FZROX vs VTSAX: The hidden cost of Fidelity’s zero fee index funds
The point is quite straight forward: Vanguard's VTSAX pays dividends quarterly and Fidelity's FZROX pays dividends yearly. The lost growth due to less frequent reinvestment of dividends is several times larger than the ER of Vanguard's fund. The article has a link to a spreadsheet. Using the last 40 years of S&P 500 it estimates that the total cost of VTSAX is 0.07% (of which 0.04% is ER) and FZROX is 0.15% (of which 0% is ER). So assuming that you care about a 0.08% difference, you really will make more money with VTSAX.
I took their spreadsheet and added columns for Fidelity's regular total market fund, FSKAX. That fund distributes dividends twice a year and has an ER of 0.015% and distributes dividends twice a year. As you might guess, it sits between VTSAX and FZROX:
Code: Select all
ER Total Inefficiency VTSAX 0.040% 0.074% FSKAX 0.015% 0.139% FZROX 0.000% 0.146%