The Bigger Story: Fidelity Expense Ratios

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burnout454
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The Bigger Story: Fidelity Expense Ratios

Post by burnout454 » 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?
Last edited by burnout454 on Fri Aug 10, 2018 6:37 pm, edited 1 time in total.

megabad
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Re: The Bigger Story: Fidelity Expense Ratios

Post by megabad » Fri Aug 10, 2018 9:49 am

I agree this a very positive recent change. And I also feel that the lower expenses on funds that track a known index instead of a newly created one (like the Fidelity ZERO cost funds) more interest me. I think this brings Fidelity in line with Vanguard (maybe even ahead) even after you add the capital gains distribution impact. Fidelity is a great brokerage house imo. Their 401k service has been best in class in my experience.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by DartThrower » 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.
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Re: The Bigger Story: Fidelity Expense Ratios

Post by scdevon » 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.
I have almost everything in FSTVX. .04% ER and it reliably yields 1.6%. I like that it follows the ^DWCF almost to the penny every day.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by Nate79 » Fri Aug 10, 2018 9:59 am

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.
I don't think anyone has recommended someone with capital gains or even to use these mutual funds in a taxable accounts due to the tax cost. Use the low cost ETF's instead if want to save cost.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by John Laurens » Fri Aug 10, 2018 10:06 am

I hope this move by Fidelity will actually allow me to move to Vanguard. If Vanguard responds by dropping share classes, I could move my solo 401k to Vanguard. As it stands now, Vanguard’s total US stock index within the i401k is nearly 10 times the cost of Fidelity’s. 14bp vs 1.5. Vanguard is certainly not the low cost leader when it comes to a solo 401k

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greg24
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Re: The Bigger Story: Fidelity Expense Ratios

Post by greg24 » Fri Aug 10, 2018 10:17 am

I'm not sure ~3 bp is significantly cheaper. It is cheaper. Enough to move our entire portfolio of investments? If I had a million dollars, it'd be $300 per year.

Such a move would would include my money market funds, which would suddenly be yielding ~22 fewer bp at Fidelity, AFAICT.

I do like the continued market pressure to lower fees.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by tfb » Fri Aug 10, 2018 10:59 am

Remember so many people still are not investing in index funds yet. If they became aware because they saw a Fidelity ad on TV, it's going to be a win regardless whether they get into index funds from Fidelity or Vanguard. Who's "the best" isn't as important as getting closer to good.
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Re: The Bigger Story: Fidelity Expense Ratios

Post by FIBoston » 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.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by pokebowl » 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.
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Re: The Bigger Story: Fidelity Expense Ratios

Post by HEDGEFUNDIE » 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.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by Nate79 » 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.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by sperry8 » Fri Aug 10, 2018 11:56 am

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?
Wow, didn't know this. I wouldn't move... but new monies will definitely go to funds with lower ERs (assuming they track their index similarly). I hold an index fund with Fidelity and they have a good website and good reporting. I'd have no issue investing with them should new monies need to go to funds in those categories.
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Re: The Bigger Story: Fidelity Expense Ratios

Post by TwstdSista » Fri Aug 10, 2018 11:57 am

I don't know that it's enough to move brokerages. But I'm certainly glad I'm already at Fidelity!

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Re: The Bigger Story: Fidelity Expense Ratios

Post by iceport » 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.
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Re: The Bigger Story: Fidelity Expense Ratios

Post by greg24 » 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.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by 9-5 Suited » 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.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by MichCPA » Fri Aug 10, 2018 12:44 pm

All of this tax drag talk ignores the fact that for me and many others on this board 24,000 per year goes into tax advantaged accounts. As far as the index being tracked, if something like 60-80% of your portfolio is an S&P 500 fund it seems like those issued are substantially reduced. I think the proper approach is for me to wait until the beginning of 2019 for the dust to settle and then see if its worth moving stuff over the fidelity. That will give me about half of a year to see how the new fidelity funds track their benchmarks.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by JamalJones » Fri Aug 10, 2018 12:48 pm

iceport wrote:
Fri Aug 10, 2018 11:57 am

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.
iceport,

Very good point! The Vanguard equivalent has ~4x the holdings so much more diverse. Doesn't mean it will always outperform the Fido fund, but I would think most Bogleheads would prefer that Vanguard version.
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Re: The Bigger Story: Fidelity Expense Ratios

Post by triceratop » 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.
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Re: The Bigger Story: Fidelity Expense Ratios

Post by Masterblaster » Fri Aug 10, 2018 12:57 pm

The ER's posted from Fidelity may not be what they seem.

If I pull up the prospectus from fund FSTVX (for example) I get an ER of 0.015 percent plus "other annual expenses" of 0.02 percent. The way I count the true ER for this fund is 0.035 percent which is the same as it's been. The reported 0.015% ER is misleading.

Are they just playing with semantics here ?

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Re: The Bigger Story: Fidelity Expense Ratios

Post by Nate79 » 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).

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Re: The Bigger Story: Fidelity Expense Ratios

Post by HEDGEFUNDIE » Fri Aug 10, 2018 1:13 pm

Masterblaster wrote:
Fri Aug 10, 2018 12:57 pm
The ER's posted from Fidelity may not be what they seem.

If I pull up the prospectus from fund FSTVX (for example) I get an ER of 0.015 percent plus "other annual expenses" of 0.02 percent. The way I count the true ER for this fund is 0.035 percent which is the same as it's been. The reported 0.015% ER is misleading.

Are they just playing with semantics here ?
The prospectus has not yet been updated with these new fees, it has a date of 4/28/2018. For example that doc still says the premium class has a minimum entry of $10k, which has now been removed

The quote page has the updated fees as of 8/1/2018 (0.15% for both gross and net expense ratio).

https://fundresearch.fidelity.com/mutua ... /315911800

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Re: The Bigger Story: Fidelity Expense Ratios

Post by sport » Fri Aug 10, 2018 1:43 pm

Although younger Bogleheads probably do not think of such things, there will come a time when you will no longer be managing your accounts. You may become disabled, and someone will manage them for you. Or you may leave them to your beneficiaries, such as your spouse, or children.

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.

So, while you may save some money in the short run be moving accounts from V to F, or just having accounts at F in preference to V, in the long run F will be making big profits from you/your accounts in most cases. It should be noted that F is not offering these very low cost products out of the goodness of their hearts. They are in business for only one reason: to make a profit. So, you can be sure that they have calculated that they will end up making more profits by offering these products at low fees.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by farnsy » Fri Aug 10, 2018 1:54 pm

This change in expense ratios is great news for Fidelity investors like myself. Well, it's unambiguously good news anyway. The fees were already great.

As far as Fidelity now being better than Vanguard, I guess so but the differences are extremely small. The reality is that index funds from both providers are among the cheapest anywhere and running pretty much at cost. Investing in them is dramatically better than most alternatives, but the two are not all that different from each other. If you are investing in Vanguard or Fidelity index funds, then you are doing well, and that's not going to change.

There are reasons to choose one over the other, such as Fidelity running a much better solo 401(k) program or Vanguard offering more index funds (like a corporate bond index fund), but the difference in expense ratios is small among them. Basically Fidelity had to do this to halt the ingrained notion that you should always use Vanguard if you are being cost conscious. It's a price war and we are the winners.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by HEDGEFUNDIE » 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.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by sport » Fri Aug 10, 2018 1:58 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.
Past performance may not be indicative of future results. :twisted:

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Re: The Bigger Story: Fidelity Expense Ratios

Post by HEDGEFUNDIE » Fri Aug 10, 2018 2:23 pm

sport wrote:
Fri Aug 10, 2018 1:58 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.
Past performance may not be indicative of future results. :twisted:
Well ok, as long as we are talking hypotheticals, if and when Vanguard decides to match these fees, I'll be looking for your outraged post asking why the "non-profit" and "altruistic" Vanguard didn't lower the fees earlier.

Here's the thing, if in fact Vanguard is non-profit at its core, they should be indifferent between managing more or fewer assets. All the cost efficiencies would be passed on to the investor. Which means they have much less incentive to lower fees to attract more assets. Which leads me to believe that a meaningful fee difference between Vanguard and Fidelity could persist.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by jeffyscott » Fri Aug 10, 2018 3:22 pm

9-5 Suited wrote:
Fri Aug 10, 2018 12:33 pm
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?
But you're not really rewarding them if you invest in only the loss leaders.
press on, regardless - John C. Bogle

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Re: The Bigger Story: Fidelity Expense Ratios

Post by jeffyscott » Fri Aug 10, 2018 3:33 pm

HEDGEFUNDIE wrote:
Fri Aug 10, 2018 2:23 pm
Here's the thing, if in fact Vanguard is non-profit at its core, they should be indifferent between managing more or fewer assets. All the cost efficiencies would be passed on to the investor. Which means they have much less incentive to lower fees to attract more assets. Which leads me to believe that a meaningful fee difference between Vanguard and Fidelity could persist.
Agree, if Vanguard is what they say they are, they will not engage in subsidizing selected groups of investors.

Schwab lowered many of their index fund ERs to less than Vanguard and eliminated minimums and tiers about 18 months ago. I don't think Vanguard did anything in response?
http://www.investmentnews.com/article/2 ... s-on-index
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Re: The Bigger Story: Fidelity Expense Ratios

Post by White Coat Investor » 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?
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Re: The Bigger Story: Fidelity Expense Ratios

Post by Nate79 » 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.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by triceratop » Fri Aug 10, 2018 4:23 pm

Nate79 wrote:
Fri Aug 10, 2018 4:22 pm
What is the ticker? I can not find it in a quick internet search.
I think it was a trick question; Fidelity has no such fund, showing the value Vanguard provides across the fund complex (in WCI's opinion anyway).
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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Re: The Bigger Story: Fidelity Expense Ratios

Post by Nate79 » Fri Aug 10, 2018 4:33 pm

triceratop wrote:
Fri Aug 10, 2018 4:23 pm
Nate79 wrote:
Fri Aug 10, 2018 4:22 pm
What is the ticker? I can not find it in a quick internet search.
I think it was a trick question; Fidelity has no such fund, showing the value Vanguard provides across the fund complex (in WCI's opinion anyway).
IJS is free to trade at Fidelity, which could explain (perhaps) why they do not have their own separate small cap value index fund. They have an active fund but it is closed to investors I think. IJS has a bigger ER than VBR but since we don't need to obsess about ER any more this should suffice.
:twisted:

spidercharm
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Re: The Bigger Story: Fidelity Expense Ratios

Post by spidercharm » Fri Aug 10, 2018 4:34 pm

HEDGEFUNDIE wrote:
Fri Aug 10, 2018 2:23 pm
sport wrote:
Fri Aug 10, 2018 1:58 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.
Past performance may not be indicative of future results. :twisted:
Well ok, as long as we are talking hypotheticals, if and when Vanguard decides to match these fees, I'll be looking for your outraged post asking why the "non-profit" and "altruistic" Vanguard didn't lower the fees earlier.

Here's the thing, if in fact Vanguard is non-profit at its core, they should be indifferent between managing more or fewer assets. All the cost efficiencies would be passed on to the investor. Which means they have much less incentive to lower fees to attract more assets. Which leads me to believe that a meaningful fee difference between Vanguard and Fidelity could persist.
Is there a higher chance of leaving potential cost reductions on the table when the model is not for profit? Just a question - not a statement.

When people talk about vanguard ownership model and the fact that they operate at cost (as an excuse to justify higher ER), it's not just about trading fees (which have come down significantly in the industry overall, so they should be insignificant portion of ER). How do we know if they are operating efficiently in terms of other costs including employee/headcount, infrastructure, technology and other operating expenses? How do these other costs get divided (I am assuming as overhead)? Does the ownership model and relative success over the years provide lack of incentive to optimize other costs?

Let's not forget - with everything being equal - as indexing asset base grow, we should expect ER to continue to be lowered. Otherwise there are definite inefficiencies somewhere. I wouldn't discount a possibility that Fido is not thinking of this as loss leader, but rather pure efficiency play by growing asset base.

I am not trying to say any of it is a problem. I like vanguard and have most of my assets with them (although I am seriously considering fido for some of the new money). Also, I sincerely appreciate what vanguard has done leading the industry and we all have benefited from it. I want them to improve, that's all. And, they should continue to lead the way (or at least not fall behind so much in setting trends).

Note: For this observation, I am not even comparing with new Fido zero cost funds (we will see how they perform), but rather more mature and existing institutional fund counterparts from fidelity where they dropped ER significantly (1.5bp for TSM and 6 bp for Total International).
Last edited by spidercharm on Fri Aug 10, 2018 4:50 pm, edited 5 times in total.

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triceratop
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Re: The Bigger Story: Fidelity Expense Ratios

Post by triceratop » Fri Aug 10, 2018 4:37 pm

Nate79 wrote:
Fri Aug 10, 2018 4:33 pm
triceratop wrote:
Fri Aug 10, 2018 4:23 pm
Nate79 wrote:
Fri Aug 10, 2018 4:22 pm
What is the ticker? I can not find it in a quick internet search.
I think it was a trick question; Fidelity has no such fund, showing the value Vanguard provides across the fund complex (in WCI's opinion anyway).
IJS is free to trade at Fidelity, which could explain (perhaps) why they do not have their own separate small cap value index fund. They have an active fund but it is closed to investors I think. IJS has a bigger ER than VBR but since we don't need to obsess about ER any more this should suffice.
:twisted:
True, true.

Of course people attuned to ideas of total cost have been fine with IJS (or VIOV) for quite a while since its tax efficiency over VBR has almost covered its extra expense ratio (and of course its deeper small/value exposure is the real reason people like the S&P index over the CRSP one). This is inconvenient to those who claim people who talk about tracking error and total cost are Vanguard shills though, so I haven't seen them bring up this point, where we seemingly endorse iShares funds over Vanguard on the same grounds. :twisted:
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

alter
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Re: The Bigger Story: Fidelity Expense Ratios

Post by alter » Fri Aug 10, 2018 4:56 pm

Thanks for the post OP, FUSVX looks like a great choice.

Austintatious
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Re: The Bigger Story: Fidelity Expense Ratios

Post by Austintatious » Fri Aug 10, 2018 6:26 pm

I have to wonder if this is "The Bigger Story":
Family First
How the owners of Fidelity get richer at everyday investors’ expense
By Tim McLaughlin

Filed Oct. 5, 2016, noon GMT

The billionaire Johnson clan has a private venture capital arm that competes directly for lucrative deals with the Fidelity funds in which millions of Americans put their nest eggs. Corporate governance specialists say the arrangement poses a troubling conflict of interest.

BOSTON - The mutual fund giant Fidelity Investments, founded seven decades ago and run ever since by the Johnson family, has won the trust of tens of millions of investors.

The company’s tradition of putting clients’ interests “before our own is a big part of what makes Fidelity special,” the fund firm says in its mission statement.

In at least one lucrative field, however, the Johnson family’s interests come first. A private venture capital arm run on behalf of the Johnsons, F-Prime Capital Partners, competes directly with the stable of Fidelity mutual funds in which the public invests. It’s an arrangement that securities lawyers say poses an unusual conflict of interest.
https://www.reuters.com/investigates/sp ... ty-family/

It's certainly big enough for me. If I knew that the corporate mentality reflected by that kind of practice existed at Vanguard, our life savings would certainly be elsewhere.

Jeff Albertson
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Re: The Bigger Story: Fidelity Expense Ratios

Post by Jeff Albertson » Fri Aug 10, 2018 6:41 pm

Any guarantees that Fidelity will continue these low fees in the future? If fees change in the future, you could change back to Vanguard. However, after a certain amount of built up capital gains, you are almost trapped into remaining & paying the higher fees. Vanguard could also raise fees, but, IMHO, much less likely.

carguyny
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Re: The Bigger Story: Fidelity Expense Ratios

Post by carguyny » Fri Aug 10, 2018 7:05 pm

Austintatious wrote:
Fri Aug 10, 2018 6:26 pm
I have to wonder if this is "The Bigger Story":
Family First
How the owners of Fidelity get richer at everyday investors’ expense
By Tim McLaughlin

Filed Oct. 5, 2016, noon GMT

The billionaire Johnson clan has a private venture capital arm that competes directly for lucrative deals with the Fidelity funds in which millions of Americans put their nest eggs. Corporate governance specialists say the arrangement poses a troubling conflict of interest.

BOSTON - The mutual fund giant Fidelity Investments, founded seven decades ago and run ever since by the Johnson family, has won the trust of tens of millions of investors.

The company’s tradition of putting clients’ interests “before our own is a big part of what makes Fidelity special,” the fund firm says in its mission statement.

In at least one lucrative field, however, the Johnson family’s interests come first. A private venture capital arm run on behalf of the Johnsons, F-Prime Capital Partners, competes directly with the stable of Fidelity mutual funds in which the public invests. It’s an arrangement that securities lawyers say poses an unusual conflict of interest.
https://www.reuters.com/investigates/sp ... ty-family/

It's certainly big enough for me. If I knew that the corporate mentality reflected by that kind of practice existed at Vanguard, our life savings would certainly be elsewhere.
Has nothing at all to do with index funds, I'm not looking at any of the big custodians for access to private investments so see no problem.

The one positive from this is I get great IPO access at Fidelity, which I don't get at Vanguard and Schwab (I have accounts at all 3).

sambb
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Re: The Bigger Story: Fidelity Expense Ratios

Post by sambb » Fri Aug 10, 2018 7:08 pm

I always find it puzzling here there are advocates for low expenses, until someone beats vanguard.
Sort of like the complaints about customer service from all sorts of places (airlines, etc.), except when it comes to vanguard.
It seems strange onjectively.
Kudos to fidelity for lowering expenses.

gostars
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Re: The Bigger Story: Fidelity Expense Ratios

Post by gostars » Fri Aug 10, 2018 7:11 pm

Jeff Albertson wrote:
Fri Aug 10, 2018 6:41 pm
Any guarantees that Fidelity will continue these low fees in the future? If fees change in the future, you could change back to Vanguard. However, after a certain amount of built up capital gains, you are almost trapped into remaining & paying the higher fees. Vanguard could also raise fees, but, IMHO, much less likely.
No guarantees, but those investing in taxable accounts should probably not be investing in non-Vanguard mutual funds to begin with because of the capital gains distributions. The big advantage to these changes comes is in tax-advantaged accounts, where people are free to sell their funds and leave if they don't like something Fidelity does in the future (another change not mentioned in this thread is Fidelity eliminating the fee they used to charge for closing an account). Those investing in taxable at Fidelity should probably continue to use the iShares ETFs, which don't match the new mutual fund ERs but still generally beat Vanguard by around 1bp, and are typically slightly more efficient when it comes to combined ER+tax cost when investing in taxable, at least according to the spreadsheet one of the people here created (my apologies to the creator of the spreadsheet for not remember who it was).

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Re: The Bigger Story: Fidelity Expense Ratios

Post by patrick » 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.

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cowdogman
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Re: The Bigger Story: Fidelity Expense Ratios

Post by cowdogman » 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.

Dottie57
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Re: The Bigger Story: Fidelity Expense Ratios

Post by Dottie57 » Fri Aug 10, 2018 7:49 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.
Me too. A firm but polite “No” works well.

EyeDee
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Vanguard Expense Ratios

Post by EyeDee » Fri Aug 10, 2018 8:14 pm

.
Although I would like to think that Vanguard provides funds at cost and that there is little they can do to compete with the Schwab and Fidelity on dropping share classes and expense ratios further, there appears to be some arbitrary control by Vanguard considering that Admiral share expense ratios always seem to equal ETF share expense ratios. If Vanguard was not doing something arbitrary, you would think that sometimes the Admiral share expense ratios would not equal the ETF share expense ratios.

Considering Vanguard seems to want to get most people to convert to brokerage accounts from mutual fund accounts, I have a wild proposal for Vanguard. Eliminate Vanguard Admiral shares for funds having ETF shares (which should grow in the future as they add ETF shares to their active funds) by merging them into Investor shares and drop ETF shares to their true cost. This would cause people who really want the lowest cost Vanguard shares to convert their shares to ETFs and perhaps get some hold outs converted from mutual fund accounts to brokerage accounts. It would also remove the need for those of us who are so desirous of avoiding brokerage accounts from having to deal with both Admiral and Investor shares (we would be putting our money where our mouths are by paying higher fees to stay with Investor shares in non-brokerage account and show Vanguard how many people will truly pay a little to stay non-brokerage accounts and if enough of us who have Admiral shares stay with the Investor shares the Investor shares would come down in cost).

Since ETFs can be bought in any amount, this would also emphasize that Vanguard is competing with Fidelity's and Schwab's minimum balances mutual funds with their ETFs and not with their mutual funds.

Of course to avoid costing considerable money to handle all the conversions to ETFs, they would have to automate the conversion from Investor shares to ETFs so it could be done from their web site instead of requiring a phone call (at least that is what I thought I read on the forum recently, perhaps someone with a brokerage account can verify that there is not already an option on brokerage accounts to do the conversions to ETFs).

Although this is a just a wild idea they are already doing this with some of their funds currently like Total World Stock Index Fund and FTSE All-World ex-US Small-Cap Index Fund. These funds might eventually get Admiral shares, but considering many people have mentioned that they hold FTSE All-World ex-US Small-Cap Index Fund ETF shares to get the lower cost shares the Admiral shares are likely to not come soon.
Randy

GLState
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Re: The Bigger Story: Fidelity Expense Ratios

Post by GLState » Fri Aug 10, 2018 9:02 pm

sambb wrote:
Fri Aug 10, 2018 7:08 pm
I always find it puzzling here there are advocates for low expenses, until someone beats vanguard.
Sort of like the complaints about customer service from all sorts of places (airlines, etc.), except when it comes to vanguard.
It seems strange onjectively.
Kudos to fidelity for lowering expenses.
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.
Last edited by GLState on Fri Aug 10, 2018 9:13 pm, edited 1 time in total.

passiveTiger
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Re: The Bigger Story: Fidelity Expense Ratios

Post by passiveTiger » Fri Aug 10, 2018 9:09 pm

White Coat Investor wrote:
Fri Aug 10, 2018 3:34 pm
What's the ER on Fidelity's small value index fund?
For the bored investor who is wise enough to not pay someone else for active management but is not wise enough to refrain from doing it oneself, Vanguard has more options for slice-and-dice indexing than Fidelity.

John Bogle and Burton Malkiel have stated (http://johncbogle.com/wordpress/wp-cont ... 0op-ed.pdf) "Eugene Fama and Kenneth French have suggested that higher returns can be generated by indexed portfolios of stocks with small capitalizations and low price-to-book-value ratios... Are they correct? We think not."

If someone is going to be bored, it would be far less expensive to seek adventure at Vanguard than Fidelity, though.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by DaftInvestor » Sat Aug 11, 2018 9:26 am

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.
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.

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Re: The Bigger Story: Fidelity Expense Ratios

Post by welderwannabe » Sat Aug 11, 2018 9:39 am

John Laurens wrote:
Fri Aug 10, 2018 10:06 am
I hope this move by Fidelity will actually allow me to move to Vanguard. If Vanguard responds by dropping share classes, I could move my solo 401k to Vanguard. As it stands now, Vanguard’s total US stock index within the i401k is nearly 10 times the cost of Fidelity’s. 14bp vs 1.5. Vanguard is certainly not the low cost leader when it comes to a solo 401k

Regards,
John
Fidelity's i401k product is far superior to Vanguard's. Even if Vanguard dropped their fees I still wouldn't move. Vanguard's i401k is extremely limited for some reason. No admiral shares. No individual bonds. No CDs.

No thanks.
I am not an investment professional, but I did stay at a Holiday Inn Express last night.

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