Move VG Roth to Fidelity for ZERO fund?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Topic Author
dave.m
Posts: 89
Joined: Mon Dec 02, 2019 7:12 pm

Move VG Roth to Fidelity for ZERO fund?

Post by dave.m »

My Roth account at Vanguard currently has 100% investment in VTSAX. My other retirement accounts include bonds and international.

The expense was extremely low for VTSAX, however, it’s not zero.

I have an account at both Vanguard and Fidelity so I log in to each place and therefore it’s no more convenient for me to have a Roth at either one. I opened it in Vanguard, and have been happy with them so far, so I really had no reason to change. However, switching to Fidelity would save me a little bit on an expense ratio. I realize it’s a small number of savings each year, however, it’s still a savings.

It appears the Fidelity ZERO Large Cap Index Fund (FNILX) more closely resembles the S&P 500 index vanguard offers, and the total stock market zero fund through Fidelity doesn’t contain nearly the same number of companies. So I may consider FNILX if I switch.

Has anyone already made the switch? Or considered it and stayed with Vanguard? What is the opinion of the forum about this potential decision?
nalor511
Posts: 6013
Joined: Mon Jul 27, 2015 1:00 am

Re: Move VG Roth to Fidelity for ZERO fund?

Post by nalor511 »

I moved to Fidelity for the better support, not for the zero funds. Zero doesn't really mean zero, you can see the performance almost exactly mirrors the VG fund. I hold VG etfs at fidelity. I hold zero funds at fidelity. The same as to make no difference (except you can transfer ETFs out to any broker you want with no selling and no fees, should you ever want to)
Topic Author
dave.m
Posts: 89
Joined: Mon Dec 02, 2019 7:12 pm

Re: Move VG Roth to Fidelity for ZERO fund?

Post by dave.m »

nalor511 wrote: Thu Jan 30, 2025 3:12 pm Zero doesn't really mean zero,
It doesn’t? Not even inside a Roth?
GoldStar
Posts: 1263
Joined: Wed May 23, 2018 10:59 am

Re: Move VG Roth to Fidelity for ZERO fund?

Post by GoldStar »

dave.m wrote: Thu Jan 30, 2025 3:16 pm
nalor511 wrote: Thu Jan 30, 2025 3:12 pm Zero doesn't really mean zero,
It doesn’t? Not even inside a Roth?
It does really mean ZERO expense ratio. Some Vanguard fans like to speculate they will make that up some other way but the returns speak for themselves.
It is FZROX that is the total market fund similar to VTSAX. It's a great fund to have in Roth. I am not sure you need to switch just to get the extra dollars of ER savings- it won't amount to too much unless you have a really large portfolio.
You will find longtime Vanguard fans like to speculate and poke fun at these funds. Vanguard fans were proud when Vanguard had the lowest ERs - but now that Fidelity has beat them at their own game they like to try to say the lowest ER doesn't matter.
Last edited by GoldStar on Thu Jan 30, 2025 3:26 pm, edited 2 times in total.
exodusNH
Posts: 11727
Joined: Wed Jan 06, 2021 7:21 pm

Re: Move VG Roth to Fidelity for ZERO fund?

Post by exodusNH »

dave.m wrote: Thu Jan 30, 2025 3:16 pm
nalor511 wrote: Thu Jan 30, 2025 3:12 pm Zero doesn't really mean zero,
It doesn’t? Not even inside a Roth?
The difference between 0.00 and 0.03 is meaningless, since the ER doesn't capture all the fund expenses.

How well it tracks its index, controls its trading costs (not in the ER), and whether it returns share lending revenue to the shareholders matters more.

Over the short period of time FZROX has existed, it has done better than VTSAX, but that is likely due to it having 1,000-1,500 fewer of the small and micro cap stocks.
rkhusky
Posts: 20716
Joined: Thu Aug 18, 2011 8:09 pm

Re: Move VG Roth to Fidelity for ZERO fund?

Post by rkhusky »

The ER difference is meaningless. Every day the funds fluctuate 10x more than the annual ER difference. Find another reason to switch.
nalor511
Posts: 6013
Joined: Mon Jul 27, 2015 1:00 am

Re: Move VG Roth to Fidelity for ZERO fund?

Post by nalor511 »

GoldStar wrote: Thu Jan 30, 2025 3:20 pm
dave.m wrote: Thu Jan 30, 2025 3:16 pm

It doesn’t? Not even inside a Roth?
It does really mean ZERO expense ratio. Some Vanguard fans like to speculate they will make that up some other way but the returns speak for themselves.
It is FZROX that is the total market fund similar to VTSAX. It's a great fund to have in Roth. I am not sure you need to switch just to get the extra dollars of ER savings- it won't amount to too much unless you have a really large portfolio.
You will find longtime Vanguard fans like to speculate and poke fun at these funds. Vanguard fans were proud when Vanguard had the lowest ERs - but now that Fidelity has beat them at their own game they like to try to say the lowest ER doesn't matter.
The performance difference is explainable by sampling rather than any miniscule ER difference viewtopic.php?t=295930
GoldStar
Posts: 1263
Joined: Wed May 23, 2018 10:59 am

Re: Move VG Roth to Fidelity for ZERO fund?

Post by GoldStar »

nalor511 wrote: Thu Jan 30, 2025 3:46 pm
GoldStar wrote: Thu Jan 30, 2025 3:20 pm

It does really mean ZERO expense ratio. Some Vanguard fans like to speculate they will make that up some other way but the returns speak for themselves.
It is FZROX that is the total market fund similar to VTSAX. It's a great fund to have in Roth. I am not sure you need to switch just to get the extra dollars of ER savings- it won't amount to too much unless you have a really large portfolio.
You will find longtime Vanguard fans like to speculate and poke fun at these funds. Vanguard fans were proud when Vanguard had the lowest ERs - but now that Fidelity has beat them at their own game they like to try to say the lowest ER doesn't matter.
The performance difference is explainable by sampling rather than any miniscule ER difference viewtopic.php?t=295930
Maybe. But it is really a 0% expense ratio.
We can all speculate about what will do better for the next 10 years but there is no denying FZROX starts with a slight edge having the 0% ER. It is indeed real.
Telling people zero ER isn't really zero ER is confusing and wrong .
tibbitts
Posts: 26770
Joined: Tue Feb 27, 2007 5:50 pm

Re: Move VG Roth to Fidelity for ZERO fund?

Post by tibbitts »

dave.m wrote: Thu Jan 30, 2025 3:01 pm I realize it’s a small number of savings each year, however, it’s still a savings.
I pick up pennies in the street when I'm walking too, but I have to accept that it's a hobby and not a productive activity. Sure, it's okay to move money around as a hobby, I guess, but if you're going to do that can't you pick up a transfer bonus from somebody in the process? That would make it a more productive hobby.
exodusNH
Posts: 11727
Joined: Wed Jan 06, 2021 7:21 pm

Re: Move VG Roth to Fidelity for ZERO fund?

Post by exodusNH »

GoldStar wrote: Thu Jan 30, 2025 3:52 pm
nalor511 wrote: Thu Jan 30, 2025 3:46 pm

The performance difference is explainable by sampling rather than any miniscule ER difference viewtopic.php?t=295930
Maybe. But it is really a 0% expense ratio.
We can all speculate about what will do better for the next 10 years but there is no denying FZROX starts with a slight edge having the 0% ER. It is indeed real.
Telling people zero ER isn't really zero ER is confusing and wrong .
That's not entirely true.

The ER does not include all the funds expenses. In particular, trading costs aren't part of the ER. It also doesn't reflect lending income returned to the fund.

That's not to say FZROX isn't a good fund. It's that the "0" is more marketing than substance, just like Vanguard's claim that the mutual fund shareholders own Vanguard.

Note that I hold it in my HSA, which is my only account at Fidelity. I don't hold it because it's ER, but because it means that I don't have to think about wash sales.
3000
Posts: 431
Joined: Sat Aug 17, 2019 9:08 pm

Re: Move VG Roth to Fidelity for ZERO fund?

Post by 3000 »

I'm at Fidelity and I like it and the ZERO funds. I hold FZROX.

If you want a total stock market fund I wouldn't worry about the number of stocks VTSAX has compared to others. Any of the funds below would serve someone well.

VTSAX - 3,609 stocks - ER 0.03% - Vanguard Total Stock Market Index Fund Admiral Shares

FSKAX - 3,900 stocks - ER 0.015% - Fidelity Total Market Index Fund

FZROX - 2,563 stocks - ER 0 - Fidelity ZERO Total Market Index Fund

ITOT - 2,534 stocks - ER 0.03% - iShares Core S&P Total US Stock Market ETF

SCHB - 2,429 stocks - ER 0.03% - Schwab U.S. Broad Market ETF
123
Posts: 11439
Joined: Fri Oct 12, 2012 3:55 pm

Re: Move VG Roth to Fidelity for ZERO fund?

Post by 123 »

I would not move primarily for ZERO funds.

If you have a traditional IRA I would tend to keep a traditional IRA at the same place as your Roth IRA for ease of potential Roth conversions. Its very easy to do Roth conversions at Fidelity when your traditional IRA account is there as well.
The closest helping hand is at the end of your own arm.
PeterParker
Posts: 194
Joined: Sun Mar 17, 2013 2:19 pm

Re: Move VG Roth to Fidelity for ZERO fund?

Post by PeterParker »

If you're really optimizing pennies, why not get Robinhood gold ($60 a year) --- get a 2% rollover bonus on your entire IRA, then 3% additional match for all annual contributions into that IRA? (roth or trad).

Plus the RH gold comes with $1000 in interest free margin (that really itself offsets the $60 fee).

That "2%" bonus is equivalent to your ER differential (.03-0.015%) by a factor of about 100 years.
GoldStar
Posts: 1263
Joined: Wed May 23, 2018 10:59 am

Re: Move VG Roth to Fidelity for ZERO fund?

Post by GoldStar »

exodusNH wrote: Thu Jan 30, 2025 4:10 pm
GoldStar wrote: Thu Jan 30, 2025 3:52 pm

Maybe. But it is really a 0% expense ratio.
We can all speculate about what will do better for the next 10 years but there is no denying FZROX starts with a slight edge having the 0% ER. It is indeed real.
Telling people zero ER isn't really zero ER is confusing and wrong .
That's not entirely true.

The ER does not include all the funds expenses. In particular, trading costs aren't part of the ER. It also doesn't reflect lending income returned to the fund.

That's not to say FZROX isn't a good fund. It's that the "0" is more marketing than substance, just like Vanguard's claim that the mutual fund shareholders own Vanguard.

Note that I hold it in my HSA, which is my only account at Fidelity. I don't hold it because it's ER, but because it means that I don't have to think about wash sales.
It IS entirely true that FZROX charges a 0% Expense Ratio while VTSAX charges something greater.
You can call it marketing- that does not make it untrue.

There might be trading costs but all funds have them and they are outside the expense ratio. The lower ER gives the fund a starting advantage.
Eno Deb
Posts: 870
Joined: Sun Feb 03, 2019 3:08 pm

Re: Move VG Roth to Fidelity for ZERO fund?

Post by Eno Deb »

GoldStar wrote: Thu Jan 30, 2025 3:20 pmIt does really mean ZERO expense ratio. Some Vanguard fans like to speculate they will make that up some other way but the returns speak for themselves.
One thing that I always found a bit peculiar about the Fidelity Zero funds is that they distribute dividends only once per year in December, whereas most other stock funds have quarterly or semi-annual distributions. Is it possible that they do this so they can earn more interest on the dividends over the year, or perhaps save some transaction costs? In any case it means that -- assuming equal dividend yield -- the investor will have a slightly lower return on the dividends than with a fund that distributes more often.
GoldStar
Posts: 1263
Joined: Wed May 23, 2018 10:59 am

Re: Move VG Roth to Fidelity for ZERO fund?

Post by GoldStar »

Eno Deb wrote: Thu Jan 30, 2025 5:07 pm
GoldStar wrote: Thu Jan 30, 2025 3:20 pmIt does really mean ZERO expense ratio. Some Vanguard fans like to speculate they will make that up some other way but the returns speak for themselves.
One thing that I always found a bit peculiar about the Fidelity Zero funds is that they distribute dividends only once per year in December, whereas most other stock funds have quarterly or semi-annual distributions. Is it possible that they do this so they can earn more interest on the dividends over the year, or perhaps save some transaction costs? In any case it means that -- assuming equal dividend yield -- the investor will have a slightly lower return on the dividends than with a fund that distributes more often.
Some funds are quarterly, some semi-annual, some annual. Annual isn't specific to just FZROX. When the funds distributes - its value drops by that amount. How is one that distributes more often giving me a better return? Do you have a reference that explains how this could be?
I assumed the ones that distribute more often only do so because some of their investors don't reinvest the amount - but want the quarterly income. I didn't know there was some return advantage realized.
You seen to imply that Fidelity is somehow taking a more frequent dividend and profiting from it.
Eno Deb
Posts: 870
Joined: Sun Feb 03, 2019 3:08 pm

Re: Move VG Roth to Fidelity for ZERO fund?

Post by Eno Deb »

GoldStar wrote: Thu Jan 30, 2025 5:49 pm
Eno Deb wrote: Thu Jan 30, 2025 5:07 pm One thing that I always found a bit peculiar about the Fidelity Zero funds is that they distribute dividends only once per year in December, whereas most other stock funds have quarterly or semi-annual distributions. Is it possible that they do this so they can earn more interest on the dividends over the year, or perhaps save some transaction costs? In any case it means that -- assuming equal dividend yield -- the investor will have a slightly lower return on the dividends than with a fund that distributes more often.
Some funds are quarterly, some semi-annual, some annual. Annual isn't specific to just FZROX. When the funds distributes - its value drops by that amount. How is one that distributes more often giving me a better return? Do you have a reference that explains how this could be?
No reference, just speculation. If they distribute the dividends quarterly, as investor I can invest them earlier and earn some returns. If they distribute the same amount of annual dividends only, say, at the end of the year, they should accumulate as cash in the mutual fund, and presumably the fund company can earn interest on it?
I assumed the ones that distribute more often only do so because some of their investors don't reinvest the amount - but want the quarterly income.
Is a stock fund allowed to reinvest dividends back into stocks rather than distributing them?
GoldStar
Posts: 1263
Joined: Wed May 23, 2018 10:59 am

Re: Move VG Roth to Fidelity for ZERO fund?

Post by GoldStar »

Eno Deb wrote: Thu Jan 30, 2025 6:00 pm No reference, just speculation. If they distribute the dividends quarterly, as investor I can invest them earlier and earn some returns.
Okay. I think your speculation is wrong.
If a fund distributes $1.00 a year in December you can take that $1 after the fund drops by that $1 and put it back in the fund. If, instead it drops 25 cents 4 times a year that is 4 times the value drops by 25 cents. You take that 25 and invest it back in the fund. Net is the same. Some funds would probably hold the dividends for multiple years if they could but are required to distribute at least once yearly because Uncle Sam wants his taxes.
User avatar
Feldman
Posts: 408
Joined: Sun May 19, 2024 12:46 pm
Location: . . . From Across The Hall!

Re: Move VG Roth to Fidelity for ZERO fund?

Post by Feldman »

GoldStar wrote: Thu Jan 30, 2025 6:13 pm
Eno Deb wrote: Thu Jan 30, 2025 6:00 pm No reference, just speculation. If they distribute the dividends quarterly, as investor I can invest them earlier and earn some returns.
Okay. I think your speculation is wrong.
If a fund distributes $1.00 a year in December you can take that $1 after the fund drops by that $1 and put it back in the fund. If, instead it drops 25 cents 4 times a year that is 4 times the value drops by 25 cents. You take that 25 and invest it back in the fund. Net is the same. Some funds would probably hold the dividends for multiple years if they could but are required to distribute at least once yearly because Uncle Sam wants his taxes.
The more frequent distributions have more time to remain invested, i.e. more time in the market. Isn't it kind of like how the frequency of compounding affects the final amount by maximizing the interest paid? Continuous compounding is best. The closer you get to continuous compounding, the better the result. 4 is closer to continuous than 1 is. Otherwise, getting a big refund at tax time would be the same thing as having that money distributed in your paycheck thoughout the year to invest. But having the money periodically should clearly be the better option than letting someone else hold it and distribute it to you as a lump sum at some future date.
Last edited by Feldman on Thu Jan 30, 2025 6:29 pm, edited 1 time in total.
nalor511
Posts: 6013
Joined: Mon Jul 27, 2015 1:00 am

Re: Move VG Roth to Fidelity for ZERO fund?

Post by nalor511 »

GoldStar wrote: Thu Jan 30, 2025 6:13 pm
Eno Deb wrote: Thu Jan 30, 2025 6:00 pm No reference, just speculation. If they distribute the dividends quarterly, as investor I can invest them earlier and earn some returns.
Okay. I think your speculation is wrong.
If a fund distributes $1.00 a year in December you can take that $1 after the fund drops by that $1 and put it back in the fund. If, instead it drops 25 cents 4 times a year that is 4 times the value drops by 25 cents. You take that 25 and invest it back in the fund. Net is the same. Some funds would probably hold the dividends for multiple years if they could but are required to distribute at least once yearly because Uncle Sam wants his taxes.
Net isn't the same because the price may be different once a year than 4 times a year, and with the latter you get use of the money earlier which has some value, more time to grow. How much value? Probably the 0.03% they're saving you on fees
Mike Scott
Posts: 3924
Joined: Fri Jul 19, 2013 2:45 pm

Re: Move VG Roth to Fidelity for ZERO fund?

Post by Mike Scott »

I use Zero funds in Fidelity HSA but I would not move my Vanguard funds to Fidelity to do that. You can of course if you want.
GoldStar
Posts: 1263
Joined: Wed May 23, 2018 10:59 am

Re: Move VG Roth to Fidelity for ZERO fund?

Post by GoldStar »

Feldman wrote: Thu Jan 30, 2025 6:27 pm
GoldStar wrote: Thu Jan 30, 2025 6:13 pm

Okay. I think your speculation is wrong.
If a fund distributes $1.00 a year in December you can take that $1 after the fund drops by that $1 and put it back in the fund. If, instead it drops 25 cents 4 times a year that is 4 times the value drops by 25 cents. You take that 25 and invest it back in the fund. Net is the same. Some funds would probably hold the dividends for multiple years if they could but are required to distribute at least once yearly because Uncle Sam wants his taxes.
The more frequent distributions have more time to remain invested, i.e. more time in the market. Isn't it kind of like how the frequency of compounding affects the final amount by maximizing the interest paid? Continuous compounding is best. The closer you get to continuous compounding, the better the result. 4 is closer to continuous than 1 is. Otherwise, getting a big refund at tax time would be the same thing as having that money distributed in your paycheck thoughout the year to invest. But having the money periodically should clearly be the better option than letting someone else hold it and distribute it to you as a lump sum at some future date.
But if the fund isn't distributing to me 4 times a year isn't it simply compounding within the fund itself versus me deciding to compound it by putting it back in the fund?
It's not like they are taking stock dividend proceeds and putting them somewhere else until they decide to pay a dividend. They use the money in the fund - at some point at least once a year they must distribute the net amount but when they do they drop fund value by same amount. Either they reinvest or I reinvest - I still don't see how the net isn't the same.
GoldStar
Posts: 1263
Joined: Wed May 23, 2018 10:59 am

Re: Move VG Roth to Fidelity for ZERO fund?

Post by GoldStar »

nalor511 wrote: Thu Jan 30, 2025 6:29 pm Net isn't the same because the price may be different once a year than 4 times a year, and with the latter you get use of the money earlier which has some value, more time to grow. How much value? Probably the 0.03% they're saving you on fees
I am still confused - do you have a reference?
If I am reinvesting the dividend they are required to pay out yearly back into the fund how does it matter whether they are reinvesting it more frequently or paying it out to me and forcing me to do so more frequently.
Ideally the fund would never pay the dividends out and just keep them invested.
User avatar
White Coat Investor
Posts: 18708
Joined: Fri Mar 02, 2007 8:11 pm
Location: Greatest Snow On Earth

Re: Move VG Roth to Fidelity for ZERO fund?

Post by White Coat Investor »

dave.m wrote: Thu Jan 30, 2025 3:01 pm My Roth account at Vanguard currently has 100% investment in VTSAX. My other retirement accounts include bonds and international.

The expense was extremely low for VTSAX, however, it’s not zero.

I have an account at both Vanguard and Fidelity so I log in to each place and therefore it’s no more convenient for me to have a Roth at either one. I opened it in Vanguard, and have been happy with them so far, so I really had no reason to change. However, switching to Fidelity would save me a little bit on an expense ratio. I realize it’s a small number of savings each year, however, it’s still a savings.

It appears the Fidelity ZERO Large Cap Index Fund (FNILX) more closely resembles the S&P 500 index vanguard offers, and the total stock market zero fund through Fidelity doesn’t contain nearly the same number of companies. So I may consider FNILX if I switch.

Has anyone already made the switch? Or considered it and stayed with Vanguard? What is the opinion of the forum about this potential decision?
[Unnecessary comment removed by admin LadyGeek] You've jumped the shark. Spend your time on something that matters. This doesn't. These funds are the same for all practical purposes, at least inside a retirement account.
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
User avatar
Feldman
Posts: 408
Joined: Sun May 19, 2024 12:46 pm
Location: . . . From Across The Hall!

Re: Move VG Roth to Fidelity for ZERO fund?

Post by Feldman »

GoldStar wrote: Thu Jan 30, 2025 6:36 pm
Feldman wrote: Thu Jan 30, 2025 6:27 pm

The more frequent distributions have more time to remain invested, i.e. more time in the market. Isn't it kind of like how the frequency of compounding affects the final amount by maximizing the interest paid? Continuous compounding is best. The closer you get to continuous compounding, the better the result. 4 is closer to continuous than 1 is. Otherwise, getting a big refund at tax time would be the same thing as having that money distributed in your paycheck thoughout the year to invest. But having the money periodically should clearly be the better option than letting someone else hold it and distribute it to you as a lump sum at some future date.
But if the fund isn't distributing to me 4 times a year isn't it simply compounding within the fund itself versus me deciding to compound it by putting it back in the fund?
It's not like they are taking stock dividend proceeds and putting them somewhere else until they decide to pay a dividend. They use the money in the fund - at some point at least once a year they must distribute the net amount but when they do they drop fund value by same amount. Either they reinvest or I reinvest - I still don't see how the net isn't the same.
It depends on whether the dividends are accumulated and held as cash within the fund, or used to purchase more holdings for the fund. I am not knowledgeable enough about the mechanics of mutual funds to know which is correct, but I'm interested to learn.
greenway23
Posts: 112
Joined: Sun May 16, 2021 9:00 pm

Re: Move VG Roth to Fidelity for ZERO fund?

Post by greenway23 »

I just did the opposite - had the zero funds in a Roth at Fidelity but moved it to Vanguard, where I have a taxable account that holds VTSAX and VTIAX. I first had to sell the zero funds and buy VOO so that I wouldn’t be out of the market for several days. Once all the shares were transferred over, I sold the VOO shares and purchased VTSAX and VTIAX in my Roth (since I prefer mutual funds to ETFs). Doing this all was more cumbersome than I had anticipated. On the day I sold VOO and bought VTSAX/VTIAX, the market was more volatile than usual, and I probably lost more money than if I had eaten the fee to exchange into the same VG mutual funds at Fidelity before the transfer. Overall, I’m happy to have everything consolidated, and I was very unhappy with Fidelity’s account closings and fund holds (my transfer of $7000 for my IRA contribution was held for like 4 weeks).

I know it’s not ideal to hold the same funds in taxable and retirement account, but I don’t intend to sell any taxable assets for many years, if ever, and I figure I can switch the Roth assets to something different when that time comes.
Geologist
Posts: 3755
Joined: Fri Jan 02, 2009 6:35 pm

Re: Move VG Roth to Fidelity for ZERO fund?

Post by Geologist »

Practically all funds maintain some cash in a money market fund for short-term liquidity purposes.

Having said that, most of the time the distributions are much larger than the size of the money market account. For example, in the 2023 annual report, the Vanguard 500 fund cash had a money market fund of $2.5 billion (and it had been about that size in semi-annual and annual reports for several years). However, the total distributions for 2023 for the fund (all classes) were nearly $14 billion. So this means the dividends were invested in the stocks of the index until distribution time.

Keep in mind for a mutual fund where shareholders reinvest distributions, nothing needs to be done (the reinvestment is just an accounting shift). Stocks only have to be sold for people taking distributions in cash (in the mutual fund or all shareholders for an ETF).

Therefore whether a fund distributes quarterly or annually really makes no difference to returns.
Geologist
Posts: 3755
Joined: Fri Jan 02, 2009 6:35 pm

Re: Move VG Roth to Fidelity for ZERO fund?

Post by Geologist »

I'm with rkhusky and White Coat Investor. The difference in expense ratio is not material. 0.03% is $30 per $100,000 invested per year. Even compounded over many years, this is not going to make a significant difference (50 x 30 = $1500).
User avatar
Feldman
Posts: 408
Joined: Sun May 19, 2024 12:46 pm
Location: . . . From Across The Hall!

Re: Move VG Roth to Fidelity for ZERO fund?

Post by Feldman »

Geologist wrote: Thu Jan 30, 2025 7:02 pm Practically all funds maintain some cash in a money market fund for short-term liquidity purposes.

Having said that, most of the time the distributions are much larger than the size of the money market account. For example, in the 2023 annual report, the Vanguard 500 fund cash had a money market fund of $2.5 billion (and it had been about that size in semi-annual and annual reports for several years). However, the total distributions for 2023 for the fund (all classes) were nearly $14 billion. So this means the dividends were invested in the stocks of the index until distribution time.

Keep in mind for a mutual fund where shareholders reinvest distributions, nothing needs to be done (the reinvestment is just an accounting shift). Stocks only have to be sold for people taking distributions in cash (in the mutual fund or all shareholders for an ETF).

Therefore whether a fund distributes quarterly or annually really makes no difference to returns.
Thank you for the clear explanation.
Eno Deb
Posts: 870
Joined: Sun Feb 03, 2019 3:08 pm

Re: Move VG Roth to Fidelity for ZERO fund?

Post by Eno Deb »

GoldStar wrote: Thu Jan 30, 2025 6:13 pm
Eno Deb wrote: Thu Jan 30, 2025 6:00 pm No reference, just speculation. If they distribute the dividends quarterly, as investor I can invest them earlier and earn some returns.
Okay. I think your speculation is wrong.
If a fund distributes $1.00 a year in December you can take that $1 after the fund drops by that $1 and put it back in the fund. If, instead it drops 25 cents 4 times a year that is 4 times the value drops by 25 cents. You take that 25 and invest it back in the fund. Net is the same.
I think it depends on what the fund does with the dividends that it doesn't pay out quickly. If they keep it as cash in the fund, they will probably earn some interest. If they distribute it earlier you can invest it (same fund or not) and earn some returns.
Last edited by Eno Deb on Thu Jan 30, 2025 7:17 pm, edited 1 time in total.
GoldStar
Posts: 1263
Joined: Wed May 23, 2018 10:59 am

Re: Move VG Roth to Fidelity for ZERO fund?

Post by GoldStar »

Geologist wrote: Thu Jan 30, 2025 7:02 pm
Therefore whether a fund distributes quarterly or annually really makes no difference to returns.
Thanks. I was beginning to think I was missing something when 3 people were telling me otherwise and was not able to articulate it as well.

It seems this is just another case of folks going out of their way with trying to find fault with this fund.
Eno Deb
Posts: 870
Joined: Sun Feb 03, 2019 3:08 pm

Re: Move VG Roth to Fidelity for ZERO fund?

Post by Eno Deb »

Geologist wrote: Thu Jan 30, 2025 7:02 pm Practically all funds maintain some cash in a money market fund for short-term liquidity purposes.

Having said that, most of the time the distributions are much larger than the size of the money market account. For example, in the 2023 annual report, the Vanguard 500 fund cash had a money market fund of $2.5 billion (and it had been about that size in semi-annual and annual reports for several years). However, the total distributions for 2023 for the fund (all classes) were nearly $14 billion. So this means the dividends were invested in the stocks of the index until distribution time.
That also seems weird, because then two funds holding the same stocks but having different distribution schedules would likely have different dividend yields depending on how the holdings develop throughout the year. Are stock funds allowed to simply reinvest dividends instead of distributing them?
User avatar
Feldman
Posts: 408
Joined: Sun May 19, 2024 12:46 pm
Location: . . . From Across The Hall!

Re: Move VG Roth to Fidelity for ZERO fund?

Post by Feldman »

GoldStar wrote: Thu Jan 30, 2025 7:17 pm
Geologist wrote: Thu Jan 30, 2025 7:02 pm
Therefore whether a fund distributes quarterly or annually really makes no difference to returns.
Thanks. I was beginning to think I was missing something when 3 people were telling me otherwise and was not able to articulate it as well.

It seems this is just another case of folks going out of their way with trying to find fault with this fund.
I admitted to not being confident in how the fund was structured and what was actually happening with the unpaid dividends. Discussing topics is how we reach greater understanding. Had you articulated with the same effectiveness and confidence as Geologist, I would have accepted that. I'm appreciative, and we all learned something.
Geologist
Posts: 3755
Joined: Fri Jan 02, 2009 6:35 pm

Re: Move VG Roth to Fidelity for ZERO fund?

Post by Geologist »

I suppose there could be one reason why Fidelity Zero funds pay distributions annually: there is some level of administrative expense in paying distributions. Since the expenses of the Fidelity Zero funds (except for the fees and expenses of the Independent Trustees) are being paid by Fidelity Management and Research (the parent company of Fidelity), it lowers their expenses if distributions are only paid once per year.
GoldStar
Posts: 1263
Joined: Wed May 23, 2018 10:59 am

Re: Move VG Roth to Fidelity for ZERO fund?

Post by GoldStar »

Feldman wrote: Thu Jan 30, 2025 7:25 pm
GoldStar wrote: Thu Jan 30, 2025 7:17 pm

Thanks. I was beginning to think I was missing something when 3 people were telling me otherwise and was not able to articulate it as well.

It seems this is just another case of folks going out of their way with trying to find fault with this fund.
I admitted to not being confident in how the fund was structured and what was actually happening with the unpaid dividends. Discussing topics is how we reach greater understanding. Had you articulated with the same effectiveness and confidence as Geologist, I would have accepted that. I'm appreciative, and we all learned something.
I didn't mean any ill will against you or anyone else in this thread specifically. It's just for years when this fund comes up different speculations around other ways Fidelity might be making money, or how the fund must be inferior, have come up. Usually someone else jumps in and shoots those items down. This is the first time I recall the dividend payment schedule being brought up as a negative and I too, was really trying to sort out if there was really a valid negative this time.
The only potential downside of this fund is you can't move it outside of Fidelity. Otherwise - it is a great fund.
Eno Deb
Posts: 870
Joined: Sun Feb 03, 2019 3:08 pm

Re: Move VG Roth to Fidelity for ZERO fund?

Post by Eno Deb »

GoldStar wrote: Thu Jan 30, 2025 7:39 pmThis is the first time I recall the dividend payment schedule being brought up as a negative
As the person who first brought it up: if you re-read my first post you'll see that I was asking a question. Please don't put words in my mouth.
GoldStar
Posts: 1263
Joined: Wed May 23, 2018 10:59 am

Re: Move VG Roth to Fidelity for ZERO fund?

Post by GoldStar »

Eno Deb wrote: Thu Jan 30, 2025 7:43 pm
GoldStar wrote: Thu Jan 30, 2025 7:39 pmThis is the first time I recall the dividend payment schedule being brought up as a negative
As the person who first brought it up: if you re-read my first post you'll see that I was asking a question. Please don't put words in my mouth.
With all respect - the following are your words and it isn't a question- it is a statement of certainty:
In any case it means that -- assuming equal dividend yield -- the investor will have a slightly lower return on the dividends than with a fund that distributes more often
.

Next poster was also a statement of certainly following yours.
User avatar
bikefish
Posts: 290
Joined: Wed Jul 10, 2024 10:38 am

Re: Move VG Roth to Fidelity for ZERO fund?

Post by bikefish »

I am not even sure Milburn Drysdale or Mr. Mooney would consider making the switch. Juice not worth the squeeze.
User avatar
papiper
Posts: 282
Joined: Tue May 28, 2013 10:36 am

Re: Move VG Roth to Fidelity for ZERO fund?

Post by papiper »

from Marketwatch... 1YR. 3Yr.* 5 Yr.* (*annualized)
VTSAX 23.77% 12.00%. 14.16%
FZROX 23.86% 12.16%. 14.31%

A very small difference - but what an amazing stretch the market has had these last years!
User avatar
sycamore
Posts: 7619
Joined: Tue May 08, 2018 12:06 pm

Re: Move VG Roth to Fidelity for ZERO fund?

Post by sycamore »

dave.m wrote: Thu Jan 30, 2025 3:01 pm ...
The expense was extremely low for VTSAX, however, it’s not zero.
...
It appears the Fidelity ZERO Large Cap Index Fund (FNILX) more closely resembles the S&P 500 index vanguard offers...
If you want zero ER and something that tracks the S&P 500, how about BNY Mellon US Large Cap Core Equity ETF , ticker BKLC?

You can trade it at any brokerage. It won't suffer from the lock-in of the Fidelity Zero mutual funds.
Tramper Al
Posts: 3878
Joined: Thu Oct 18, 2007 11:42 am

Re: Move VG Roth to Fidelity for ZERO fund?

Post by Tramper Al »

dave.m wrote: Thu Jan 30, 2025 3:01 pm Has anyone already made the switch? Or considered it and stayed with Vanguard? What is the opinion of the forum about this potential decision?
I use FZILX (this is the "zero" International Equity) and I find some of the discussion here of interest. I don't think it's a great look, though, for forum respondents to tell the OP that his/her interest in a financial matter like this is not worth the time of day. I know I've seen celebratory threads about a fund lowering its expenses from 0.06 to 0.03, for example - maybe its OK if it lands you (still) at Vanguard? Not to mention so many threads about nothing. My international allocation is somewhere near 10 times the example above, putting me in line for savings of $15,000? A little here, a little there, pretty soon we're talking about real money.
Geologist
Posts: 3755
Joined: Fri Jan 02, 2009 6:35 pm

Re: Move VG Roth to Fidelity for ZERO fund?

Post by Geologist »

Eno Deb wrote: Thu Jan 30, 2025 7:23 pm
Geologist wrote: Thu Jan 30, 2025 7:02 pm Practically all funds maintain some cash in a money market fund for short-term liquidity purposes.

Having said that, most of the time the distributions are much larger than the size of the money market account. For example, in the 2023 annual report, the Vanguard 500 fund cash had a money market fund of $2.5 billion (and it had been about that size in semi-annual and annual reports for several years). However, the total distributions for 2023 for the fund (all classes) were nearly $14 billion. So this means the dividends were invested in the stocks of the index until distribution time.
That also seems weird, because then two funds holding the same stocks but having different distribution schedules would likely have different dividend yields depending on how the holdings develop throughout the year. Are stock funds allowed to simply reinvest dividends instead of distributing them?
Mutual funds must distribute essentially all their net income each year, but there is no requirement they hold the dividends they receive in cash until they distribute them. Furthermore, if they are index funds, to minimize their tracking error, they will want to remain as closely invested to the index as possible. That would mean investing available cash (beyond their usual minimum for liquidity) in the index. Keep in mind that the fund receives cash in a number of ways, not just from dividends: new investments from investors, interest on the liquid cash. (and they may need to disburse cash for expenses or for investors redeeming shares). Therefore, they can just invest net cash that comes in.

Finally, as I pointed out in another post, for mutual fund investors who reinvest distributions (typically this is most; for the Fidelity Total Stock Zero fund, it appears to be more than 90%), no cash is required for the distributions. There is just a bookkeeping change that adds shares to each account at a lower NAV.

Edit: by the way, the same fund can have different yields. Vanguard ETF share classes have all distributions in cash and each brokerage reinvests those distributions on different days (for investors who reinvest distributions). This creates different yields for that fund depending on the share price that each brokerage gets for its purchase of the ETF for reinvestment.
rkhusky
Posts: 20716
Joined: Thu Aug 18, 2011 8:09 pm

Re: Move VG Roth to Fidelity for ZERO fund?

Post by rkhusky »

If I were at Fidelity I would look at the zero funds, but would probably go with their standard Total Market fund. Using a standard third-party index, instead of the proprietary index that the zero funds follow, would be worth the tiny ER difference.
Minty
Posts: 810
Joined: Sun Mar 24, 2013 3:19 pm
Location: NorCal

Re: Move VG Roth to Fidelity for ZERO fund?

Post by Minty »

I think another reason FZROX has outperformed and may well continue to outperform is that in addition to waving the ER, Fidelity pays no licensing fee to the benchmark owner--no sliver to S&P or Wilshire. I just checked, Portfolio Visualizer reports that as of 1/31/2025, FZROX has outperformed VTI and VTSAX in every measured time period, by 10 basis points annually for VTI, 14 for VTSAX. Just as Mr. Bogle explained "invest we must," it is also true that "choose we must." Choosing the best performer takes no more time or effort, so that's my approach.
Core Four w/ nominal bonds & TIPS. Refi Rampage: Purchase: 3.875% 30 -> R1 3% 20 -> R2 2.375% 15 -> R3 1.99% 15 -> R4 1.875% 15
tibbitts
Posts: 26770
Joined: Tue Feb 27, 2007 5:50 pm

Re: Move VG Roth to Fidelity for ZERO fund?

Post by tibbitts »

Tramper Al wrote: Fri Jan 31, 2025 12:13 pm
dave.m wrote: Thu Jan 30, 2025 3:01 pm Has anyone already made the switch? Or considered it and stayed with Vanguard? What is the opinion of the forum about this potential decision?
I use FZILX (this is the "zero" International Equity) and I find some of the discussion here of interest. I don't think it's a great look, though, for forum respondents to tell the OP that his/her interest in a financial matter like this is not worth the time of day. I know I've seen celebratory threads about a fund lowering its expenses from 0.06 to 0.03, for example - maybe its OK if it lands you (still) at Vanguard? Not to mention so many threads about nothing. My international allocation is somewhere near 10 times the example above, putting me in line for savings of $15,000? A little here, a little there, pretty soon we're talking about real money.
The OP asked for opinions and the consensus seems to be that this is a waste of time and effort, even though not much of either may be required. However if the OP derives some personal pleasure from it, like with saving $5 on tax software or other activities Bogleheads post about from time to time, then there might be enough value in that to make the switch worthwhile to the OP.
PeterParker
Posts: 194
Joined: Sun Mar 17, 2013 2:19 pm

Re: Move VG Roth to Fidelity for ZERO fund?

Post by PeterParker »

Just like whether you should collect 'dividend' stocks or not, or whether Fidelity "zero expense" juices their fees on other hidden BS like bid-ask or other obscure or altogether hidden fees, which they obviously do, it's ultimately a 'waste of time' discussion, but if it makes you feel good, transfer to the zero ER funds!

Remember time is money. If you're worth $150 an hour and have labored an hour over this (including clicking all the buttons to do the rollover and the forms and the passwords) + forum time here, whelp, there goes your gains on about $1MM transfered!
Geologist
Posts: 3755
Joined: Fri Jan 02, 2009 6:35 pm

Re: Move VG Roth to Fidelity for ZERO fund?

Post by Geologist »

Minty wrote: Fri Jan 31, 2025 9:04 pm I think another reason FZROX has outperformed and may well continue to outperform is that in addition to waving the ER, Fidelity pays no licensing fee to the benchmark owner--no sliver to S&P or Wilshire. I just checked, Portfolio Visualizer reports that as of 1/31/2025, FZROX has outperformed VTI and VTSAX in every measured time period, by 10 basis points annually for VTI, 14 for VTSAX. Just as Mr. Bogle explained "invest we must," it is also true that "choose we must." Choosing the best performer takes no more time or effort, so that's my approach.
First, the expense ratio (ER) includes the fee for using the index for any index fund. Therefore, this is not “another reason” FZROX can outperform because the fee is in addition to the other expenses of the fund, it is part of the total expenses that make up a fund’s expense ratio.

Second, if you read the prospectus for the Fidelity Zero funds, you will see that they pay a fee to S&P for their index (Fidelity Product Services “has contracted with S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC) to calculate and maintain the index”). So you see S&P is involved and is paid.

It may be that because Fidelity designed the index, the contractual fee is lower than using general indexes. However, Fidelity is paying all the expenses of the fund so a lower fee here would just reduce costs to Fidelity.
feh
Posts: 2243
Joined: Sat Dec 15, 2012 10:39 am

Re: Move VG Roth to Fidelity for ZERO fund?

Post by feh »

dave.m wrote: Thu Jan 30, 2025 3:01 pm My Roth account at Vanguard currently has 100% investment in VTSAX. My other retirement accounts include bonds and international.

The expense was extremely low for VTSAX, however, it’s not zero.
It's close enough, IMO. I wouldn't bother with the switch just for this reason.
User avatar
sycamore
Posts: 7619
Joined: Tue May 08, 2018 12:06 pm

Re: Move VG Roth to Fidelity for ZERO fund?

Post by sycamore »

Minty wrote: Fri Jan 31, 2025 9:04 pm I just checked, Portfolio Visualizer reports that as of 1/31/2025, FZROX has outperformed VTI and VTSAX in every measured time period, by 10 basis points annually for VTI, 14 for VTSAX.
Methinks you misunderstand how Portfolio Visualizer works :)

You say PV says FZROX wins in "every measured time period". To disprove that, I merely need to find one time period where it's not true. On my very first guess at a time period I found one:
https://www.portfoliovisualizer.com/bac ... UuswBUt7RY

FZROX lost by 10 bps in the Jan 2020-Dec 2021 time period.

I bet you too can find some time periods like that! Welcome to the fun world of backtesting a couple of situations and drawing inappropriate conclusions! :sharebeer
Minty
Posts: 810
Joined: Sun Mar 24, 2013 3:19 pm
Location: NorCal

Re: Move VG Roth to Fidelity for ZERO fund?

Post by Minty »

Geologist wrote: Sat Feb 01, 2025 6:56 am
Minty wrote: Fri Jan 31, 2025 9:04 pm I think another reason FZROX has outperformed and may well continue to outperform is that in addition to waving the ER, Fidelity pays no licensing fee to the benchmark owner--no sliver to S&P or Wilshire. I just checked, Portfolio Visualizer reports that as of 1/31/2025, FZROX has outperformed VTI and VTSAX in every measured time period, by 10 basis points annually for VTI, 14 for VTSAX. Just as Mr. Bogle explained "invest we must," it is also true that "choose we must." Choosing the best performer takes no more time or effort, so that's my approach.
First, the expense ratio (ER) includes the fee for using the index for any index fund. Therefore, this is not “another reason” FZROX can outperform because the fee is in addition to the other expenses of the fund, it is part of the total expenses that make up a fund’s expense ratio.

Second, if you read the prospectus for the Fidelity Zero funds, you will see that they pay a fee to S&P for their index (Fidelity Product Services “has contracted with S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC) to calculate and maintain the index”). So you see S&P is involved and is paid.

It may be that because Fidelity designed the index, the contractual fee is lower than using general indexes. However, Fidelity is paying all the expenses of the fund so a lower fee here would just reduce costs to Fidelity.
I think we may be agreeing that Fidelity has made a better mousetrap. I hope I am not misreading you, but I don't think you are questioning that a fund which does not license a benchmark has lower costs--whoever pays them--than one that does. Or that a producer which has figured out a way to offer a product at a lesser cost, may be able to pass along the savings to consumers.
Core Four w/ nominal bonds & TIPS. Refi Rampage: Purchase: 3.875% 30 -> R1 3% 20 -> R2 2.375% 15 -> R3 1.99% 15 -> R4 1.875% 15
Post Reply