The Bigger Story: Fidelity Expense Ratios

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House Blend
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Re: The Bigger Story: Fidelity Expense Ratios

Post by House Blend » Sat Aug 11, 2018 10:39 am

Nate79 wrote:
Fri Aug 10, 2018 1:05 pm
triceratop wrote:
Fri Aug 10, 2018 12:50 pm
Nate79 wrote:
Fri Aug 10, 2018 11:53 am
FIBoston wrote:
Fri Aug 10, 2018 11:28 am
Don't the relative tax inefficiencies of Fidelity's funds (at least FSTVX) when compared to their most comparable Vanguard funds end up cancelling out the lower fees? I don't have total understanding of this but I thought that was the information I had seen. I could be wrong.
I made a quick calculation for the tax drag in a taxable account for FSTVX using the recent last couple of years capital gains distributions as an example. Note that historically this fund hasn't distributed that much but last couple of years it distributed about 0.5%. Tax drag is only the drag on the loss in growth on the taxes paid assuming tax rate paid now is same as when sold because the basis is increasing (as capital gains are reinvested increasing cost basis). I calculate the tax drag to be in the range of 0.02-0.03% per year though historically it would be zero except in the last couple of years.
(emphasis mine)

Not if you plan to gift your shares to heirs or charity. It's also not how tax drag is generally understood.
Actual tax drag is an individual situation specific detail. I disagree that gifting shares to charity or to heirs is what is on people's mind the most when thinking about tax drag of a mutual fund in a taxable account vs a retirement account. People are welcome to calculate the actual tax drag for their specific circumstances. I made the calculation for the most common.

In the case where there are no capital gains tax rate when the security are sold (or just looking at final account value) the tax drag for this fund would be about 0.075% per year (though again this is based on the last couple of years of distributions, historically the numbers were less).
I think the most important point in this context is that the tax implications of a 0.5% long term cap gain distribution are subtle, and in any case, not as simple as a 0.5% qualified dividend distribution. Treating the two as if they were equivalent would be a weakness of any magic formula that attempts to reduce "tax drag" to a single number, especially if that magic formula is intended to be customized with inputs from an individual's tax situation.

I haven't paid capital gains tax since 2005 (before that I didn't have the good sense to avoid active funds in taxable that routinely distribute capital gains), and have since accumulated substantial carryover losses. As a result, even if I did start using index funds in taxable that occasionally spit out a 0.5% LTCG distribution, it would have zero tax implications until some point in the *distant* future, if and when I eventually run out of carryover losses.

(On the other hand, ST cap gain distributions are toxic. Not as bad as non-qualified dividends, but close.)

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cowdogman
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Re: The Bigger Story: Fidelity Expense Ratios

Post by cowdogman » Sat Aug 11, 2018 11:27 am

If it takes you hours to set up a new brokerage account, complete some transfers, and set up automated ACH - you must be slow with a computer :)
On the other hand it takes more than 2 minutes. Its about a 15 minute task.
I just set up a joint non-retirement joint account at Fidelity this morning, including linking it to my checking account and sending an initial amount to Fidelity.

Took more than two minutes, but less than 15.

All our new money is going to Fidelity, and I plan to move over an i401(k) from Vanguard. I'll revisit moving over our other Vanguard accounts after using Fidelity for a few months.

My view of Vanguard over the last several years: ranges from meh to poor.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by iceport » Sat Aug 11, 2018 1:45 pm

burnout454 wrote:
Fri Aug 10, 2018 8:53 am
Forgive me if this was highlighted in one of the longer threads, but this chart seems to me a bigger story than the introduction of the two ZERO expense funds. Other Fidelity index funds have expense ratios on average half of Vanguard's expense ratios.

If there is some debate about whether the two ZERO funds (and their .04% difference) are worth moving from Vanguard to Fidelity, is the fact that virtually ALL of their index funds are significantly cheaper than Vanguard worth the move?
Jonathan Clements covers a whole host of interesting points on the developments at Fidelity.

Low Fidelity
WE HAVE FINALLY hit rock-bottom. Last week, Fidelity Investments announced that it was introducing two index funds with zero annual expenses, while also slashing expenses on its other index funds and dropping the required minimum investment on all funds, both actively managed and indexed. All of this raises five key questions.
  1. Why is Fidelity doing this?
  2. Is this a bait-and-switch?
  3. Is Fidelity’s move significant?
  4. What does all this mean for Vanguard?
  5. Should you move your money to Fidelity?
GLState wrote:
Fri Aug 10, 2018 9:02 pm
Posters here often recommend Vanguard, Schwab, or Fidelity as being excellent choices to handle their accounts. We're all for low expenses, but chasing basis points from brokerage to brokerage hardly seems worth the effort. Invest with the provider that you like the best... a couple basis points wouldn't sway my decision.
I'm with you, GLState!

First off, almost 43% of my portfolio is in a taxable account at Vanguard, most of which is sitting on huge unrealized capital gains. So relocating is a non-starter for me.

Secondly, even absent a taxable account, it would take a mighty big incentive for me to want to rip up my roots and relocate. In my experience, moving IRAs always involves being out of the market for a week or two. That bugs me to no end. When I rolled over funds from work to a tIRA at Vanguard, even with a minimal 5 business days out of the market (which I thought was great) I lost $400 on a measly $12k REIT holding alone. With my luck, it would take decades of fee savings to overcome the losses I'd incur with my lousy timing.

Maybe I'm the only one who likes to see if there was any market-timing cost involved, but that's what I do, and I hate to find losses. When I moved taxable and IRA accounts from Fidelity to Vanguard a decade ago, I broke it up into three separate, smaller moves over many weeks so that only fixed income ever had to be out of the market.

So thank but no thanks with changing horses in mid-stream.

I'm amazed at how casually other folks can approach moving their funds around. Do you ever check to see if there was an unintended market-timing cost?
"Discipline matters more than allocation.” ─William Bernstein

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Re: The Bigger Story: Fidelity Expense Ratios

Post by WanderingDoc » Sat Aug 11, 2018 1:50 pm

pokebowl wrote:
Fri Aug 10, 2018 11:49 am
I am unsure why one must choose only one brokerage. I myself use both. The recent Fidelity moves while welcome, are not enough for my to move my taxable brokerage holdings back to Fidelity. Vanguard still has the advantage there.

Now if after a year, Fidelity shows they are keeping these price points for all their index funds, I may be tempted to roll my IRAs back over, as its a painless process between Fidelity and Vanguard. Others have brought up the lower ER not being worth it, however it only takes 2 minutes of mouse clicking to achieve it. Worth it in my opinion.
Same. I am giving Fidelity (and Vanguard) 1 year. I hold my modest Roth IRA in Vanguard International. If the zero fee Fidelity fund tracks the international index well, its a no-brainer to move a tax-sheltered account to Fidelity, whether to the zero-fee or their regular international MF.
Don't wait to buy real estate. Buy real estate, and wait. | Rent where you live, buy where others pay your mortgage for you.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by WanderingDoc » Sat Aug 11, 2018 1:53 pm

greg24 wrote:
Fri Aug 10, 2018 12:27 pm
pokebowl wrote:
Fri Aug 10, 2018 11:49 am
Others have brought up the lower ER not being worth it, however it only takes 2 minutes of mouse clicking to achieve it. Worth it in my opinion.
It would take much much longer than 2 minutes to move several accounts from Vanguard to Fidelity, change automated ACH, etc. At a minimum, hours.
Exactly. I would imagine for me to move my Roth IRA from Vanguard to Fidelity, it would take paperwork, notary (possibly), mailing, waiting 2-3 weeks, etc.
Don't wait to buy real estate. Buy real estate, and wait. | Rent where you live, buy where others pay your mortgage for you.

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Earl Lemongrab
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Re: The Bigger Story: Fidelity Expense Ratios

Post by Earl Lemongrab » Sat Aug 11, 2018 3:28 pm

Jeff Albertson wrote:
Fri Aug 10, 2018 6:41 pm
Any guarantees that Fidelity will continue these low fees in the future? I
Any guarantee Vanguard will continue their low fees?
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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Earl Lemongrab
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Re: The Bigger Story: Fidelity Expense Ratios

Post by Earl Lemongrab » Sat Aug 11, 2018 3:29 pm

iceport wrote:
Sat Aug 11, 2018 1:45 pm
I'm amazed at how casually other folks can approach moving their funds around. Do you ever check to see if there was an unintended market-timing cost?
I use ETFs. I always move my assets in-kind. There is no market-timing.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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Phineas J. Whoopee
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Re: The Bigger Story: Fidelity Expense Ratios

Post by Phineas J. Whoopee » Sat Aug 11, 2018 4:18 pm

scdevon wrote:
Fri Aug 10, 2018 9:57 am
I think you'll see Vanguard follow Fidelity's fees lower, so i don't know if I would change fund families just yet if you're happy with Vanguard.
...
Vanguard reports expense ratios after the fact. They try not to spend too much, then at the end of the fund's fiscal year they say how the proportions worked out. I would not expect Vanguard to follow anybody's fees. I would expect them, over time, to achieve more efficiencies of scale.

PJW

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Re: The Bigger Story: Fidelity Expense Ratios

Post by jeffyscott » Sat Aug 11, 2018 4:39 pm

Earl Lemongrab wrote:
Sat Aug 11, 2018 3:29 pm
iceport wrote:
Sat Aug 11, 2018 1:45 pm
I'm amazed at how casually other folks can approach moving their funds around. Do you ever check to see if there was an unintended market-timing cost?
I use ETFs. I always move my assets in-kind. There is no market-timing.
Mutual funds can be moved in kind also.
press on, regardless - John C. Bogle

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jeffyscott
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Re: The Bigger Story: Fidelity Expense Ratios

Post by jeffyscott » Sat Aug 11, 2018 5:03 pm

iceport wrote:
Sat Aug 11, 2018 1:45 pm
In my experience, moving IRAs always involves being out of the market for a week or two. That bugs me to no end. When I rolled over funds from work to a tIRA at Vanguard, even with a minimal 5 business days out of the market (which I thought was great) I lost $400 on a measly $12k REIT holding alone. With my luck, it would take decades of fee savings to overcome the losses I'd incur with my lousy timing.

Maybe I'm the only one who likes to see if there was any market-timing cost involved, but that's what I do, and I hate to find losses. When I moved taxable and IRA accounts from Fidelity to Vanguard a decade ago, I broke it up into three separate, smaller moves over many weeks so that only fixed income ever had to be out of the market.
I did a rollover from my employer plan in about 7 steps, same idea as you of having only fixed income out of the market...and actually I did it so that it was mostly only assets that were in stable value that were out of the market as even bond funds had moved about 1% in a week at that time. In these situations, one thing in favor of Fidelity (along with Schwab and TDA) is they may have a nearby physical location, which shortens the process, particularly compared to Vanguard where it can take 3 weeks to process a rollover check.

But this was not an issue when I transferred an IRA between brokerages, in that case it was done in-kind and all electronically online. No paper, no checks, no mailing of anything.
press on, regardless - John C. Bogle

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iceport
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Re: The Bigger Story: Fidelity Expense Ratios

Post by iceport » Sat Aug 11, 2018 5:14 pm

jeffyscott wrote:
Sat Aug 11, 2018 4:39 pm
Earl Lemongrab wrote:
Sat Aug 11, 2018 3:29 pm
iceport wrote:
Sat Aug 11, 2018 1:45 pm
I'm amazed at how casually other folks can approach moving their funds around. Do you ever check to see if there was an unintended market-timing cost?
I use ETFs. I always move my assets in-kind. There is no market-timing.
Mutual funds can be moved in kind also.
jeffyscott wrote:
Sat Aug 11, 2018 5:03 pm
iceport wrote:
Sat Aug 11, 2018 1:45 pm
In my experience, moving IRAs always involves being out of the market for a week or two. That bugs me to no end. When I rolled over funds from work to a tIRA at Vanguard, even with a minimal 5 business days out of the market (which I thought was great) I lost $400 on a measly $12k REIT holding alone. With my luck, it would take decades of fee savings to overcome the losses I'd incur with my lousy timing.

Maybe I'm the only one who likes to see if there was any market-timing cost involved, but that's what I do, and I hate to find losses. When I moved taxable and IRA accounts from Fidelity to Vanguard a decade ago, I broke it up into three separate, smaller moves over many weeks so that only fixed income ever had to be out of the market.
I did a rollover from my employer plan in about 7 steps, same idea as you of having only fixed income out of the market...and actually I did it so that it was mostly only assets that were in stable value that were out of the market as even bond funds had moved about 1% in a week at that time. In these situations, one thing in favor of Fidelity (along with Schwab and TDA) is they may have a nearby physical location, which shortens the process, particularly compared to Vanguard where it can take 3 weeks to process a rollover check.

But this was not an issue when I transferred an IRA between brokerages, in that case it was done in-kind and all electronically online. No paper, no checks, no mailing of anything.
Wow, really? I've never been able to do it. (Glad to see I'm not the only one thinking this way, though!)

IDS (or equivalent) taxable > Vanguard in 2005 required a check from IDS.
Fidelity taxable + Roth IRA > Vanguard in 2008 required checks from Fidelity.
Prudential 457 rollover > Vanguard in 2018 required a check from Prudential.

I now hold 3 accounts at Vanguard: taxable, Roth IRA and tIRA.
All holdings are Vanguard mutual funds except for 2 Vanguard ETFs.

Are you telling me I could move everything to Fidelity with in-kind transfers? And thus I could completely eliminate any time out of the market?

(I have absolutely no interest in doing this, but your comments intrigued me.)
"Discipline matters more than allocation.” ─William Bernstein

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Re: The Bigger Story: Fidelity Expense Ratios

Post by cowdogman » Sat Aug 11, 2018 6:57 pm

Are you telling me I could move everything to Fidelity with in-kind transfers? And thus I could completely eliminate any time out of the market?
I've been looking at this issue (for after-tax investments) over the last couple days ICW moving from Vanguard to Fidelity.

ETFs can be moved from Vanguard with no time out of the market or tax consequence (and Vanguard funds with equivalent ETFs (e.g., Total Stock Market) can be converted to ETFs with no tax consequence--and then transferred to Fidelity). "Tax consequence" means triggering cap gains. Note buying/selling ETFs at Fidelity costs $4.50 per trade.

Some Vanguard funds can be moved directly to Fidelity, but none of the Admiral funds can. Note the fees for holding Vanguard funds at Fidelity are high--at least for the funds I looked at.

If you're worried about time out of the market more than cap gains, I suppose you could transfer the (transferable) Vanguard funds to Fidelity and then exchange for Fidelity funds--but check the Fidelity fees for trading in Vanguard funds--I think they are pretty high.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by Nate79 » Sat Aug 11, 2018 7:16 pm

cowdogman wrote:
Sat Aug 11, 2018 6:57 pm
Are you telling me I could move everything to Fidelity with in-kind transfers? And thus I could completely eliminate any time out of the market?
I've been looking at this issue (for after-tax investments) over the last couple days ICW moving from Vanguard to Fidelity.

ETFs can be moved from Vanguard with no time out of the market or tax consequence (and Vanguard funds with equivalent ETFs (e.g., Total Stock Market) can be converted to ETFs with no tax consequence--and then transferred to Fidelity). "Tax consequence" means triggering cap gains. Note buying/selling ETFs at Fidelity costs $4.50 per trade.

Some Vanguard funds can be moved directly to Fidelity, but none of the Admiral funds can. Note the fees for holding Vanguard funds at Fidelity are high--at least for the funds I looked at.

If you're worried about time out of the market more than cap gains, I suppose you could transfer the (transferable) Vanguard funds to Fidelity and then exchange for Fidelity funds--but check the Fidelity fees for trading in Vanguard funds--I think they are pretty high.
I'm surprised Fidelity doesn't allow incoming Admiral funds. Schwab does as I have an Admiral fund (small cap value) held at Schwab.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by Beehave » Sat Aug 11, 2018 7:22 pm

iceport wrote:
Fri Aug 10, 2018 11:57 am
burnout454 wrote:
Fri Aug 10, 2018 8:53 am
Other Fidelity index funds have expense ratios on average half of Vanguard's expense ratios.
...

If there is some debate about whether the two ZERO funds (and their .04% difference) are worth moving from Vanguard to Fidelity, is the fact that virtually ALL of their index funds are significantly cheaper than Vanguard worth the move?
Folks should evaluate the funds carefully on a case-by-case basis.

I just spot-checked the emerging markets funds, for example.

The two funds are not the same. The Vanguard fund (VEMAX, ER=0.14%) is an all-cap index fund with over 4000 holdings and around 82% emerging markets exposure by Morningstar's classification. The Fidelity fund (FPMAX, ER=0.08%) is a large-cap fund with 1107 holdings (just over a quarter the holdings of VEMAX) and about 71% emerging markets exposure by Morningstar's classification.

An investor could reasonably conclude these differences are negligible, or that the difference of 6 basis points is negligible. But it would be tough to argue that the Vanguard fund costs more than it should, with nearly 4 times the holdings to transact as the Fidelity fund.
Thanks for pointing this out. It does not surprise me. Vanguard is not-for-profit. If Fidelity, which is for-profit undercuts, there's likely something going on somewhere in terms of quality, security, or service that may not obvious on the surface.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by Cop51 » Sat Aug 11, 2018 7:24 pm

HEDGEFUNDIE wrote:
Fri Aug 10, 2018 11:51 am
What is most striking about that table is that the Vanguard fees are for Admiral class funds w/ $10k minimums, while the Fidelity funds and fees are for the very first dollar of investment.

For new investors, I don't see how you wouldn't recommend Fidelity now.
I agree with this specifically. Right now my ROTH IRA isn’t even over 100k so for me the switch right now isn’t worth the headache. I’ll sit back and see what happens over the next year. I did just help a friend set up his ROTH with Fidelity because he’s starting at $0.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by jeffyscott » Sat Aug 11, 2018 7:51 pm

iceport wrote:
Sat Aug 11, 2018 5:14 pm
Are you telling me I could move everything to Fidelity with in-kind transfers? And thus I could completely eliminate any time out of the market?
As others have noted it may depend on what you own. My move was one (non-admiral) Vanguard mutual fund. The fund was also available at the new brokerage but with transaction fee. Since I already owned it, there was no fee for just moving and that brokerage does not charge a transaction fee for selling, so that was not an issue. After it was there, I sold and redeployed the money.

But yes, in this case the money was never out of the market unlike my rollover.
press on, regardless - John C. Bogle

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iceport
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Re: The Bigger Story: Fidelity Expense Ratios

Post by iceport » Sat Aug 11, 2018 8:52 pm

jeffyscott wrote:
Sat Aug 11, 2018 7:51 pm
iceport wrote:
Sat Aug 11, 2018 5:14 pm
Are you telling me I could move everything to Fidelity with in-kind transfers? And thus I could completely eliminate any time out of the market?
As others have noted it may depend on what you own. My move was one (non-admiral) Vanguard mutual fund. The fund was also available at the new brokerage but with transaction fee. Since I already owned it, there was no fee for just moving and that brokerage does not charge a transaction fee for selling, so that was not an issue. After it was there, I sold and redeployed the money.

But yes, in this case the money was never out of the market unlike my rollover.
That's interesting, thanks jeffyscott!

I've got the following 10 funds at Vanguard, besides MM/settlement funds. All mutual funds are admiral. Not sure I'd ever want to risk it, and I can't imagine what kind of incentive would tempt me. I've been happy as a clam for the last 13 years at Vanguard. Plus, we're on the same page: I don't want to trade, and Vanguard doesn't want me to trade; our goals are perfectly aligned. (Can I get a $25,000 transfer bonus out of Fidelity? To be honest, that's about what it would take.)

Vanguard Total Stock Market Index
Vanguard Small-Cap Index
Vanguard Real Estate Index
Vanguard Global ex-U.S. Real Estate (ETF)
Vanguard Developed Markets Index Fund
Vanguard Emerging Markets Stock Index
Vanguard FTSE All-Wrld ex-US Sm Cap (ETF)
Vanguard Total Bond Market Index
Vanguard Inflation-Protected Securities
Vanguard Short-Term Corporate Bond Index Fund
"Discipline matters more than allocation.” ─William Bernstein

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cowdogman
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Re: The Bigger Story: Fidelity Expense Ratios

Post by cowdogman » Sat Aug 11, 2018 9:45 pm

An interesting question for a Vanguard rep would be "can I change my Admiral shares to Investor shares before I transfer them to Fidelity?" Curious whether Vanguard would allow that.

I saw one article (which I can't find now) that said the restriction on non-Vanguard firms holding Admiral shares is a relatively recent change (a couple years ago) and that it was being driven by Vanguard, not the other firms. Makes sense. Holders of Admiral shares are probably the customers Vanguard most wants to keep.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by carguyny » Sat Aug 11, 2018 10:31 pm

cowdogman wrote:
Sat Aug 11, 2018 9:45 pm
An interesting question for a Vanguard rep would be "can I change my Admiral shares to Investor shares before I transfer them to Fidelity?" Curious whether Vanguard would allow that.

I saw one article (which I can't find now) that said the restriction on non-Vanguard firms holding Admiral shares is a relatively recent change (a couple years ago) and that it was being driven by Vanguard, not the other firms. Makes sense. Holders of Admiral shares are probably the customers Vanguard most wants to keep.
I don't think there would be an issue of transfer in kind of Vanguard Admiral shares at fidelity. In fact, we recently added a Vanguard Admiral fund to my work 401k that is at Fidelity.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by Earl Lemongrab » Sat Aug 11, 2018 11:48 pm

Beehave wrote:
Sat Aug 11, 2018 7:22 pm
Vanguard is not-for-profit. If Fidelity, which is for-profit undercuts, there's likely something going on somewhere in terms of quality, security, or service that may not obvious on the surface.
Just because a company is not trying to make a profit doesn't mean that they are guaranteed to have the lowest prices. They also don't have a profit incentive to cut costs.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by jalbert » Sat Aug 11, 2018 11:55 pm

burnout454 wrote:
Fri Aug 10, 2018 8:53 am
Forgive me if this was highlighted in one of the longer threads, but this chart seems to me a bigger story than the introduction of the two ZERO expense funds. Other Fidelity index funds have expense ratios on average half of Vanguard's expense ratios.

Image

If there is some debate about whether the two ZERO funds (and their .04% difference) are worth moving from Vanguard to Fidelity, is the fact that virtually ALL of their index funds are significantly cheaper than Vanguard worth the move?
Mutual fund companies use soft-dollar arrangements with brokers to realize expenses without accounting for them in the fund’s expense ratio. Vanguard does this as well. The question is how much of the fund’s expenses are realized in this manner, unaccounted for in ER, for both fund families? This is not an easy question to answer.

Fidelity also takes greater securities lending risk as discussed in another thread.
Risk is not a guarantor of return.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by Beehave » Sun Aug 12, 2018 12:13 am

Earl Lemongrab wrote:
Sat Aug 11, 2018 11:48 pm
Beehave wrote:
Sat Aug 11, 2018 7:22 pm
Vanguard is not-for-profit. If Fidelity, which is for-profit undercuts, there's likely something going on somewhere in terms of quality, security, or service that may not obvious on the surface.
Just because a company is not trying to make a profit doesn't mean that they are guaranteed to have the lowest prices. They also don't have a profit incentive to cut costs.
You are right, the sword can cut both ways. It is possible that there are inefficiencies at Vanguard that could force higher costs until and unless fixed, and that Fidelity's lower prices may be the needed incentive. It is also possible that Fidelity must cut some corners somewhere to underprice Vanguard. So, as always, buyer beware, and as always, these discussions will help bring to light the tradeoffs. Thanks for providing a different perspective!
:sharebeer

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Re: The Bigger Story: Fidelity Expense Ratios

Post by stlutz » Sun Aug 12, 2018 12:25 am

Doesn't it really come to down Vanguard using the funds to subsidize the brokerage and Fidelity using the brokerage to subsidize the funds? Just to compare a bit:

--The ER on Fidelity's sweep money market fund is .42%. For Vanguard it's .11%
--Fidelity gives free trades on iShares ETFs but gets compensation from Blackrock. Vanguard is going to give free ETF trades for everyone and get compensation from nobody.
--Fidelity has lower ERs on core index fund holdings than Vanguard.

With free trades, $2 trades, a high yielding sweep fund--Vanguard has to be running it's brokerage operation at a loss. If they just sold it to somebody else, costs would go up. It costs money to execute trades, issue statements etc. Vanguard is not charging people what is actually costs to perform these functions. Those costs are passed onto their funds.

Fidelity is running some funds at a loss but is apparently making money on brokerage.

At the end of the day, Vanguard runs its overall operation at cost and Fidelity runs theirs at a profit. But in neither case is it true that all pieces of the operation are breaking even or running a profit.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by iceport » Sun Aug 12, 2018 1:08 am

Gleevec wrote: It’s funny that this forum is now supporting factor weighted investing, after lampooning Merriman on small cap value for years, now that it is the only fund that Fidelity doesn’t beat Vanguard on, after years of saying simplicity with a 3 fund portfolio (which Fidelity has better ER on now) is best
This seems way off-base. There have always been proponents of both simple total-market investing and factor investing here. Some of the former may have been critical of Merriman, but I am reasonably certain somewhere in another thread some factor investor was hammering a "lumper," as total-market investors were/are disparagingly called. The forum is not monolithic, by any stretch of the imagination.
Gleevec wrote:The mental gymnastics being played here are illustrative to me, and I want to thank this forum for showing me how cognitive biases can make sure we keep rooting for the home team, even if it’s against our best interests factually. I’ve always respected the high level of discussions here, which come from what is a highly intelligence crowd, and to see the same behaviors here that we are seeing more broadly in our politics and society has really opened my eyes to things far beyond a couple basis point decrease in expense ratios
I'm not saying that's not going on too, but given your ability to misplace somewhere between a quarter and a half of the forum regulars, I'd say there might be a little cognitive bias in your thinking as well.
Gleevec wrote:(BTW the most impressive thing Fidelity did, to me at least, is lower investment minimums for their now lowest ER indexes- if you want to talk about democratizing good investment decisions to lower/middle income people and young people just getting started in investing, Fidelity and Schwab are far ahead of the home team here)
Good point!
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Re: The Bigger Story: Fidelity Expense Ratios

Post by jeffyscott » Sun Aug 12, 2018 6:48 am

stlutz wrote:
Sun Aug 12, 2018 12:25 am
Doesn't it really come to down Vanguard using the funds to subsidize the brokerage and Fidelity using the brokerage to subsidize the funds? Just to compare a bit:

--The ER on Fidelity's sweep money market fund is .42%. For Vanguard it's .11%
--Fidelity gives free trades on iShares ETFs but gets compensation from Blackrock. Vanguard is going to give free ETF trades for everyone and get compensation from nobody.
--Fidelity has lower ERs on core index fund holdings than Vanguard.

With free trades, $2 trades, a high yielding sweep fund--Vanguard has to be running it's brokerage operation at a loss. If they just sold it to somebody else, costs would go up. It costs money to execute trades, issue statements etc. Vanguard is not charging people what is actually costs to perform these functions. Those costs are passed onto their funds.

Fidelity is running some funds at a loss but is apparently making money on brokerage.

At the end of the day, Vanguard runs its overall operation at cost and Fidelity runs theirs at a profit. But in neither case is it true that all pieces of the operation are breaking even or running a profit.
If true then Vanguard will be subsidizing frequent traders of ETFs, who's money are they using to do that?

Since I would be careful to keep $0 in sweep account and don't use ETFs, that would seem to mean that I would be providing subsidies to other investors at Vanguard while at Fidelity I might be the beneficiary of subsidies.
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Re: The Bigger Story: Fidelity Expense Ratios

Post by cowdogman » Sun Aug 12, 2018 10:02 am

I don't think there would be an issue of transfer in kind of Vanguard Admiral shares at fidelity. In fact, we recently added a Vanguard Admiral fund to my work 401k that is at Fidelity.
I'm going by what a Fidelity rep told me on Friday and also from various other threads on this site and other sites (e.g., https://discuss.morningstar.com/NewSoci ... 61049.aspx).

Maybe corporate 401(k)s are an exception for selling new shares--vs. in kind transfers into the account.

I was asking Fidelity about non-retirement and IRA accounts.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by steadyeddy » Sun Aug 12, 2018 10:21 am

Taylor has a great quote which I wasn’t able to dig up, so I’ll paraphrase: If you can decide between two good options, the differences between them are probably immaterial.

I have money at both Vanguard and Fidelity and like them both. I would use either one interchanibly and trust my investment outcomes would be very similar with either custodian.

I just hope Bogleheads doesn’t devolve into constant vanguard vs fidelity discussions a la the Apple/Android devotees.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by tuningfork » Sun Aug 12, 2018 10:31 am

iceport wrote:
Sat Aug 11, 2018 5:14 pm
Are you telling me I could move everything to Fidelity with in-kind transfers? And thus I could completely eliminate any time out of the market?
Confirming others' experiences with moving IRAs. I have a couple of IRAs that started out at TD Ameritrade, moved them to T Rowe Price, and later moved them to Fidelity. All in-kind, never out of the market, never any tax implications.

Likewise, I moved a taxable mutual fund account from T Rowe Price to Fidelity, in kind, no tax impact. I'm still holding TRP mutual funds but the account is now at Fidelity. I did this simply to reduce the number of financial institutions I have to deal with.

However, 401(k)'s are a different beast. I had a 401(k) at Fidelity that I rolled over to an IRA at Fidelity. Just a rollover, no transfer. I was required to liquidate all the holdings. The rollover happened overnight on the day I requested it, so next morning the funds were in the IRA. I was out of the market for about an hour until I had them reinvested in my new holdings (I put the new IRA into ETFs). Had I not been ready to login and act first thing in the morning I would have been out of the market longer.

Today my holdings are split between Fidelity and Vanguard. Much of my Vanguard holdings are in Admiral shares in a taxable account with enough capital gains it makes little sense to try to move them out of Vanguard. Apparently I could convert the Admiral shares to ETFs at Vanguard, then transfer in-kind to Fidelity if I wanted to sever my relationship with Vanguard without incurring taxes. Not planning to do that at the moment.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by cowdogman » Sun Aug 12, 2018 12:32 pm

Today my holdings are split between Fidelity and Vanguard. Much of my Vanguard holdings are in Admiral shares in a taxable account with enough capital gains it makes little sense to try to move them out of Vanguard. Apparently I could convert the Admiral shares to ETFs at Vanguard, then transfer in-kind to Fidelity if I wanted to sever my relationship with Vanguard without incurring taxes. Not planning to do that at the moment.
One of the questions I'm pondering now is whether there is any downside to converting my Vanguard Total Stock (US) and Total Stock (International) Admiral shares to ETFs now on the chance that I might move them later. If there were a risk that Vanguard would, in the future, not allow such conversions or charge for the conversions, then it would make sense to do the conversions now.

The only possible downside I can see is Vanguard screwing up the conversion and triggering cap gains, but I don't see that as a material risk.

Thoughts?

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Re: The Bigger Story: Fidelity Expense Ratios

Post by iceport » Sun Aug 12, 2018 2:00 pm

cowdogman wrote:
Sun Aug 12, 2018 12:32 pm
One of the questions I'm pondering now is whether there is any downside to converting my Vanguard Total Stock (US) and Total Stock (International) Admiral shares to ETFs now on the chance that I might move them later. If there were a risk that Vanguard would, in the future, not allow such conversions or charge for the conversions, then it would make sense to do the conversions now.

The only possible downside I can see is Vanguard screwing up the conversion and triggering cap gains, but I don't see that as a material risk.

Thoughts?
Do you already have a consolidated brokerage account for taxable holdings, or is it the legacy mutual fund type of account that would require "upgrading?" I've successfully converted my Roth accounts to a consolidated brokerage type, but I am resisting the "upgrade" for my taxable account for as long as they'll let me, due to the cost basis issues reported by others.
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Re: The Bigger Story: Fidelity Expense Ratios

Post by cowdogman » Sun Aug 12, 2018 2:53 pm

Do you already have a consolidated brokerage account for taxable holdings, or is it the legacy mutual fund type of account that would require "upgrading?" I've successfully converted my Roth accounts to a consolidated brokerage type, but I am resisting the "upgrade" for my taxable account for as long as they'll let me, due to the cost basis issues reported by others.
Funny you should ask, because what has prompted me to start looking at Fidelity is that I am so irritated with Vanguard over the "upgrade" of our joint non-retirement account to a brokerage account. See my complaints here: viewtopic.php?f=10&t=256125&p=4061681#p4061681.

To what cost basis issues are you referring?

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Re: The Bigger Story: Fidelity Expense Ratios

Post by iceport » Sun Aug 12, 2018 3:17 pm

cowdogman wrote:
Sun Aug 12, 2018 2:53 pm
To what cost basis issues are you referring?
I think my cost basis concern might be misplaced. I just did a quick search of some of the marathon threads on the topic of the upgrade, and it seems that if there were any cost basis accounting issues they were isolated events, which probably means they were not related to the upgrade. Other than that, it seems the loss of cost basis elections and elections of dividend reinvestments were minor annoyances. I don't know why I had it in my head that the cost bases didn't transfer over for some folks...
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Re: The Bigger Story: Fidelity Expense Ratios

Post by cowdogman » Sun Aug 12, 2018 3:22 pm

I think my cost basis concern might be misplaced.
Whew!

I just looked at the same threads, and plan to do an audit of my basis before any transfer.

Thanks.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by BoglePaul » Tue Aug 14, 2018 7:20 pm

DartThrower wrote:
Fri Aug 10, 2018 9:52 am
Based on my portfolio and your table I would save about $250 on expenses alone by switching from VG to Fido. However there would be capital gains on the after tax piece that would swamp the savings. In addition I would have to get to know the Fidelity culture, which by the posts I see on this site is pretty good. There would be a new website to learn as well.
Finally, by virtue of their organizational structure, Vanguard's commitment to low costs and other considerations relating to the best interests of the investors is part of their DNA in a way that is really unique. I get the sense that Vanguard's commitment to this approach is for the long haul. Fidelity's may or may not be.

For me at this point in my life the switching costs are way higher than $250/year. Moving to Fidelity wouldn't be justified.
However, not the difference in return on the Vanguard Cash Management account. Any significant holdings in cash will yield more than $250/year quickly.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by BoglePaul » Tue Aug 14, 2018 7:38 pm

cowdogman wrote:
Fri Aug 10, 2018 7:43 pm
Based on my portfolio and your table I would save about $250 on expenses alone by switching from VG to Fido. However there would be capital gains on the after tax piece that would swamp the savings. In addition I would have to get to know the Fidelity culture, which by the posts I see on this site is pretty good. There would be a new website to learn as well.
Finally, by virtue of their organizational structure, Vanguard's commitment to low costs and other considerations relating to the best interests of the investors is part of their DNA in a way that is really unique. I get the sense that Vanguard's commitment to this approach is for the long haul. Fidelity's may or may not be.
The quoted post and a lot of the above posts talk about the Vanguard culture.

My wife and I have been with Vanguard for a long time--as our sole investment vehicle. I'd have to dig thru my files, but maybe as long as 30 years. And my experience is that over the last several years Vanguard has declined substantially, both in terms of customer service and the general feeling that Vanguard was different from the for-profit companies. The quality of the Flagship reps that we have had has declined sequentially, and our current rep is worse than worthless (I pray he won't answer the phone when I call the Flagship number). We also have a couple individual 401(k)s at Vanguard and the Vanguard Small Business website that we have to use to administer the 401(k)s is a disaster--it looks like it hasn't been updated since the 90s and is very buggy.

My wife and I don't trade--funds or stocks. We contact Flagship maybe 3-4 times a year with minor issues/questions. But even with that little contact, Vanguard has found ways to disappoint. As a very current example, I sent in a strong complaint to our Flagship rep yesterday with a request for his supervisor to contact me--other than an auto reply saying that my message has been received, I've had no response.

I was a true Vanguard believer, but I'm not anymore.

I spent most of today looking at the pros and cons of switching to Fidelity, and I have to say that the pros are seriously outweighing the cons. Yes, I'm nervous that Fidelity will reverse course, but we can always switch back or go elsewhere. I was worried about triggering cap gains in the move, but based on the fact that all the funds where we have cap gains have ETF equivalents, we can avoid the cap gains by converting to ETFs and then transferring the ETFs to Fidelity. I'm not worried about Fidelity fees because we don't trade and I would stick with the Fidelity index funds. I am also seriously looking at the Fidelity cash management account/credit card/etc. Most of all I'm hoping the people at Fidelity to will be pros. And I like the Fidelity website.

I am curious about the "tax drag" issues discussed above. I'm not following the concerns or arguments.

Maybe my perceptions are wrong, but I think reliance on the "Vanguard culture" as a reason to stick around is out of date.
If Fidelity offered Primecap funds without a trading fee I would consider switching back (the cash management account was great). The recent dissapointment of the Vanguard website redesign is another push in that direction. At the end of the day, I just can not take Fidelity's $75.00 transaction fee to trade Vanguard Primecap Core (VPCCX).

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Re: The Bigger Story: Fidelity Expense Ratios

Post by nisiprius » Tue Aug 14, 2018 8:11 pm

I saw a TV ad for Fidelity's ZERO® funds, I believe it was while my wife was watching the evening news. So Fidelity is not only doing this, they are actively promoting and marketing it.
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Re: The Bigger Story: Fidelity Expense Ratios

Post by Theoretical » Tue Aug 14, 2018 8:20 pm

BoglePaul wrote:
Tue Aug 14, 2018 7:38 pm
cowdogman wrote:
Fri Aug 10, 2018 7:43 pm
Based on my portfolio and your table I would save about $250 on expenses alone by switching from VG to Fido. However there would be capital gains on the after tax piece that would swamp the savings. In addition I would have to get to know the Fidelity culture, which by the posts I see on this site is pretty good. There would be a new website to learn as well.
Finally, by virtue of their organizational structure, Vanguard's commitment to low costs and other considerations relating to the best interests of the investors is part of their DNA in a way that is really unique. I get the sense that Vanguard's commitment to this approach is for the long haul. Fidelity's may or may not be.
The quoted post and a lot of the above posts talk about the Vanguard culture.

My wife and I have been with Vanguard for a long time--as our sole investment vehicle. I'd have to dig thru my files, but maybe as long as 30 years. And my experience is that over the last several years Vanguard has declined substantially, both in terms of customer service and the general feeling that Vanguard was different from the for-profit companies. The quality of the Flagship reps that we have had has declined sequentially, and our current rep is worse than worthless (I pray he won't answer the phone when I call the Flagship number). We also have a couple individual 401(k)s at Vanguard and the Vanguard Small Business website that we have to use to administer the 401(k)s is a disaster--it looks like it hasn't been updated since the 90s and is very buggy.

My wife and I don't trade--funds or stocks. We contact Flagship maybe 3-4 times a year with minor issues/questions. But even with that little contact, Vanguard has found ways to disappoint. As a very current example, I sent in a strong complaint to our Flagship rep yesterday with a request for his supervisor to contact me--other than an auto reply saying that my message has been received, I've had no response.

I was a true Vanguard believer, but I'm not anymore.

I spent most of today looking at the pros and cons of switching to Fidelity, and I have to say that the pros are seriously outweighing the cons. Yes, I'm nervous that Fidelity will reverse course, but we can always switch back or go elsewhere. I was worried about triggering cap gains in the move, but based on the fact that all the funds where we have cap gains have ETF equivalents, we can avoid the cap gains by converting to ETFs and then transferring the ETFs to Fidelity. I'm not worried about Fidelity fees because we don't trade and I would stick with the Fidelity index funds. I am also seriously looking at the Fidelity cash management account/credit card/etc. Most of all I'm hoping the people at Fidelity to will be pros. And I like the Fidelity website.

I am curious about the "tax drag" issues discussed above. I'm not following the concerns or arguments.

Maybe my perceptions are wrong, but I think reliance on the "Vanguard culture" as a reason to stick around is out of date.
If Fidelity offered Primecap funds without a trading fee I would consider switching back (the cash management account was great). The recent dissapointment of the Vanguard website redesign is another push in that direction. At the end of the day, I just can not take Fidelity's $75.00 transaction fee to trade Vanguard Primecap Core (VPCCX).
If you invest automatically, it’s $5/trade instead. You only have to pay the $75 once.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by Hug401k » Tue Aug 14, 2018 8:41 pm

sport wrote:
Fri Aug 10, 2018 1:43 pm
When that time arrives, someone else will be making the investment decisions. Will they also be sharp Bogleheads who are aware of the pitfalls of expensive investment products? Or, will they be gullible novices who will believe the friendly "advisor who only wants to help them". When this happens, and it will happen someday, Fidelity representatives will be only too happy to convince your successor to move to some very expensive products, thus providing profits for Fidelity. Vanguard, OTOH, does not have such expensive products to sell. They are also not out to make a profit from your investments, and their employees do not work on commission.
Wow. I've been investing at Fidelity for 25 years and I don't remember them ever trying to sell anything except retirement account investment management. Not something I need but many people do. You make it sound like they are sharks circling... they must be very very patient sharks.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by pjshen » Tue Aug 14, 2018 8:45 pm

patrick wrote:
Fri Aug 10, 2018 7:14 pm
HEDGEFUNDIE wrote:
Fri Aug 10, 2018 1:56 pm
sport wrote:
Fri Aug 10, 2018 1:43 pm
When that time arrives, someone else will be making the investment decisions. Will they also be sharp Bogleheads who are aware of the pitfalls of expensive investment products? Or, will they be gullible novices who will believe the friendly "advisor who only wants to help them". When this happens, and it will happen someday, Fidelity representatives will be only too happy to convince your successor to move to some very expensive products, thus providing profits for Fidelity.
I have had a Fidelity account for years and I have never had an advisor contact me for anything. Many accounts moved back and forth, plenty of opportunities for them to upsell, hasn't happened once.
They have tried to upsell me, however.
FWIW, me too. I have more $$$ in Vanguard than Fidelity but plan to consolidate into a single investment company in effort to simplify finances after retirement -- probably will choose Vanguard when the time comes. I, too, believe in rewarding Vanguard's business model and feel more comfortable having us (or more likely our kids) deal with Vanguard as our mental sharpness dulls in old age.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by informal guide » Tue Aug 14, 2018 8:50 pm

There is lots of discussion about the most recent Fidelity price drop/zero price offering. There has also been significant mention of the tax drag on taxable accounts from Fidelity's capital gains distributions. Many have praised Fidelity for their bold moves. Others have talked about these funds being loss leaders.

What has not been mentioned is the dramatic price difference in the money market funds. I have accounts at both. My Fidelity brokerage account clears trades and keeps otherwise uninvested cash in SPAXX - Fidelity Government money market. The expense ratio for that is 0.42%. The fund is just over $105 Billion in assets. Seven day yield is 1.56%.

My Vanguard account clears trades and keeps otherwise uninvested cash in VMMXX - Vanguard Federal Money Market. The expense ratio of that fund is 0.11%. Severn day yield is 1.88% and the fund is similar in size - -$97.8 Billion. Both clearing funds seem quite similar, including gross yield (seven day quoted yield plus expenses added back)

The impact to me individually is modest in total, given I don't typically have lots of $$ in uninvested cash - -for example, 31 basis points on $10,000 average balance is $31 annually. But think of it from Fidelity's standpoint. If Vanguard operates at cost and Fidelity's cost (not price) is similar, Fidelity makes 0.42% -0.11% in additional margin from their primary retail money market fund. That is 0.31% margin on $105 Billion in assets. That is slightly more than $325 Million annually. Now that is real money that can be used to subsidize loss leaders like their zero to very low cost index funds!

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Re: The Bigger Story: Fidelity Expense Ratios

Post by BoglePaul » Wed Aug 15, 2018 4:47 pm

Theoretical wrote:
Tue Aug 14, 2018 8:20 pm
BoglePaul wrote:
Tue Aug 14, 2018 7:38 pm
cowdogman wrote:
Fri Aug 10, 2018 7:43 pm
Based on my portfolio and your table I would save about $250 on expenses alone by switching from VG to Fido. However there would be capital gains on the after tax piece that would swamp the savings. In addition I would have to get to know the Fidelity culture, which by the posts I see on this site is pretty good. There would be a new website to learn as well.
Finally, by virtue of their organizational structure, Vanguard's commitment to low costs and other considerations relating to the best interests of the investors is part of their DNA in a way that is really unique. I get the sense that Vanguard's commitment to this approach is for the long haul. Fidelity's may or may not be.
The quoted post and a lot of the above posts talk about the Vanguard culture.

My wife and I have been with Vanguard for a long time--as our sole investment vehicle. I'd have to dig thru my files, but maybe as long as 30 years. And my experience is that over the last several years Vanguard has declined substantially, both in terms of customer service and the general feeling that Vanguard was different from the for-profit companies. The quality of the Flagship reps that we have had has declined sequentially, and our current rep is worse than worthless (I pray he won't answer the phone when I call the Flagship number). We also have a couple individual 401(k)s at Vanguard and the Vanguard Small Business website that we have to use to administer the 401(k)s is a disaster--it looks like it hasn't been updated since the 90s and is very buggy.

My wife and I don't trade--funds or stocks. We contact Flagship maybe 3-4 times a year with minor issues/questions. But even with that little contact, Vanguard has found ways to disappoint. As a very current example, I sent in a strong complaint to our Flagship rep yesterday with a request for his supervisor to contact me--other than an auto reply saying that my message has been received, I've had no response.

I was a true Vanguard believer, but I'm not anymore.

I spent most of today looking at the pros and cons of switching to Fidelity, and I have to say that the pros are seriously outweighing the cons. Yes, I'm nervous that Fidelity will reverse course, but we can always switch back or go elsewhere. I was worried about triggering cap gains in the move, but based on the fact that all the funds where we have cap gains have ETF equivalents, we can avoid the cap gains by converting to ETFs and then transferring the ETFs to Fidelity. I'm not worried about Fidelity fees because we don't trade and I would stick with the Fidelity index funds. I am also seriously looking at the Fidelity cash management account/credit card/etc. Most of all I'm hoping the people at Fidelity to will be pros. And I like the Fidelity website.

I am curious about the "tax drag" issues discussed above. I'm not following the concerns or arguments.

Maybe my perceptions are wrong, but I think reliance on the "Vanguard culture" as a reason to stick around is out of date.
If Fidelity offered Primecap funds without a trading fee I would consider switching back (the cash management account was great). The recent dissapointment of the Vanguard website redesign is another push in that direction. At the end of the day, I just can not take Fidelity's $75.00 transaction fee to trade Vanguard Primecap Core (VPCCX).
If you invest automatically, it’s $5/trade instead. You only have to pay the $75 once.
Perhaps they can make it $5/trade and skip the front-end/back-end gouging. I feel $75 is on the high end. Scottrade used to be a lot less.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by fennewaldaj » Wed Aug 15, 2018 4:52 pm

BoglePaul wrote:
Wed Aug 15, 2018 4:47 pm
Theoretical wrote:
Tue Aug 14, 2018 8:20 pm
BoglePaul wrote:
Tue Aug 14, 2018 7:38 pm
cowdogman wrote:
Fri Aug 10, 2018 7:43 pm
Based on my portfolio and your table I would save about $250 on expenses alone by switching from VG to Fido. However there would be capital gains on the after tax piece that would swamp the savings. In addition I would have to get to know the Fidelity culture, which by the posts I see on this site is pretty good. There would be a new website to learn as well.
Finally, by virtue of their organizational structure, Vanguard's commitment to low costs and other considerations relating to the best interests of the investors is part of their DNA in a way that is really unique. I get the sense that Vanguard's commitment to this approach is for the long haul. Fidelity's may or may not be.
The quoted post and a lot of the above posts talk about the Vanguard culture.

My wife and I have been with Vanguard for a long time--as our sole investment vehicle. I'd have to dig thru my files, but maybe as long as 30 years. And my experience is that over the last several years Vanguard has declined substantially, both in terms of customer service and the general feeling that Vanguard was different from the for-profit companies. The quality of the Flagship reps that we have had has declined sequentially, and our current rep is worse than worthless (I pray he won't answer the phone when I call the Flagship number). We also have a couple individual 401(k)s at Vanguard and the Vanguard Small Business website that we have to use to administer the 401(k)s is a disaster--it looks like it hasn't been updated since the 90s and is very buggy.

My wife and I don't trade--funds or stocks. We contact Flagship maybe 3-4 times a year with minor issues/questions. But even with that little contact, Vanguard has found ways to disappoint. As a very current example, I sent in a strong complaint to our Flagship rep yesterday with a request for his supervisor to contact me--other than an auto reply saying that my message has been received, I've had no response.

I was a true Vanguard believer, but I'm not anymore.

I spent most of today looking at the pros and cons of switching to Fidelity, and I have to say that the pros are seriously outweighing the cons. Yes, I'm nervous that Fidelity will reverse course, but we can always switch back or go elsewhere. I was worried about triggering cap gains in the move, but based on the fact that all the funds where we have cap gains have ETF equivalents, we can avoid the cap gains by converting to ETFs and then transferring the ETFs to Fidelity. I'm not worried about Fidelity fees because we don't trade and I would stick with the Fidelity index funds. I am also seriously looking at the Fidelity cash management account/credit card/etc. Most of all I'm hoping the people at Fidelity to will be pros. And I like the Fidelity website.

I am curious about the "tax drag" issues discussed above. I'm not following the concerns or arguments.

Maybe my perceptions are wrong, but I think reliance on the "Vanguard culture" as a reason to stick around is out of date.
If Fidelity offered Primecap funds without a trading fee I would consider switching back (the cash management account was great). The recent dissapointment of the Vanguard website redesign is another push in that direction. At the end of the day, I just can not take Fidelity's $75.00 transaction fee to trade Vanguard Primecap Core (VPCCX).
If you invest automatically, it’s $5/trade instead. You only have to pay the $75 once.
Perhaps they can make it $5/trade and skip the front-end/back-end gouging. I feel $75 is on the high end. Scottrade used to be a lot less.
In my brokeragelink account in my 403b account the $75 front end fee is the only one (No sell fee). Auto investments are free. I would rather pay the high fee once than $5 everytime.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by White Coat Investor » Tue Aug 21, 2018 7:24 am

Nate79 wrote:
Fri Aug 10, 2018 4:22 pm
White Coat Investor wrote:
Fri Aug 10, 2018 3:34 pm
burnout454 wrote:
Fri Aug 10, 2018 8:53 am
Forgive me if this was highlighted in one of the longer threads, but this chart seems to me as big a story as the introduction of the two ZERO expense funds. Other Fidelity index funds have expense ratios on average half of Vanguard's expense ratios.

Image

If there is some debate about whether the two ZERO funds (and their .04% difference) are worth moving from Vanguard to Fidelity, is the fact that virtually ALL of their index funds are significantly cheaper than Vanguard worth the move?
What's the ER on Fidelity's small value index fund?
What is the ticker? I can not find it in a quick internet search.
You won't find it in a prolonged internet search either. It doesn't exist. That was the point.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

Daitokuji
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Re: The Bigger Story: Fidelity Expense Ratios

Post by Daitokuji » Tue Aug 21, 2018 11:05 am

I will wait 6 months to a year and see what the difference in performance is between the Fidelity and Vanguard funds. All things being equal, Fidelity should give you 0.04% higher returns compared to Vanguard.

mervinj7
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Re: The Bigger Story: Fidelity Expense Ratios

Post by mervinj7 » Tue Aug 21, 2018 6:33 pm

White Coat Investor wrote:
Tue Aug 21, 2018 7:24 am
You won't find it in a prolonged internet search either. It doesn't exist. That was the point.
In the past, when I had a portfolio with a SCV tilt (not at Vanguard/Fidelity), I used iShares S&P SmallCap 600 Value IJS for my small-cap value allocation. It should be commission-free at Fidelity for those are not satisfied with the index funds listed in burnout454's chart. Thanks to Taylor and others on this forum, I have since simplified to a three-fund portfolio and haven't looked back.

IlliniDave
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Re: The Bigger Story: Fidelity Expense Ratios

Post by IlliniDave » Wed Aug 22, 2018 3:32 am

Fidelity manages my employer's 401k and HSA, and for the most part I think they do a fantastic job (a lot of credit goes to my megacorp too, for keeping the pressure on Fidelity wrt costs). I've only been a direct Vanguard customer for about 8 years now, but they've given me no reason to complain.

Influenced by Bogle, my way of looking at it is this. Fidelity's mission is (rightfully) to transfer as much of my money to the Johnson family as they can (as much as the market will bear). Vanguard's mission is to let me keep as much of my money as they can. I have no reason to think either firm will stray from their mission in the long term. If in 24 years (the end of my actuarial life expectancy) Fidelity is still cheaper than VG in an apples/apples comparison of core index funds I'll have made a small error. I'm okay with taking that risk.
Don't do something. Just stand there!

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darkhorse346
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Re: The Bigger Story: Fidelity Expense Ratios

Post by darkhorse346 » Wed Aug 22, 2018 5:16 am

Vanguard, Fidelity, Schwab, et al., all have their strengths and weaknesses. Each investor has to decide what attributes are most important. Not only fees, but company culture, service, etc.

Vanguard's structure is a net positive for investors, but it is not a panacea.

Several years back, while conversing with a VP of a large, publicly held chemical company, I learned that they were switching their [very large] 401(k) from Vanguard to Fidelity. Generally, the switch was the result of ongoing and costly administrative errors, poor communication, and a generally lack of responsibility. (Of course, there are at least two sides to every story, so it may have not just been Vanguard's fault.)

Fidelity now administers the Plan, but it still has Vanguard investment options, along with Fidelity, Dodge & Cox, DFA, etc.

Bottom Line: I think we all need to get real. Be rational in decision making. Don't drink the Kool Aid of Fidelity, Vanguard, or anybody else, for that matter.

This 401(k)'s problems were probably just a blip on the Vanguard radar. What chance do you think you have? Do you think your $100k IRA rollover and $50k brokerage account really matters to Vanguard, Fidelity, or anybody else, as much as it does to you? Really...?

At the end of the day, it is a business relationship. Period.

Caveat emptor.

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White Coat Investor
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Re: The Bigger Story: Fidelity Expense Ratios

Post by White Coat Investor » Wed Aug 22, 2018 11:11 am

mervinj7 wrote:
Tue Aug 21, 2018 6:33 pm
White Coat Investor wrote:
Tue Aug 21, 2018 7:24 am
You won't find it in a prolonged internet search either. It doesn't exist. That was the point.
In the past, when I had a portfolio with a SCV tilt (not at Vanguard/Fidelity), I used iShares S&P SmallCap 600 Value IJS for my small-cap value allocation. It should be commission-free at Fidelity for those are not satisfied with the index funds listed in burnout454's chart. Thanks to Taylor and others on this forum, I have since simplified to a three-fund portfolio and haven't looked back.
You could also buy Vanguard's small cap value ETF for minimal commission at Fidelity. But there is no Fidelity small cap value index mutual fund. If you want that, you should go to Vanguard.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

MrJones
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Re: The Bigger Story: Fidelity Expense Ratios

Post by MrJones » Wed Aug 22, 2018 11:25 am

9-5 Suited wrote:
Fri Aug 10, 2018 12:33 pm
I believe pretty strongly in rewarding Vanguard as much as I can for being the reason behind these changes, even at Fidelity. I think it’s good for consumers to reward the right behaviors and structures, not just run to absolute lowest fees.

Fidelity makes clear in their comms that they do this in order to “broaden their relationship” with customers, I.e. up sell to other products. Obviously Bogleheads will ignore the upselling and win on fees, but is that the company worth rewarding vs. Vanguard who isn’t as interested in you as an upselling opportunity?

I’ll stick with Vanguard.
+1. Let's not lose sight of the big picture here.

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