[Fidelity announces simplified index fund structure]

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Doc
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[Fidelity announces simplified index fund structure]

Post by Doc » Thu Oct 11, 2018 1:30 pm

From an email:
A more simplified fund structure

Because you're an existing shareholder, we're writing to inform you about recent enhancements to how the majority of our index funds are structured and named. The following changes will begin to roll out in November.

• A simplified index fund structure—we're moving away from multiple share classes to just one.
• Updated fund names and fund symbols
There's a list of some 20 Fidelity mutual funds with zero minimum and ~1/2 the ER of the comparative Vanguard Admiral class funds.

https://www.fidelity.com/mutual-funds/i ... ndex-funds

I think this is additional to the funds discussed in a recent post "Fidelity Files for four Fidelity ZERO℠ Funds". these are not zero ER just way reduced fees and no minimum.

viewtopic.php?f=10&t=255356#p4046843
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Re: Fidelity vs Vanguard - Round 2

Post by mervinj7 » Thu Oct 11, 2018 1:42 pm

Doc wrote:
Thu Oct 11, 2018 1:30 pm
From an email:
A more simplified fund structure

Because you're an existing shareholder, we're writing to inform you about recent enhancements to how the majority of our index funds are structured and named. The following changes will begin to roll out in November.

• A simplified index fund structure—we're moving away from multiple share classes to just one.
• Updated fund names and fund symbols
There's a list of some 20 Fidelity mutual funds with zero minimum and ~1/2 the ER of the comparative Vanguard Admiral class funds.

https://www.fidelity.com/mutual-funds/i ... ndex-funds

I think this is additional to the funds discussed in a recent post "Fidelity Files for four Fidelity ZERO℠ Funds". these are not zero ER just way reduced fees and no minimum.

viewtopic.php?f=10&t=255356#p4046843
Doc, this change was announced along with the new Zero funds on July 31st. Here's the press release that lists which share classes are getting merged together in November and the surviving ticker class. For example, for Fidelity Total Market Index, tickers FSTMX, FSTVX, FSKTX, and FSKAX will be merged into FSKAX. The surviving fund will have the ER of a former institutional premium share class (0.015%) but with zero minimums. It's an excellent change for both existing and new customers.

https://www.fidelity.com/bin-public/060 ... esting.pdf

mrc
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Fidelity simplified fund structure announced

Post by mrc » Thu Oct 11, 2018 2:42 pm

[Thread merged into here, see below. --admin LadyGeek]

Email communication from today announcing:
  • A simplified index fund structure—we're moving away from multiple share classes to just one.
  • Updated fund names and fund symbols
Additionally, as of August 1, every investor now receives the lowest cost expense ratio Fidelity offers2—regardless of their investment level.
Details on the Fidelity website.
If it’s not long term it’s small talk

UpperNwGuy
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Re: Fidelity simplified fund structure announced

Post by UpperNwGuy » Thu Oct 11, 2018 2:50 pm

So this is what they said they were going to do. No surprises that I can see.

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Re: Fidelity simplified fund structure announced

Post by mrc » Thu Oct 11, 2018 3:22 pm

Correct. Email going out to existing shareholders now in prep for November. I brought it up because some tickers subject to change.
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Re: Fidelity simplified fund structure announced

Post by mervinj7 » Thu Oct 11, 2018 3:26 pm


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Re: [Fidelity announces simplified index fund structure]

Post by LadyGeek » Thu Oct 11, 2018 3:52 pm

I merged mrc's thread into here and retitled the thread for clarity.
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Re: [Fidelity announces simplified index fund structure]

Post by mervinj7 » Thu Oct 11, 2018 6:11 pm

As a demonstration that these zero minimum Institutional Premium funds are available now, I recently went ahead and purchased:
  • $0.76 of FSKAX (ER 0.015%)
  • $0.29 of FTIHX (ER 0.06%)
  • $0.12 of FXNAX (ER 0.025%).

I am now the proud owner of a three-fund portfolio that's worth a grand total of $1.17 that's almost perfectly allocated with a 65/25/10 US/Intl/Bond split. Effective weighted ER is a jaw-dropping 0.027%.

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Re: [Fidelity announces simplified index fund structure]

Post by NoHeat » Thu Oct 11, 2018 7:11 pm

mervinj7 wrote:
Thu Oct 11, 2018 6:11 pm

I am now the proud owner of a three-fund portfolio that's worth a grand total of $1.17 that's almost perfectly allocated with a 65/25/10 US/Intl/Bond split. Effective weighted ER is a jaw-dropping 0.027%.
That’s impressive, that they offer that. After about 30 years, Fidelity will have collected only one cent from you.

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Re: [Fidelity announces simplified index fund structure]

Post by LadyGeek » Thu Oct 11, 2018 7:23 pm

For completeness, the IRS rounds amounts to the nearest dollar. From: Publication 17 (2017), Your Federal Income Tax | Internal Revenue Service
Rounding off dollars.

You can round off cents to whole dollars on your return and schedules. If you do round to whole dollars, you must round all amounts. To round, drop amounts under 50 cents and increase amounts from 50 to 99 cents to the next dollar. For example, $1.39 becomes $1 and $2.50 becomes $3.

If you have to add two or more amounts to figure the amount to enter on a line, include cents when adding the amounts and round off only the total.
You can have up to 49 cents capital gains without paying anything to the IRS.

(Assuming this is your only investment and your income is above the 0% tax rate.)
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Re: [Fidelity announces simplified index fund structure]

Post by Elysium » Thu Oct 11, 2018 7:24 pm

Thats't great. I'd like to purchase the Fidelity Dividend Appreciation Index fund to replace my Vanguard Dividend Appreciation Index fund to take advantage of their lower costs, but I can't find the ticker symbol. Can somone help me point to where this is listed?

Also, can someone explain why their Large Value index fund is trailing the Vanguard counterpart by such a large margin?
Last edited by Elysium on Thu Oct 11, 2018 8:54 pm, edited 1 time in total.

Dead Man Walking
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Re: [Fidelity announces simplified index fund structure]

Post by Dead Man Walking » Thu Oct 11, 2018 8:50 pm

The zero minimum amount may be as important as the zero expense ratios. Beginning investors will find the zero minimum a good reason to invest a few bucks. It's not a big deal to me now, but it would have been a really big deal 50 years ago. I'm happy to see Fidelity put out the welcome mat for new investors.

DMW

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Re: [Fidelity announces simplified index fund structure]

Post by viz » Thu Oct 11, 2018 10:45 pm

Dead Man Walking wrote:
Thu Oct 11, 2018 8:50 pm
The zero minimum amount may be as important as the zero expense ratios. Beginning investors will find the zero minimum a good reason to invest a few bucks. It's not a big deal to me now, but it would have been a really big deal 50 years ago. I'm happy to see Fidelity put out the welcome mat for new investors.

DMW
I agree, more than lower ER, lower minimum is much bigger change even though it gets less attention. And once folks open a fidelity account, how many will really move if vanguard reduces ER for admiral class? There are so many postings on this forum where people say that they aren't to fidelity for few basis points.

This change also undercuts platforms like M1 and betterment for implementing simple portfolios using MF.

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Re: [Fidelity announces simplified index fund structure]

Post by FIREchief » Thu Oct 11, 2018 10:55 pm

I recently helped a friend invest a bit over $300 in one of the new Fido Zero funds; not so much for gains but more for educational purposes. It is really nice that Fido has built enough efficiency into their systems that such low positions in a fund doesn't strain their profits. I think they have it to the point where their overhead is close to nothing regardless of the size of the investments. I really hope VG and the rest catch up quick so that there is still competition in this realm. 8-)
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Re: [Fidelity announces simplified index fund structure]

Post by JDDS » Fri Oct 12, 2018 12:42 am

0 minimums is fantastic. For people starting out it's one less concern; easy to get into multiple funds that match the target allocation without worry of having enough for each component. (or learning to trade ETFs)

Getting rid of fund classes is also awesome, another thing to forget talking about.

I hope Vanguard and others make some similar changes.

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Re: [Fidelity announces simplified index fund structure]

Post by indexfundfan » Fri Oct 12, 2018 5:36 am

I wish Fido would do the same for their money market funds.
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Re: [Fidelity announces simplified index fund structure]

Post by Doc » Fri Oct 12, 2018 6:44 am

Elysium wrote:
Thu Oct 11, 2018 7:24 pm
Also, can someone explain why their Large Value index fund is trailing the Vanguard counterpart by such a large margin?
CRSP index?
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Re: [Fidelity announces simplified index fund structure]

Post by mervinj7 » Fri Oct 12, 2018 10:35 am

LadyGeek wrote:
Thu Oct 11, 2018 7:23 pm
You can have up to 49 cents capital gains without paying anything to the IRS.

(Assuming this is your only investment and your income is above the 0% tax rate.)
Thanks, LadyGeek! Fortunately, this $1.10 account (down from $1.17 since I've posted) is not my only investment account and my tax rate is not 0%. But it is my only taxable account at Fidelity, so maybe this is a good impetus to invest in more taxable this year. :moneybag

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Re: [Fidelity announces simplified index fund structure]

Post by Elysium » Fri Oct 12, 2018 11:05 am

Doc wrote:
Fri Oct 12, 2018 6:44 am
Elysium wrote:
Thu Oct 11, 2018 7:24 pm
Also, can someone explain why their Large Value index fund is trailing the Vanguard counterpart by such a large margin?
CRSP index?
Vanguard uses CRSP index and Fidelity uses Russell 1000 value index I figure. So in other words, there is more to returns than fractional differences in ER. If I were to switch from Vanguard to Fidelity for fractional gains in ER but give up several more basis points in cumulative returns, then that doesn't sound like a great strategy. This wouldn't be a problem if the variations between indexes smoothen out over time, however, evidence shows some indexes are better constructured to capture some of the factors better than other indexes.

Isn't Russell indexes considered relatively poorly constructured among the peers. I wonder why Fidelity uses this index, possibly cheaper licensing costs for them, which makes up for the lower ER marketing strategy.

Hmm .. not easy as I thought just looking at small differences in ER.

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Re: [Fidelity announces simplified index fund structure]

Post by Doc » Fri Oct 12, 2018 2:05 pm

Elysium wrote:
Fri Oct 12, 2018 11:05 am
Isn't Russell indexes considered relatively poorly constructured among the peers. I wonder why Fidelity uses this index, possibly cheaper licensing costs for them, which makes up for the lower ER marketing strategy.
Once upon a time the Russells were constructed such that changes in the index were known to traders before the they actually occurred. It was therefore possible for traders to frontrun the index hence making Russell index funds underperform. That problem was solved a long time ago by a change in how the index was constructed.

The CRSP indexes were constructed to be very cost effective. (Think Vanguard's low cost philosophy.) Some of the CRSP indexes don't always reflect what we think about what the market segment is. For example the CRSP small cap value index has twice the market cap of the corresponding Russell or S&P.

I don't know if this makes a difference in the CRSP vs. Russell performance.

I don't think anyone but Vangaurd uses the CRSP indexes.
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Re: [Fidelity announces simplified index fund structure]

Post by Elysium » Fri Oct 12, 2018 5:35 pm

Doc wrote:
Fri Oct 12, 2018 2:05 pm
Elysium wrote:
Fri Oct 12, 2018 11:05 am
Isn't Russell indexes considered relatively poorly constructured among the peers. I wonder why Fidelity uses this index, possibly cheaper licensing costs for them, which makes up for the lower ER marketing strategy.
Once upon a time the Russells were constructed such that changes in the index were known to traders before the they actually occurred. It was therefore possible for traders to frontrun the index hence making Russell index funds underperform. That problem was solved a long time ago by a change in how the index was constructed.

The CRSP indexes were constructed to be very cost effective. (Think Vanguard's low cost philosophy.) Some of the CRSP indexes don't always reflect what we think about what the market segment is. For example the CRSP small cap value index has twice the market cap of the corresponding Russell or S&P.

I don't know if this makes a difference in the CRSP vs. Russell performance.

I don't think anyone but Vangaurd uses the CRSP indexes.
I believe DFA starts with CRSP for their selection before screening, although someone else who knows more can confirm this.

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