Despite the good moves of removing minimums, removing the distinctions of share class, and lowering the ERs for existing index funds to those of the lowest ER class (of the previous classes), Fidelity will make up some ground on money market balances.tj wrote: ↑Sun Aug 19, 2018 4:33 pmFidelity has plenty of high-profit funds. They can much better afford "loss leaders". Of course, if everyone abandoned the more expensive options, they wouldn't be able to do that.Tdubs wrote: ↑Sun Aug 19, 2018 4:17 pmI wonder the same about Fidelity. How does VG not keep up with the competition and accept some funds as loss leaders? They will have to restructure how they make money.tj wrote: ↑Sun Aug 19, 2018 3:09 pmI don't see how VG can offer Zero ER funds. How would VG fund it's operations?Tdubs wrote: ↑Sun Aug 19, 2018 7:35 amI'm sure it's addressed somewhere in this long thread, but what are the chances of VG following suit? I don't understand how they can withstand conceding the ER high ground long term.
I just transferred my IRAs to VG a couple months ago and have no loyalty to it or taxable account complications in moving on to FIDO. In fact, for my daughter's small IRA, I should do that anyway given the lack of minimums.
Vanguard's VMFXX has an ER of 0.11%. It is used as the settlement fund in brokerage accounts that Vanguard is pushing AGGRESSIVELY. They call me every two weeks to "upgrade" to one.
Fidelity uses SPAXX as its settlement fund for its brokerage accounts. The ER is 0.42% - almost four times the ER of Vanguard's brokerage settlement fund.
The Fidelity ZERO funds are only available to Fidelity brokerage accounts, so everyone who wants one will have a brokerage account, and idle cash in those accounts will provide four times the return for Fidelity that it does for Vanguard.
This is the same thing that Schwab does with its SWGXX settlement fund with an ER of 0.61%. That is going on six times the ER of Vanguard's settlement fund.