Fidelity zero funds

[Sodak]

What are your thoughts on the fidelity zero fee funds? specifically I was thinking of trading Fxaix for Fnilx. Fnilx is extremely similar to s&p and has actually slightly outperformed the s&p over the past 5 years. I know you can’t transfer the zero funds from fidelity, am I missing any other catches? While the Fxaix expense ratio is very low, it’s hard to beat free.

[lakpr]

The tiny expense ratio difference of 0.015% is not enough of an incentive for me to give up ACAT portability of my funds to a different broker. Perhaps I want to chase brokerage bonuses in the future...

[TwstdSista]

I love the Zero funds and we hold them in our IRAs and HSAs. I also recommend them to my kids and any others who ask. But solely in tax advantaged accounts (for portability reasons as described by lakpr above).

That being said, the expense ratio for FXAIX (and FSKAX) is minimal and I would gladly recommend them as well. Unless you are talking about a taxable account, there is no wrong answer to your question.

[bogling]

Why not just use Vanguard ETFs?

[dogagility]

What are your thoughts on the fidelity zero fee funds? specifically I was thinking of trading Fxaix for Fnilx. Fnilx is extremely similar to s&p and has actually slightly outperformed the s&p over the past 5 years.

I think the zero funds are great and use these in tax advantaged accounts. I would use FZROX (total market) rather than the large cap FNILX for greater market exposure.

I know you can’t transfer the zero funds from fidelity, am I missing any other catches?

No, no other catches. Wouldn't use the zero funds in a taxable account since these are not portable, as you noted.

[aristotelian]

They are excellent for retirement accounts. I would not hold in taxable account.

[Lawyered_]

Others have noted the reasons NOT to use them in a taxable account. That being said, in a retirement account, you not only save the expense ratio on say FZROX vs VTI (which is fairly minimal), but you also save the spread on the bid/ask, which you pay each time you buy or sell. Not a huge deal for VTI, but it does have a .01% spread, which is a cost every time you buy/sell. For a mutual fund like FZROX, there is no spread - so you also save on that.

[rkhusky]

If you have $1M, the ER difference is worth $150/yr. If you have $100K, it’s worth $15/yr.

[rushrocker]

If you have $1M, the ER difference is worth $150/yr. If you have $100K, it’s worth $15/yr.

All things being equal, I'll save the extra money every time. The international one is really a blessing to save on that expense ratio.

[rkhusky]

If you have $1M, the ER difference is worth $150/yr. If you have $100K, it’s worth $15/yr.

All things being equal, I'll save the extra money every time. The international one is really a blessing to save on that expense ratio.

All things are usually not equal. And for some things you don’t find out until after the fact that they aren’t equal.

[grok87]

I love the Zero funds and we hold them in our IRAs and HSAs. I also recommend them to my kids and any others who ask. But solely in tax advantaged accounts (for portability reasons as described by lakpr above).

That being said, the expense ratio for FXAIX (and FSKAX) is minimal and I would gladly recommend them as well. Unless you are talking about a taxable account, there is no wrong answer to your question.

+1

[dogagility]

All things being equal, I'll save the extra money every time. The international one is really a blessing to save on that expense ratio.

All things are usually not equal. And for some things you don’t find out until after the fact that they aren’t equal.

The only sure thing is the fee.

[GoldStar]

They are good funds and you can't beat a 0% ER.
I am all in on them now in Tax advantaged. For taxable I am primarily ITOT.

[PNWHiker]

I hold a significant amount of FZROX and have been happy with it. If you compare the returns of FZROX vs. VTI they track very nearly identically, with FZROX having an ever so slight edge due to no ER.

To me the only contraindications for the Zero funds would be if you aren't already (or don't plan to be) predominantly invested through Fidelity for the long term, or if you simply prefer the convenience of being able to sell an ETF like VTI at any point in the trading day rather then wait on an after-close execution.

[jaMichael]

I believe FZROX has 2600 holdings and VTI has 3600+ holdings. Does that matter? Is it possible that VTI will catch emerging blockbusters that FZROX might miss in a way that matters? (I own both - Mr. Decisive over here.)

[rkhusky]

All things are usually not equal. And for some things you don’t find out until after the fact that they aren’t equal.

The only sure thing is the fee.

It does seem like it would be hard to raise the ER without changing the name. But then there are the Dollar stores.

Even though the funds have tracked well, seems like there is always some risk with a proprietary fund. Although, based on the history, I wouldn’t expect significant deviation.

[VanGar+Goyle]

Why not just use Vanguard ETFs?

There are problems owning some Vanguard mutual funds outside Vanguard,
and problems owning some Fidelity Zero funds outside Fidelity.
If I had accounts with both, I would own the Vanguard funds inside Vanguard, and Fidelity Zero funds inside Fidelity.
If you eventually move the funds out, you may have to sell, and lose a few days of market movement.

[RetiOpening]

If I had accounts with both, I would own the Vanguard funds inside Vanguard, and Fidelity Zero funds inside Fidelity.
If you eventually move the funds out, you may have to sell, and lose a few days of market movement.

To avoid missing out on those few days, you could easily take the intermediate step of exchanging FZROX for FXKAX, and then moving out.

[GoldStar]

I believe FZROX has 2600 holdings and VTI has 3600+ holdings. Does that matter? Is it possible that VTI will catch emerging blockbusters that FZROX might miss in a way that matters? (I own both - Mr. Decisive over here.)

Take a look at VTIs holding and what percentage of the fund is held in the first 2600 holdings versus that last 1000. One of those minuscule holdings increasing by 100x or 1000x would be pretty inconsequential.
In other words - it doesn't really matter. Market weighting makes the excess holdings pretty meaningless.

[3000]

I believe FZROX has 2600 holdings and VTI has 3600+ holdings. Does that matter? Is it possible that VTI will catch emerging blockbusters that FZROX might miss in a way that matters? (I own both - Mr. Decisive over here.)

ITOT (iShares Core S&P Total U.S. Stock Market ETF) holds 2,550 stocks and SCHB (Schwab U.S. Broad Market ETF) holds 2,469 stocks and they are recommend along with VTI for total market funds so I think FZROX with its 2,549 stocks is good.

Here's a backtest from 2018-08-16 to 2024-11-25 corrected (changed SCHD to SCHB)

https://testfol.io/?s=d5LUEzusRKf

free photo host

[jaMichael]

I believe FZROX has 2600 holdings and VTI has 3600+ holdings. Does that matter? Is it possible that VTI will catch emerging blockbusters that FZROX might miss in a way that matters? (I own both - Mr. Decisive over here.)

Take a look at VTIs holding and what percentage of the fund is held in the first 2600 holdings versus that last 1000. One of those minuscule holdings increasing by 100x or 1000x would be pretty inconsequential.
In other words - it doesn't really matter. Market weighting makes the excess holdings pretty meaningless.

Thanks for these insights, Goldstar and 3000. Makes me wonder why Vanguard goes to the trouble and expense of tracking the more comprehensive index.

[salish sea]

To avoid missing out on those few days, you could easily take the intermediate step of exchanging FZROX for FXKAX, and then moving out.

Assuming you meant FSKAX, this is what I just did. I submitted an exchange from FZROX to FSKAX in a Roth IRA at Fidelity, so there was no time out of market. I then transferred the FSKAX shares in kind to a US Bank Roth IRA to meet the asset level needed for their 4% credit card.

[billthecat]

I believe FZROX has 2600 holdings and VTI has 3600+ holdings. Does that matter? Is it possible that VTI will catch emerging blockbusters that FZROX might miss in a way that matters? (I own both - Mr. Decisive over here.)

ITOT (iShares Core S&P Total U.S. Stock Market ETF) holds 2,550 stocks and SCHB (Schwab U.S. Broad Market ETF) holds 2,469 stocks and they are recommend along with VTI for total market funds so I think FZROX with its 2,549 stocks is good.

Here's a backtest from 2018-08-16 to 2024-11-25

https://testfol.io/?s=ikVFH4IUkBo

That chart/table shows SCHD, not SCHB.

[3000]

ITOT (iShares Core S&P Total U.S. Stock Market ETF) holds 2,550 stocks and SCHB (Schwab U.S. Broad Market ETF) holds 2,469 stocks and they are recommend along with VTI for total market funds so I think FZROX with its 2,549 stocks is good.

Here's a backtest from 2018-08-16 to 2024-11-25

https://testfol.io/?s=ikVFH4IUkBo

That chart/table shows SCHD, not SCHB.

Thanks. Typo!

Link to corrected backtest

https://testfol.io/?s=ikVFH4IUkBo

free photo host

[Boglenaut]

One caution is realize the large cap and extended funds are not related to the S&P 500.

For example, people often try to compare the Extended fund (FZIPX) with S&P completion index funds. This is a mistake because they follow different indices. This is not "good" or "bad", just different.

I actually find FZIPX is better compared to Vanguard's Small Cap fund (VSMAX/VB). I prefer mutual funds in my tax advantaged accounts at Fidelity, so use FZIPX where I normally would use VSMAX/VB.

I own VXUS/VTI in taxable and FZILX/FZROX in retirement accounts for reasons others have discussed above. The international FZILX does have a small gap on the small end. I used to fill this with VSS ( small cap international), but decided for simplicity it was worth dropping VSS for the negligible gap.

[billthecat]

That chart/table shows SCHD, not SCHB.

Thanks. Typo!

Link to corrected backtest

https://testfol.io/?s=ikVFH4IUkBo

free photo host

It's weird but that corrected ...kBo URL shows SCHD, but now the ...RKf URL in your now-edited original post shows SCHB.

I mean, it's easy enough for anyone to change SCHD to SCHB but I thought I'd point that out.

[ruralavalon]

What are your thoughts on the fidelity zero fee funds? specifically I was thinking of trading Fxaix for Fnilx. Fnilx is extremely similar to s&p and has actually slightly outperformed the s&p over the past 5 years. I know you can’t transfer the zero funds from fidelity, am I missing any other catches? While the Fxaix expense ratio is very low, it’s hard to beat free.

Tiny differences in expense ratio can produce only tiny differences in results, and so in my opinion should not be a deciding factor in fund selection.

[citris]

I have fnilx and fzilx in my Roth Ira. I think they're great funds. One I think is that they only pay out dividends once a year, which doesn't matter but it is a difference.

The other difference I've noticed is that the price doesn't seem to update as quickly as other mutual funds - The NAV isn't updated by 8pm Eastern, I have to wait for the morning to see the updated price.

Again, none of this matters, but I just think they're good funds as long as they're in tax advantaged accounts due to the lack if portability. There really is no catch other than portability, and in theory they could close the fund if they don't want to offer it anymore.

[Boglenaut]

.

The other difference I've noticed is that the price doesn't seem to update as quickly as other mutual funds - The NAV isn't updated by 8pm Eastern, I have to wait for the morning to see the updated price.

Strange. Ours usually update at around 5:25 PM Eastern time in our IRAs, Roth IRAs, and HSA, the same as the other mutual funds.

[rkhusky]

Thanks. Typo!

Link to corrected backtest

https://testfol.io/?s=ikVFH4IUkBo

free photo host

It's weird but that corrected ...kBo URL shows SCHD, but now the ...RKf URL in your now-edited original post shows SCHB.

I mean, it's easy enough for anyone to change SCHD to SCHB but I thought I'd point that out.

Where are you seeing a RKf URL? I'm still showing kBo in all posts.

[MBB_Boy]

I actually hold them in taxable. I really like Fidelity (moved from Vanguard) and we give a lot to charity. Figure I can just move them to the Fidelity DAF if they ever became unwanted

[sycamore]

It's weird but that corrected ...kBo URL shows SCHD, but now the ...RKf URL in your now-edited original post shows SCHB.

I mean, it's easy enough for anyone to change SCHD to SCHB but I thought I'd point that out.

Where are you seeing a RKf URL? I'm still showing kBo in all posts.

It's this one:

I believe FZROX has 2600 holdings and VTI has 3600+ holdings. Does that matter? Is it possible that VTI will catch emerging blockbusters that FZROX might miss in a way that matters? (I own both - Mr. Decisive over here.)

ITOT (iShares Core S&P Total U.S. Stock Market ETF) holds 2,550 stocks and SCHB (Schwab U.S. Broad Market ETF) holds 2,469 stocks and they are recommend along with VTI for total market funds so I think FZROX with its 2,549 stocks is good.

Here's a backtest from 2018-08-16 to 2024-11-25 corrected (changed SCHD to SCHB)

https://testfol.io/?s=d5LUEzusRKf
...

[rkhusky]

Where are you seeing a RKf URL? I'm still showing kBo in all posts.

It's this one:

ITOT (iShares Core S&P Total U.S. Stock Market ETF) holds 2,550 stocks and SCHB (Schwab U.S. Broad Market ETF) holds 2,469 stocks and they are recommend along with VTI for total market funds so I think FZROX with its 2,549 stocks is good.

Here's a backtest from 2018-08-16 to 2024-11-25 corrected (changed SCHD to SCHB)

https://testfol.io/?s=d5LUEzusRKf
...

Thanks. I missed that one, the edit of the original post.

[nedsaid]

If you have $1M, the ER difference is worth $150/yr. If you have $100K, it’s worth $15/yr.

All things being equal, I'll save the extra money every time. The international one is really a blessing to save on that expense ratio.

Except that all things are not equal, for one thing Fidelity Total Stock Market Index (FSKAX) and Fidelity Zero Total Stock Market (FZROX) Index funds follow different indexes. FSKAX follows the Dow Jones Total Stock Market Index and FZROX follows a proprietary index created by Fidelity. FSKAX has more stocks in it than FZROX. Both, however are fine investments.

[rushrocker]

All things being equal, I'll save the extra money every time. The international one is really a blessing to save on that expense ratio.

Except that all things are not equal, for one thing Fidelity Total Stock Market Index (FSKAX) and Fidelity Zero Total Stock Market (FZROX) Index funds follow different indexes. FSKAX follows the Dow Jones Total Stock Market Index and FZROX follows a proprietary index created by Fidelity. FSKAX has more stocks in it than FZROX. Both, however are fine investments.

My bad, I should have said 99% equal.

But I guess that's the argument of this thread. Is a 0.00% ER better than a 0.03 or 0.015? Is it "close enough" that it doesn't matter?

[billthecat]

It's weird but that corrected ...kBo URL shows SCHD, but now the ...RKf URL in your now-edited original post shows SCHB.

I mean, it's easy enough for anyone to change SCHD to SCHB but I thought I'd point that out.

Where are you seeing a RKf URL? I'm still showing kBo in all posts.

I replied but never mind, I just saw others did.

[Clever_Username]

I have a Roth IRA at Fidelity that is funded entirely by MBR through my employer plan; my personal Roth IRA contributions go to one at Vanguard that is entirely in VTSAX. My MBR-funded Roth IRA at Fidelity is entirely their domestic zero fund. I don't see a particular reason to switch over to their one that is closer to VTSAX, but I also don't see a reason not to either. I figure if I ever see an argument to make the change, it's in a tax-advantaged account so I can do so easily.

[citris]

.

The other difference I've noticed is that the price doesn't seem to update as quickly as other mutual funds - The NAV isn't updated by 8pm Eastern, I have to wait for the morning to see the updated price.

Strange. Ours usually update at around 5:25 PM Eastern time in our IRAs, Roth IRAs, and HSA, the same as the other mutual funds.

Wow, you're right. Thanks. It's updated on time in my actual brokerage account, but fidelity's actual website still shows yesterday's price. And i think because of that, google and others still show yesterday's price.