total Stock Market (VTSAX), since that's likely the baseline from which people are comparing. VTSAX, being Admiral, has to be held at Vanguard. I didn't mention anything about the taxability of the account.
I think you are confusing various discussions.
This particular discussion started not with whatever post you are talking about that mentioned VTSAX - but rather it was started with aj76ers post about moving funds in his IRA. Ruralavalon stated there was nothing wrong with moving and that's when you said there would be a penalty from being out of market. If aj76ers account and funds are already with Fidelity - there is no penalty.

User avatar
willthrill81
Posts: 6173
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

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

Post by willthrill81 » Tue Sep 11, 2018 10:47 am

UpperNwGuy wrote:
Tue Sep 11, 2018 8:06 am
GoldStar wrote:
Tue Sep 11, 2018 5:29 am
ftobin wrote:
Tue Sep 11, 2018 12:35 am
GoldStar wrote:
Mon Sep 10, 2018 7:02 pm
But you can do a sell/buy moving between funds without being out of the market for any days. That's what I did.
How are you going to pull this off if the Fidelity fund can only be held at Fidelity, and the Vanguard fund at Vanguard, as Admiral shares must be? You'll have to convert to an instrument that is transferable between brokerages (cash or Investor class shares), which will either leave you less exposed (cash) or cost you a selling fee at Fidelity (Investor class shares).
I was holding other Fidelity funds in a Fidelity account when making the transfer. Not everyone is in Vanguard which is what you seemed to assume when you said moving to ZERO funds in a taxable account would have you out of the market for a day or more.
Thanks, Goldstar, for pointing this out. My two biggest complaints about this forum are that people assume (a) that everyone is at Vanguard and (b) that everyone has access to tax-advantaged accounts.
Only a little over half of my invested assets are with Vanguard.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

User avatar
GoldStar
Posts: 601
Joined: Wed May 23, 2018 10:59 am

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

Post by GoldStar » Tue Sep 11, 2018 10:53 am

UpperNwGuy wrote:
Tue Sep 11, 2018 8:06 am
Thanks, Goldstar, for pointing this out. My two biggest complaints about this forum are that people assume (a) that everyone is at Vanguard and (b) that everyone has access to tax-advantaged accounts.
There is also the assumption that everyone has a "Costco" store within driving distance :)

User avatar
willthrill81
Posts: 6173
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

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

Post by willthrill81 » Tue Sep 11, 2018 10:56 am

GoldStar wrote:
Tue Sep 11, 2018 10:53 am
UpperNwGuy wrote:
Tue Sep 11, 2018 8:06 am
Thanks, Goldstar, for pointing this out. My two biggest complaints about this forum are that people assume (a) that everyone is at Vanguard and (b) that everyone has access to tax-advantaged accounts.
There is also the assumption that everyone has a "Costco" store within driving distance :)
When we compared prices there last year, Costco was actually higher than our local Fred Meyer grocery store on most items, especially considering that we buy most items when they're on sale at the latter. Justin at www.rootofgood.com did a comparison between Costco and many other retailers and found that Costco was neither the cheapest overall (that was Walmart) nor the cheapest on any of the items compared.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

User avatar
GoldStar
Posts: 601
Joined: Wed May 23, 2018 10:59 am

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

Post by GoldStar » Tue Sep 11, 2018 11:00 am

willthrill81 wrote:
Tue Sep 11, 2018 10:56 am
GoldStar wrote:
Tue Sep 11, 2018 10:53 am
UpperNwGuy wrote:
Tue Sep 11, 2018 8:06 am
Thanks, Goldstar, for pointing this out. My two biggest complaints about this forum are that people assume (a) that everyone is at Vanguard and (b) that everyone has access to tax-advantaged accounts.
There is also the assumption that everyone has a "Costco" store within driving distance :)
When we compared prices there last year, Costco was actually higher than our local Fred Meyer grocery store on most items, especially considering that we buy most items when they're on sale at the latter. Justin at www.rootofgood.com did a comparison between Costco and many other retailers and found that Costco was neither the cheapest overall (that was Walmart) nor the cheapest on any of the items compared.
Interesting. I don't have a Costco anywhere near me so have never been but in most threads on "where should I buy X"; Costco seems to be the #1 answer. Seems to be a boglehead favorite. Sorry to de-rail the thread - now let's get back to discussing these great new ZERO funds :)

tj
Posts: 2208
Joined: Thu Dec 24, 2009 12:10 am

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

Post by tj » Wed Sep 12, 2018 11:18 pm

Fidelity has two more ZERO funds coming next week:

Available on September 18, 2018
Fidelity® ZERO Extended Market Index Fund
Fidelity® ZERO Large Cap Index Fund

From
https://www.fidelity.com/why-fidelity/pricing-fees

https://www.bloomberg.com/news/articles ... tual-funds
https://www.wsj.com/articles/fidelity-d ... 1536787062
https://www.marketwatch.com/story/fidel ... 2018-09-12

gostars
Posts: 439
Joined: Mon Oct 09, 2017 7:53 pm

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

Post by gostars » Thu Sep 13, 2018 12:26 am

Additional useful information:
SEC filing: https://www.sec.gov/Archives/edgar/data ... ing788.htm
Large Cap Index ticker: FNILX
Extended Market Index ticker: FZIPX

The large-cap index conveniently picks the 500 largest companies, while the extended market index picks everything after that, making these funds comparable to existing S&P 500 and extended market index funds. Both funds employ statistical sampling to match index performance without including all securities. Both make use of security lending to cover fund expenses.

Note to self: update Fidelity wiki article next week

mervinj7
Posts: 696
Joined: Thu Mar 27, 2014 3:10 pm

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

Post by mervinj7 » Thu Sep 13, 2018 12:08 pm

I was sitting on the sidelines until the funds got more AUM but I finally pulled the trigger in our Roth IRAs. My wife's will use the ZERO funds (FXNAX, FZILX, FZROX) and mine will use the traditional index funds (FSKAX, FTIHX, FXNAX). That way, we can start comparing the performance moving forward.

Gleevec
Posts: 269
Joined: Sun Mar 03, 2013 11:25 am

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

Post by Gleevec » Thu Sep 13, 2018 12:30 pm

gostars wrote:
Thu Sep 13, 2018 12:26 am
Additional useful information:
SEC filing: https://www.sec.gov/Archives/edgar/data ... ing788.htm
Large Cap Index ticker: FNILX
Extended Market Index ticker: FZIPX

The large-cap index conveniently picks the 500 largest companies, while the extended market index picks everything after that, making these funds comparable to existing S&P 500 and extended market index funds. Both funds employ statistical sampling to match index performance without including all securities. Both make use of security lending to cover fund expenses.

Note to self: update Fidelity wiki article next week
Will be great for TLH for new money (transferring existing taxable less attractive due to cap gains)

Post Reply