
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?
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.DartThrower wrote: ↑Fri Aug 10, 2018 9:52 amBased 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 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.FIBoston wrote: ↑Fri Aug 10, 2018 11:28 amDon'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.
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.burnout454 wrote: ↑Fri Aug 10, 2018 8:53 amForgive 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.
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.burnout454 wrote: ↑Fri Aug 10, 2018 8:53 amOther 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?
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.
iceport,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.
(emphasis mine)Nate79 wrote: ↑Fri Aug 10, 2018 11:53 amI 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.FIBoston wrote: ↑Fri Aug 10, 2018 11:28 amDon'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.
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.triceratop wrote: ↑Fri Aug 10, 2018 12:50 pm(emphasis mine)Nate79 wrote: ↑Fri Aug 10, 2018 11:53 amI 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.FIBoston wrote: ↑Fri Aug 10, 2018 11:28 amDon'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.
Not if you plan to gift your shares to heirs or charity. It's also not how tax drag is generally understood.
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 removedMasterblaster wrote: ↑Fri Aug 10, 2018 12:57 pmThe 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 ?
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.sport wrote: ↑Fri Aug 10, 2018 1:43 pmWhen 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.
Past performance may not be indicative of future results.HEDGEFUNDIE wrote: ↑Fri Aug 10, 2018 1:56 pmI 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.sport wrote: ↑Fri Aug 10, 2018 1:43 pmWhen 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.
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.sport wrote: ↑Fri Aug 10, 2018 1:58 pmPast performance may not be indicative of future results.HEDGEFUNDIE wrote: ↑Fri Aug 10, 2018 1:56 pmI 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.sport wrote: ↑Fri Aug 10, 2018 1:43 pmWhen 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.![]()
But you're not really rewarding them if you invest in only the loss leaders.9-5 Suited wrote: ↑Fri Aug 10, 2018 12:33 pmFidelity 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?
Agree, if Vanguard is what they say they are, they will not engage in subsidizing selected groups of investors.HEDGEFUNDIE wrote: ↑Fri Aug 10, 2018 2:23 pmHere'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.
What's the ER on Fidelity's small value index fund?burnout454 wrote: ↑Fri Aug 10, 2018 8:53 amForgive 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.
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 is the ticker? I can not find it in a quick internet search.White Coat Investor wrote: ↑Fri Aug 10, 2018 3:34 pmWhat's the ER on Fidelity's small value index fund?burnout454 wrote: ↑Fri Aug 10, 2018 8:53 amForgive 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.
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?
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.triceratop wrote: ↑Fri Aug 10, 2018 4:23 pmI 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).
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.HEDGEFUNDIE wrote: ↑Fri Aug 10, 2018 2:23 pmWell 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.sport wrote: ↑Fri Aug 10, 2018 1:58 pmPast performance may not be indicative of future results.HEDGEFUNDIE wrote: ↑Fri Aug 10, 2018 1:56 pmI 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.sport wrote: ↑Fri Aug 10, 2018 1:43 pmWhen 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.![]()
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.
True, true.Nate79 wrote: ↑Fri Aug 10, 2018 4:33 pmIJS 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.triceratop wrote: ↑Fri Aug 10, 2018 4:23 pmI 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).
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https://www.reuters.com/investigates/sp ... ty-family/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.
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.Austintatious wrote: ↑Fri Aug 10, 2018 6:26 pmI have to wonder if this is "The Bigger Story":
https://www.reuters.com/investigates/sp ... ty-family/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.
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.
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).Jeff Albertson wrote: ↑Fri Aug 10, 2018 6:41 pmAny 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.
They have tried to upsell me, however.HEDGEFUNDIE wrote: ↑Fri Aug 10, 2018 1:56 pmI 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.sport wrote: ↑Fri Aug 10, 2018 1:43 pmWhen 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.
The quoted post and a lot of the above posts talk about the Vanguard culture.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.
Me too. A firm but polite “No” works well.patrick wrote: ↑Fri Aug 10, 2018 7:14 pmThey have tried to upsell me, however.HEDGEFUNDIE wrote: ↑Fri Aug 10, 2018 1:56 pmI 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.sport wrote: ↑Fri Aug 10, 2018 1:43 pmWhen 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.
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.sambb wrote: ↑Fri Aug 10, 2018 7:08 pmI 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.
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.White Coat Investor wrote: ↑Fri Aug 10, 2018 3:34 pmWhat's the ER on Fidelity's small value index fund?
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
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.John Laurens wrote: ↑Fri Aug 10, 2018 10:06 amI 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