WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

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Paul Romano
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WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by Paul Romano » Wed Sep 12, 2018 4:50 pm

Fidelity Doubles Down on Free Fund Strategy

WSJ 9/12/18

https://www.fidelity.com/about-fidelity ... ith-launch





"Fidelity Investments is preparing to double its number of free index funds, raising the stakes in its push to lure new clients from rivals like Vanguard Group.

The giant money manager expects to launch the Zero Large Cap Index Fund and Zero Extended Market Index Fund in late September, it said in a Wednesday regulatory filing. Neither will charge management fees. It introduced its first two zero-fee index funds in August.

The moves represent the latest salvo in a price war across the investing world as firms duel for increasingly cost-sensitive clients. Cheaper funds tied to indexes have attracted trillions in new money since the 2008 financial crisis as investors lost faith in stock pickers.

Its two new free funds—Zero Large Cap and Zero Extended Market Index—will track indexes of large U.S. stocks and the total return of small- and midsize U.S. companies, respectively.

The two other free funds launched in August track broader U.S. and international stock benchmarks. They have attracted more than $1 billion in assets since their launch, according to Fidelity."
Last edited by Paul Romano on Wed Sep 12, 2018 8:36 pm, edited 3 times in total.

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Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by willthrill81 » Wed Sep 12, 2018 4:55 pm

$1 billion is all that they've gotten? Vanguard's Total Stock Index and Total International index funds have combined assets of $1.1 trillion. It doesn't seem that investors are leaving Vanguard in droves yet at least.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by retiringwhen » Wed Sep 12, 2018 5:02 pm

willthrill81 wrote:
Wed Sep 12, 2018 4:55 pm
$1 billion is all that they've gotten? Vanguard's Total Stock Index and Total International index funds have combined assets of $1.1 trillion. It doesn't seem that investors are leaving Vanguard in droves yet at least.
Anyone know where to see current numbers for inflows overall to Vanguard and Fidelity, unless it moves the bar, it is just re-arranging chairs on the deck within Fidelity.

I think this strategy cannot be evaluated for at least 2 years BTW. I personally am interested, but I would not consider moving funds there until they have been around for at least a couple of years (and we see if Fidelity puts any additional restrictions on account holders.)

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Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by AZAttorney11 » Wed Sep 12, 2018 5:03 pm

willthrill81 wrote:
Wed Sep 12, 2018 4:55 pm
$1 billion is all that they've gotten? Vanguard's Total Stock Index and Total International index funds have combined assets of $1.1 trillion. It doesn't seem that investors are leaving Vanguard in droves yet at least.
I think Fidelity announced this a few weeks ago. Let's give it some time...

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Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by 2pedals » Wed Sep 12, 2018 5:03 pm

1 billion since launch, Aug 1

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Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by willthrill81 » Wed Sep 12, 2018 5:06 pm

2pedals wrote:
Wed Sep 12, 2018 5:03 pm
1 billion since launch, Aug 1
So $1 billion growth in a little under six weeks is at the pace of about $9 billion annually. At that rate, it would take them 122 years to match Vanguard's current assets in these two fund types. A billion sounds like a lot to the layperson, but in the investment world, it's peanuts.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by 2pedals » Wed Sep 12, 2018 5:08 pm

willthrill81 wrote:
Wed Sep 12, 2018 5:06 pm
2pedals wrote:
Wed Sep 12, 2018 5:03 pm
1 billion since launch, Aug 1
So $1 billion growth in a little under six weeks is at the pace of about $9 billion annually. At that rate, it would take them 122 years to match Vanguard's current assets in these two fund types. A billion sounds like a lot to the layperson, but in the investment world, it's peanuts.
I think the game is how much new money they can get under management, anyway.

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Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by triceratop » Wed Sep 12, 2018 5:08 pm

2pedals wrote:
Wed Sep 12, 2018 5:08 pm
willthrill81 wrote:
Wed Sep 12, 2018 5:06 pm
2pedals wrote:
Wed Sep 12, 2018 5:03 pm
1 billion since launch, Aug 1
So $1 billion growth in a little under six weeks is at the pace of about $9 billion annually. At that rate, it would take them 122 years to match Vanguard's current assets in these two fund types. A billion sounds like a lot to the layperson, but in the investment world, it's peanuts.
I think the game is how much new money they can get under management, anyway.
New clients, and specifically clients to whom they can sell other services.
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Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by retiringwhen » Wed Sep 12, 2018 5:09 pm

Based on the following article from May, it appears that something I had not considered before may be much more important to Fidelity than stealing inflows from other customers fund providers.

It is keeping the money from flowing OUT of Fidelity. They have been bleeding for at least a decade. IF they can just keep the net inflows neutral, they will be in a much better position. Of course that would slow Vanguard and Blackrock, but only at the very margins.

On the active front, Fidelity Investments had overall outflows of about $5.6 billion, which were mostly on the active side. Fidelity’s active funds lost about $11.3 billion in net redemptions while its passive funds had $5.7 billion in positive flows.

...

Fidelity’s mutual fund woes were also described in a recent New York Times article, which said the firm’s mutual funds have had outflows in each of the last 10 years no matter how well they have performed. The article said investors have pulled $181 billion from Fidelity’s actively-managed mutual funds since 2010.
http://citywireusa.com/professional-buy ... s/a1124326
Last edited by retiringwhen on Wed Sep 12, 2018 5:23 pm, edited 1 time in total.

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Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by willthrill81 » Wed Sep 12, 2018 5:12 pm

retiringwhen wrote:
Wed Sep 12, 2018 5:09 pm
Based on the following article from May, it appears that something I had not considered before may be much more important to Fidelity than stealing inflows from other customers.

It is keeping the money from flowing OUT of Fidelity. They have been bleeding for at least a decade. IF they can just keep the net inflows neutral, they will be in a much better position. Of course that would slow Vanguard and Blackrock, but only at the very margins.

On the active front, Fidelity Investments had overall outflows of about $5.6 billion, which were mostly on the active side. Fidelity’s active funds lost about $11.3 billion in net redemptions while its passive funds had $5.7 billion in positive flows.

...

Fidelity’s mutual fund woes were also described in a recent New York Times article, which said the firm’s mutual funds have had outflows in each of the last 10 years no matter how well they have performed. The article said investors have pulled $181 billion from Fidelity’s actively-managed mutual funds since 2010.
http://citywireusa.com/professional-buy ... s/a1124326
That sounds like the most plausible motive for these funds. Staunch the outflows.

I think that most Vanguard clients are looking at these zero fee funds with a healthy dose of skepticism toward the notion of 'free' funds and apathy toward such paltry differences in actual dollars.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by 2pedals » Wed Sep 12, 2018 5:20 pm

willthrill81 wrote:
Wed Sep 12, 2018 5:12 pm
I think that most Vanguard clients are looking at these zero fee funds with a healthy dose of skepticism toward the notion of 'free' funds and apathy toward such paltry differences in actual dollars.
Whatever the reason, ER is less and I am happy. When is Schwab going to offer me a big cash incentive for moving my money?

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Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by sc9182 » Wed Sep 12, 2018 5:30 pm

willthrill81 wrote:
Wed Sep 12, 2018 4:55 pm
$1 billion is all that they've gotten? Vanguard's Total Stock Index and Total International index funds have combined assets of $1.1 trillion. It doesn't seem that investors are leaving Vanguard in droves yet at least.
In the past few years, every brokerage except Vanguard, had mosly outflows. Fidelity's attempt could help it change the tide, earn new budding business. Even more importantly, as clients, we all could benefit from this renewed competition, and lower expense ratios.

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Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by Nate79 » Wed Sep 12, 2018 5:38 pm

$1B in a month is actually very good. Vanguard gets about $12B TOTAL inflows in a month and their biggest fund, Total stock market index family gets in range of $3-4B inflows in a month. $1B per month would put this single fund in the top 10 inflows for all mutual funds.

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Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by willthrill81 » Wed Sep 12, 2018 6:01 pm

Nate79 wrote:
Wed Sep 12, 2018 5:38 pm
$1B in a month is actually very good. Vanguard gets about $12B TOTAL inflows in a month and their biggest fund, Total stock market index family gets in range of $3-4B inflows in a month. $1B per month would put this single fund in the top 10 inflows for all mutual funds.
As noted above, there's a big question though as to how much of these inflows are from outside Fidelity or just cannibalization of other Fidelity funds. They probably aren't going to provide information on the latter, though that is certainly a significant source of these funds' growth.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by Captain kangaroo » Wed Sep 12, 2018 6:20 pm

Lowest ER in the game, some of the best customer service and technology. Fidelity is a no brainer at this point

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Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by Dottie57 » Wed Sep 12, 2018 6:43 pm

retiringwhen wrote:
Wed Sep 12, 2018 5:02 pm
willthrill81 wrote:
Wed Sep 12, 2018 4:55 pm
$1 billion is all that they've gotten? Vanguard's Total Stock Index and Total International index funds have combined assets of $1.1 trillion. It doesn't seem that investors are leaving Vanguard in droves yet at least.
Anyone know where to see current numbers for inflows overall to Vanguard and Fidelity, unless it moves the bar, it is just re-arranging chairs on the deck within Fidelity.

I think this strategy cannot be evaluated for at least 2 years BTW. I personally am interested, but I would not consider moving funds there until they have been around for at least a couple of years (and we see if Fidelity puts any additional restrictions on account holders.)
+1

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Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by Jack FFR1846 » Wed Sep 12, 2018 6:57 pm

I just received a notice that Fidelity is making changes in my 401k. I went to netbenefits to the change notices and found the changes. Some are just name changes or ticker changes with reductions in fees (only 30% reductions for contrafund) but looking through, every fund in our plan has had the ER dropped. My S&P 500 dropped in my IRA at 0.015%.
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Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by Paul Romano » Wed Sep 12, 2018 8:21 pm

Link to Fidelity press release:

Fidelity® Continues to Lead the Industry with Launch of Two Additional Zero Expense Ratio Mutual Funds

First Two Fidelity ZERO Funds Grow to More than $1 Billion

09/12/2018

https://www.fidelity.com/about-fidelity ... ith-launch


"In addition to the new funds, Fidelity recently announced ground-breaking changes that provide more value to investors, including zero minimums for account opening, zero investment minimums on Fidelity retail and advisor mutual funds and 529 plans,2 zero account fees, zero domestic money movement fees and significantly reduced index pricing. Fidelity has a long-standing commitment to use its leadership and scale to consistently deliver enhanced value to investors. For example, as Fidelity has doubled its index mutual fund assets, the firm also systematically reduced index mutual fund pricing by nearly 50 percent to provide greater value to investors. Notably, as Fidelity passed on the benefit of its scale to investors, all of its stock and bond index funds and sector ETFs have total net expenses lower than all of Vanguard's comparable funds.

This is one more example of a long history of Fidelity providing customers with enhanced value based on its leadership position and scale, including providing a number of services for free or at a very low cost, such as Fidelity's no annual fee 2 percent cash back credit card; free debit card and ATM fee reimbursement4; free check writing and bill pay; free portfolio review at any of Fidelity's nationwide network of investor centers; free asset allocation models for diversified and income portfolios; and transparent bond pricing at $1 per contract.

New Fidelity ZERO Index Funds

Consistent with Fidelity ZERO Total Market Index Fund and Fidelity ZERO International Index Fund, investors will pay a 0.00% fee for the new funds, regardless of how much they invest in either fund.

Fidelity ZERO Large Cap Index Fund: The fund will seek to provide investment results that correspond to the total return of stocks of large-capitalization U.S. companies.
Fidelity ZERO Extended Market Index Fund: The fund will seek to provide investment results that correspond to the total return of stocks of mid- to small-capitalization U.S. companies."

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Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by 2pedals » Thu Sep 13, 2018 1:13 pm

More competition for new money from Chase

https://www.doctorofcredit.com/coming-o ... -deposits/

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Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by pokebowl » Fri Sep 14, 2018 2:51 pm

I for one welcome continued competition, as in the long run we all win (hopefully). That being said it will be interesting to see if Fidelity not only can keep this level of cost shifting up, but also maintain both their customer and online system support as well. I feel it will take several years to really see how this works out, not to mention what the response will be from the industry to counter should inflows to Fidelity rapidly pick up.
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Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by MichCPA » Fri Sep 14, 2018 3:15 pm

willthrill81 wrote:
Wed Sep 12, 2018 5:06 pm
2pedals wrote:
Wed Sep 12, 2018 5:03 pm
1 billion since launch, Aug 1
So $1 billion growth in a little under six weeks is at the pace of about $9 billion annually. At that rate, it would take them 122 years to match Vanguard's current assets in these two fund types. A billion sounds like a lot to the layperson, but in the investment world, it's peanuts.
Vanguard also makes those funds available in 401k plans and that is growth that Fidelity hasn't tapped yet. Some people are going to hold out until the funds have some track record. Its too early to say what the AUM will be in 1 or 2 years.

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Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by JamalJones » Fri Sep 14, 2018 7:42 pm

As I've mentioned at least twice before, Vanguard, I believe, will lower ERs eventually. They don't have to match Fido's zero ERs. All then need to do is lower them a bit (I don't know what "a bit" would be, but a 25%-66% reduction for many of their ETFs/Mutual Funds would be a good start!)

There's no way Vanguard can just let this slide and do nothing. Lower ERs are coming Vanguard customers!! :sharebeer
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Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by JoMoney » Fri Sep 14, 2018 9:29 pm

Anxious to see what these funds look like once they've been in operation for a bit. I wonder how much security lending income will got back to the fund, how much they utilize derivatives to synthesize holding stocks, and how much is spent in brokerage/transaction fees (which are not included in ER calculation). The real proof will be to see how the performance of these funds stack up with other index funds over a mutli-year period. My guess, is it won't make much of a difference either way.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by Elysium » Fri Sep 14, 2018 9:59 pm

My experience is that they are putting up an effort to not come across as clamouring for assets and new clients at any rate. I recently had a call with a rep at Fidelity about opening a Solo 401(k) and moving my current plan with Vanguard. They had me talk to a retirement specialist, who tried to understand why I am trying to move the account and what exactly is driving the decision. Then he tried to explain their Solo 401(k) is very plain and not have a lot of features such as roth option and rollover option. It was almost like they were trying to discourage from someone making a drastic decision just based on the news they heard lately. Anyway, I found the transparency very refreshing. I have been very lethargic about moving my Solo 401(k) though even after that because I have it open with Vanguard and it's getting funded. But, I get annoyed with Vanguard for not letting me buy admiral shares even though I can match the minimums and more, it's just plain ridiculous on their part not let me buy lower expense class shares in Solo 401(k). So, I am determined to move that account to Fidelity, and the rep was very helpful in explaining the correct way to transfer. At the same time, they try to be as transparent as possible and trying not to sound desparate to bring on asset flow at any rate.

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Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by retiringwhen » Fri Sep 14, 2018 10:14 pm

Elysium wrote:
Fri Sep 14, 2018 9:59 pm
My experience is that they are putting up an effort to not come across as clamouring for assets and new clients at any rate. I recently had a call with a rep at Fidelity about opening a Solo 401(k) and moving my current plan with Vanguard. They had me talk to a retirement specialist, who tried to understand why I am trying to move the account and what exactly is driving the decision. Then he tried to explain their Solo 401(k) is very plain and not have a lot of features such as roth option and rollover option. It was almost like they were trying to discourage from someone making a drastic decision just based on the news they heard lately. Anyway, I found the transparency very refreshing. I have been very lethargic about moving my Solo 401(k) though even after that because I have it open with Vanguard and it's getting funded. But, I get annoyed with Vanguard for not letting me buy admiral shares even though I can match the minimums and more, it's just plain ridiculous on their part not let me buy lower expense class shares in Solo 401(k). So, I am determined to move that account to Fidelity, and the rep was very helpful in explaining the correct way to transfer. At the same time, they try to be as transparent as possible and trying not to sound desparate to bring on asset flow at any rate.
Vanguard appears to have a consistent policy of not wanting to loose money on any customers and the cost of administering a Solo 401(K) is much higher than a standard brokerage or IRA account. Fidelity et al, definitely have a different strategy. That is the reality, move the money to Fidelity and let someone else pay for the cost of your account, just make sure it is not YOU by using one of their higher costs services or funds. Fidelity may actually be concerned about their losing money on that Solo 401(k) too and are not too eager to take themselves, thus the foot dragging (BTW,their disclosure about being plain Jane account also is likely a sign, that if you want rollover options and/or Roth, you are going to pay for them somehow.)

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Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by Paul Romano » Tue Sep 18, 2018 9:34 am

Bloomberg writes the following:


Fidelity Investments Chief Executive Officer Abigail Johnson said the firm’s decision to launch a series of no-fee mutual funds had a simple rationale: bring in new customers.

“The objective was to lower the friction and get more people to try Fidelity,” Johnson said in a brief interview. “The hope is they will like it and want to do more business with us.” She spoke Friday after an event at Fidelity’s Boston headquarters about technology in finance.

Asked how Fidelity would make money on the no-fee products Johnson said, “You don’t make money on every customer in financial services. The way you make money is by building relationships and doing a great job.”

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Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by lukestuckenhymer » Tue Sep 18, 2018 1:33 pm

Zero minimum is great for people who are just starting their retirement savings as well. I'm recommending these to my girlfriend who is just opening an IRA for the first time. For people who have $5,500 (or less) to open an IRA, you can't find a better deal to achieve immediate, low cost diversification. Vanguard's $3,000 minimums ain't gonna work for 20-somethings with limited funds to invest.

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Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by davidkw » Tue Sep 18, 2018 2:24 pm

From the Seattle Times: Seattle Times
Asked how Fidelity would make money on the no-fee products Johnson said, “You don’t make money on every customer in financial services. The way you make money is by building relationships and doing a great job.”
Fidelity has a great reputation with Bogleheads. It seems with a big down turn in the economy, the active management companies will struggle and might consolidate.

In the 1980s and 1990s, American Century was a popular company where I held my money there. They have not lowered their fees.
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Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by jcerickson » Tue Sep 18, 2018 7:41 pm

lukestuckenhymer wrote:
Tue Sep 18, 2018 1:33 pm
Zero minimum is great for people who are just starting their retirement savings as well. I'm recommending these to my girlfriend who is just opening an IRA for the first time. For people who have $5,500 (or less) to open an IRA, you can't find a better deal to achieve immediate, low cost diversification. Vanguard's $3,000 minimums ain't gonna work for 20-somethings with limited funds to invest.
Vanguard's Target Retirement funds have only a $1,000 minimum. And if you don't have $1,000, you can spend about $150 for a share of Vanguard Total Stock Market ETF (VTI) or about $78 for a share of the Total Bond ETF (BND) or about $54 for a share the Total International ETF (VXUS).

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Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by rkhusky » Tue Sep 18, 2018 7:49 pm

JamalJones wrote:
Fri Sep 14, 2018 7:42 pm
As I've mentioned at least twice before, Vanguard, I believe, will lower ERs eventually. They don't have to match Fido's zero ERs. All then need to do is lower them a bit (I don't know what "a bit" would be, but a 25%-66% reduction for many of their ETFs/Mutual Funds would be a good start!)

There's no way Vanguard can just let this slide and do nothing. Lower ERs are coming Vanguard customers!! :sharebeer
Vanguard's ER's are a reflection of their funds' actual expenses, not a marketing gimmick. They aren't going to lower the ER's below cost and try to make up for it in volume.

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Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by sc9182 » Tue Sep 18, 2018 8:01 pm

rkhusky wrote:
Tue Sep 18, 2018 7:49 pm
JamalJones wrote:
Fri Sep 14, 2018 7:42 pm
As I've mentioned at least twice before, Vanguard, I believe, will lower ERs eventually. They don't have to match Fido's zero ERs. All then need to do is lower them a bit (I don't know what "a bit" would be, but a 25%-66% reduction for many of their ETFs/Mutual Funds would be a good start!)

There's no way Vanguard can just let this slide and do nothing. Lower ERs are coming Vanguard customers!! :sharebeer
Vanguard's ER's are a reflection of their funds' actual expenses, not a marketing gimmick. They aren't going to lower the ER's below cost and try to make up for it in volume.
There have been threads about how large some Vanguard funds have grown, and what if there is room for cutting it down further.

Infact over decades, many a firms cut expense ratios, Vanguard especially. May be there is some room for further improvement from everybody including Vanguard!

More ideas, hoping better response from Vanguard! Loving the competition, makes investing more inclusive, along with lowered fees!

Wonder if ETFs also reduce their expense ratios!

If you have larger portfolios, lower/zero ERs make all the more difference. A low/zero ER may save you your years worth of HSA or IRA contribution !

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Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by rkhusky » Wed Sep 19, 2018 6:29 am

sc9182 wrote:
Tue Sep 18, 2018 8:01 pm
There have been threads about how large some Vanguard funds have grown, and what if there is room for cutting it down further.
Vanguard may be able to marginally lower some of their ER's by finding new efficiencies. But they are at a disadvantage compared to Fidelity because all of Vanguard's funds are considered to be low cost compared to other companies (e.g. Morningstar considers VG Explorer's ER of 0.44 to be low). They don't have a group of high cost funds that they can use to support customer service and reporting costs like many other companies. I would prefer they keep their current fee structure and maintain or improve infrastructure and customer service, rather than cut things to the bare bone.

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Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by sc9182 » Wed Sep 19, 2018 7:32 am

rkhusky wrote:
Wed Sep 19, 2018 6:29 am
sc9182 wrote:
Tue Sep 18, 2018 8:01 pm
There have been threads about how large some Vanguard funds have grown, and what if there is room for cutting it down further.
Vanguard may be able to marginally lower some of their ER's by finding new efficiencies. But they are at a disadvantage compared to Fidelity because all of Vanguard's funds are considered to be low cost compared to other companies (e.g. Morningstar considers VG Explorer's ER of 0.44 to be low). They don't have a group of high cost funds that they can use to support customer service and reporting costs like many other companies. I would prefer they keep their current fee structure and maintain or improve infrastructure and customer service, rather than cut things to the bare bone.
Most of brokerage profits comes un-invested/under-invested cash sitting around, also advisory services, ayup from Annuities products. Where is tthat extra profit/margin going!

Improving infra, Website, App, and customer service - definitely concur ! Hoping Vanguard one-ups others products and services!
Last edited by sc9182 on Wed Sep 19, 2018 9:16 am, edited 1 time in total.

lifeisinmirrors
Posts: 34
Joined: Fri Jul 06, 2018 6:15 pm

Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by lifeisinmirrors » Wed Sep 19, 2018 8:21 am

If a customer would move their account away from Vanguard to avoid paying 4 basis points for VTSAX, then there is no way to keep that customer without losing money on their business. I don't see how it would benefit Vanguard to have a bunch of money-losing accounts.

lukestuckenhymer
Posts: 72
Joined: Wed May 30, 2018 11:53 am

Re: WSJ 9/12/18- Fidelity Doubles Down on Free Fund Strategy

Post by lukestuckenhymer » Thu Sep 20, 2018 12:09 pm

jcerickson wrote:
Tue Sep 18, 2018 7:41 pm
lukestuckenhymer wrote:
Tue Sep 18, 2018 1:33 pm
Zero minimum is great for people who are just starting their retirement savings as well. I'm recommending these to my girlfriend who is just opening an IRA for the first time. For people who have $5,500 (or less) to open an IRA, you can't find a better deal to achieve immediate, low cost diversification. Vanguard's $3,000 minimums ain't gonna work for 20-somethings with limited funds to invest.
Vanguard's Target Retirement funds have only a $1,000 minimum. And if you don't have $1,000, you can spend about $150 for a share of Vanguard Total Stock Market ETF (VTI) or about $78 for a share of the Total Bond ETF (BND) or about $54 for a share the Total International ETF (VXUS).
Before the ZERO funds came along, target retirement was going to be what I recommended. However, now a young person has the ability to go 100% equity without having to deal with $3,000 minimums in each fund, so that's definitely a better deal for a 20-something, in my mind. And with zero ER, why would she bother with anything else?

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