Move VG Roth to Fidelity for ZERO fund?

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Minty
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by Minty »

sycamore wrote: Sat Feb 01, 2025 8:35 am
Minty wrote: Fri Jan 31, 2025 9:04 pm I just checked, Portfolio Visualizer reports that as of 1/31/2025, FZROX has outperformed VTI and VTSAX in every measured time period, by 10 basis points annually for VTI, 14 for VTSAX.
Methinks you misunderstand how Portfolio Visualizer works :)

You say PV says FZROX wins in "every measured time period". To disprove that, I merely need to find one time period where it's not true. On my very first guess at a time period I found one:
https://www.portfoliovisualizer.com/bac ... UuswBUt7RY

FZROX lost by 10 bps in the Jan 2020-Dec 2021 time period.

I bet you too can find some time periods like that! Welcome to the fun world of backtesting a couple of situations and drawing inappropriate conclusions! :sharebeer
You got me! I just meant all of the time periods identified by Portfolio Visualizer (3 months, YTD, 1, 3, 5 years, max), which I took as a reasonable, non-cherrypicked set of examples. In a cherry-picked set, red on roulette sometimes does better than a three-fund portfolio, but I am not about to switch! I am one of those folks who believes that past performance, though no guarantee, is the best evidence we have of future performance, but I would be happy to be educated that some set of time periods other than that used in PV is a better indicator. I have to admit that my bias, which may be wrong, is that if year after year, some fund outperforms others in the same category, with the same or better Sharpe ratio, Sortino ratio, best year and worst year, I am going to start to wonder if that fund is, in fact, better structured or operated, and therefore may well outperform in the future. I also admit that I consider 10 basis points on a million, to use PeterParker's example, for each year of the rest of my life, to be worth attending to. I respect that others may consider that too trivial to fuss about.
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Eno Deb
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by Eno Deb »

Geologist wrote: Fri Jan 31, 2025 12:39 pm
Eno Deb wrote: Thu Jan 30, 2025 7:23 pm That also seems weird, because then two funds holding the same stocks but having different distribution schedules would likely have different dividend yields depending on how the holdings develop throughout the year. Are stock funds allowed to simply reinvest dividends instead of distributing them?
Mutual funds must distribute essentially all their net income each year, but there is no requirement they hold the dividends they receive in cash until they distribute them.
What else can/do they do with dividends they receive from the holdings until the next distribution by the fund? Many stocks pay dividends quarterly so if a fund only distributes them once a year they must keep them somewhere. :confused
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by Eno Deb »

GoldStar wrote: Thu Jan 30, 2025 7:57 pm
Eno Deb wrote: Thu Jan 30, 2025 7:43 pm As the person who first brought it up: if you re-read my first post you'll see that I was asking a question. Please don't put words in my mouth.
With all respect - the following are your words and it isn't a question- it is a statement of certainty:
In any case it means that -- assuming equal dividend yield -- the investor will have a slightly lower return on the dividends than with a fund that distributes more often
.
That is actually a fact. If two funds distribute equal annual dividends, and one distributes them e.g. in quarterly installments while the other pays once at the end of the year, then you will obviously earn a bigger return from the former fund if you invest the dividends. If you assume that the second fund internally reinvests the dividends it receives until the end of the year, then the total annual dividends distributed by the funds will usually not be equal.
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by Geologist »

Eno Deb wrote: Sun Feb 02, 2025 7:24 pm
Geologist wrote: Fri Jan 31, 2025 12:39 pm

Mutual funds must distribute essentially all their net income each year, but there is no requirement they hold the dividends they receive in cash until they distribute them.
What else can/do they do with dividends they receive from the holdings until the next distribution by the fund? Many stocks pay dividends quarterly so if a fund only distributes them once a year they must keep them somewhere. :confused
As I have replied upthread (to others, if not you), the dividends may come in quarterly but generally not on the same date, so the cash is just another cash flow to be balanced with additions/subtractions from shareholders buying/redeeming shares, deducting money for fund expenses, and so on. If there is net cash, then the fund invests it in investments of the fund ((so if it is a stock index fund, in the stocks).

For a mutual fund (which, after all, was the original investment company type posed by the OP), the fund's distribution doesn't require cash for fundholders reinvesting their distributions (this is only a bookkeeping entry). Cash is only needed for those fund holders taking distributions in cash and this is typically less than 10% of the actual distribution. If that is more than the cash the fund has on hand, then it just sells some investments of the fund.
GoldStar
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by GoldStar »

Eno Deb wrote: Sun Feb 02, 2025 7:31 pm
GoldStar wrote: Thu Jan 30, 2025 7:57 pm

With all respect - the following are your words and it isn't a question- it is a statement of certainty:

.
That is actually a fact. If two funds distribute equal annual dividends, and one distributes them e.g. in quarterly installments while the other pays once at the end of the year, then you will obviously earn a bigger return from the former fund if you invest the dividends. If you assume that the second fund internally reinvests the dividends it receives until the end of the year, then the total annual dividends distributed by the funds will usually not be equal.
Nope.

I don't know how else to explain it. When they don't pay the dividend earlier in the year the money stays in the fund as part of the NAV and continues to be invested. If they pay it to you sooner, you lose the points on the NAV of the fund but invest it back in the fund. The net is the same. I, and another poster, explained it a couple of different ways. Sorry I am not getting through.

Edit Add: I just did a search and found an old thread to one of the many FZROX FUD articles where this misconception you have is discussed and debunked. Some in this thread may explain it better than I:
viewtopic.php?t=294370. And if you read the source article of this thread you will see they initially made the same claim you did - but had to go back and cross out those parts of the article and make corrections.
Last edited by GoldStar on Mon Feb 03, 2025 8:03 am, edited 3 times in total.
nalor511
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by nalor511 »

GoldStar wrote: Sun Feb 02, 2025 7:40 pm
Eno Deb wrote: Sun Feb 02, 2025 7:31 pm That is actually a fact. If two funds distribute equal annual dividends, and one distributes them e.g. in quarterly installments while the other pays once at the end of the year, then you will obviously earn a bigger return from the former fund if you invest the dividends. If you assume that the second fund internally reinvests the dividends it receives until the end of the year, then the total annual dividends distributed by the funds will usually not be equal.
Nope.
:thumbsdown

https://stockanalysis.com/etf/vti/dividend/ , 1.23%
https://stockanalysis.com/quote/mutf/VTSAX/dividend/ , 1.22%
https://stockanalysis.com/quote/mutf/FZROX/dividend/ , 1.12%
GoldStar
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by GoldStar »

Not sure what your point is. These briefs aren't even correct. Bad source.
kidshrink
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by kidshrink »

Geologist wrote: Thu Jan 30, 2025 7:06 pm I'm with rkhusky and White Coat Investor. The difference in expense ratio is not material. 0.03% is $30 per $100,000 invested per year. Even compounded over many years, this is not going to make a significant difference (50 x 30 = $1500).
If the difference is immaterial, what’s the rationale for Vanguard not charging zero expense ratio like Fidelity?
feh
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by feh »

kidshrink wrote: Mon Feb 03, 2025 6:21 pm
Geologist wrote: Thu Jan 30, 2025 7:06 pm I'm with rkhusky and White Coat Investor. The difference in expense ratio is not material. 0.03% is $30 per $100,000 invested per year. Even compounded over many years, this is not going to make a significant difference (50 x 30 = $1500).
If the difference is immaterial, what’s the rationale for Vanguard not charging zero expense ratio like Fidelity?
Perhaps Vanguard isn't willing to invest in a loss leader. Or they aren't willing to come up with their own index.
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by Geologist »

kidshrink wrote: Mon Feb 03, 2025 6:21 pm
Geologist wrote: Thu Jan 30, 2025 7:06 pm I'm with rkhusky and White Coat Investor. The difference in expense ratio is not material. 0.03% is $30 per $100,000 invested per year. Even compounded over many years, this is not going to make a significant difference (50 x 30 = $1500).
If the difference is immaterial, what’s the rationale for Vanguard not charging zero expense ratio like Fidelity?
The zero funds still have expenses. Fidelity's parent company (FMR) is paying these expenses. Based on Fidelity's comparable funds, these expenses amount to millions of dollars a year. Where would Vanguard get this money? FMR gets it by making a profit on rather higher expenses for other funds (for example, SPAXX and FZFXX, two of its main money market funds have expense ratios of 0.42%).

The difference in expense ratio between investing in these Fidelity money market funds and Vanguard's (0.11% or lower) is highly material.
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gasdoc
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by gasdoc »

Mike Scott wrote: Thu Jan 30, 2025 6:29 pm I use Zero funds in Fidelity HSA but I would not move my Vanguard funds to Fidelity to do that. You can of course if you want.
This.

I like that Vanguard attempts to be the low cost leader in everything that they do, while Fidelity is basically putting a handful of funds 'on sale.' Ive also noticed when using Fidelity for my HSA that, while i don't move things around much, I have noticed that I have to be intentional to get to the "zero" funds at Fidelity, and usually end up at higher cost funds if I am not intentional about it.

Gasdoc
feh
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by feh »

gasdoc wrote: Mon Feb 03, 2025 7:15 pm
Mike Scott wrote: Thu Jan 30, 2025 6:29 pm I use Zero funds in Fidelity HSA but I would not move my Vanguard funds to Fidelity to do that. You can of course if you want.
This.

I like that Vanguard attempts to be the low cost leader in everything that they do, while Fidelity is basically putting a handful of funds 'on sale.' Ive also noticed when using Fidelity for my HSA that, while i don't move things around much, I have noticed that I have to be intentional to get to the "zero" funds at Fidelity, and usually end up at higher cost funds if I am not intentional about it.
Wondering what "higher cost funds" you are referring to. When it comes to indexes, I think Fidelity's ERs are better than Vanguards, even ignoring the zero ER funds.
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by cupcakeswsprinkles »

I do not trust the zero funds. Fidelity needs to be paid to stay in business so they are making money some other way. I have had enough bait and switches for a lifetime.

With that said, the fees are lower at Fidelity, it does not matter that much, but, they did role out standard TOTP 2fa authentication so I feel it is more secure than Vanguard.
Minty
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by Minty »

cupcakeswsprinkles wrote: Mon Feb 03, 2025 8:20 pm I do not trust the zero funds. Fidelity needs to be paid to stay in business so they are making money some other way. I have had enough bait and switches for a lifetime.
Agreed. Fidelity and Schwab are in business to make money. Vanguard is not what it used to be. On the other hand, I am not aware of any instances where any major brokerage has attempted to shaft mutual fund investors by, say, raising the ER of a low-cost fund by orders of magnitude. I don't know what the legal limitations on changing the nature of the Zero funds are, but I take comfort in knowing that no one seems to have an example of a mutual fund issuer taking advantage of investors being tied down by capital gains to extract value. Particularly with funds like the Zeros, which attract thrifty buyers, if Fidelity were to suddenly try to impose a 10% back-end load or something, even if it were legal, the reputational consequences would be devastating for a century. So I don't worry about that. I would worry if Bogleheads could come up with examples of situations where mutual fund investors were exploited by issuers. (I don't count the Vanguard settlement, myself, because it seems to have been a blunder, rather than an exercise in extraction from the shareholders).
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arcticpineapplecorp.
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by arcticpineapplecorp. »

dave.m wrote: Thu Jan 30, 2025 3:01 pm The expense was extremely low for VTSAX, however, it’s not zero.
so what if it's not zero. It still outperformed FZROX since FZROX's inception (2018):

turned $10,000 into:

ending balance CAGR
fzrox $22,385.21 13.28%
vti $22,631.31 13.47%
vtsax $22,624.01 13.47%

vtsax outperformed fzrox as did vti as one would expect.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
Minty
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by Minty »

arcticpineapplecorp. wrote: Mon Feb 03, 2025 9:46 pm
dave.m wrote: Thu Jan 30, 2025 3:01 pm The expense was extremely low for VTSAX, however, it’s not zero.
so what if it's not zero. It still outperformed FZROX since FZROX's inception (2018):

turned $10,000 into:

ending balance CAGR
fzrox $22,385.21 13.28%
vti $22,631.31 13.47%
vtsax $22,624.01 13.47%

vtsax outperformed fzrox as did vti as one would expect.
There are a number of threads about errors in testfol.io data. I hope they have been fixed. I've been relying on Portfolio Visualizer, but if anyone has negative information about their accuracy, please share.

viewtopic.php?t=441282
viewtopic.php?t=437640
viewtopic.php?t=447308
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by JMACatfish »

Geologist wrote: Thu Jan 30, 2025 7:06 pm I'm with rkhusky and White Coat Investor. The difference in expense ratio is not material. 0.03% is $30 per $100,000 invested per year. Even compounded over many years, this is not going to make a significant difference (50 x 30 = $1500).
This isn't how you would calculate the lost value. This is saying it'd be $30 per year, but contributions and previous shrinkages would both affect this loss each year.

0.03% expense ratio means you capture 0.9997 of the value each year. Using your example of 50 years, you'd have 0.9997^50 = 0.985 times what you'd otherwise have with a 0% expense ratio, or just about 1.5% less. If you let $10k compound at 7% real each year, it's the difference between $294,570 and about $290,184. Over 30 years, it's the difference between $76,122 and $74,890.

Which may not be very much of the grand scheme of things. But for international stocks with an expense ratio roughly double that, and with larger sums of money, we could easily hit differences of 5 figures. Not bad for submitting one single-paged form and twiddling your thumbs. Certainly better time-adjusted return than credit card churning or cutting off a few dozen bucks from tax software.

Full disclosure, I moved from Vanguard to Fidelity for zero ER international funds. Was very simple, very easy, and have no regrets.
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sycamore
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by sycamore »

Another single data point: from 1/2019 (1st full month after FZROX inception) through 1/2025
SPTM (S&P 1500 Index) beat FZROX and VTSAX/VTI and SCHB (Schwab Broad Market Index).

PV: https://www.portfoliovisualizer.com/bac ... SQs7rfVYZo
testfolio: https://testfol.io/?s=dGHlfC5qHbt
The two backtests don't exactly match but are close. I don't know which is right. Maybe both are wrong. But both show SPTM winning.

No need to move to a different brokerage! :)
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by rkhusky »

JMACatfish wrote: Mon Feb 03, 2025 10:19 pm
Geologist wrote: Thu Jan 30, 2025 7:06 pm I'm with rkhusky and White Coat Investor. The difference in expense ratio is not material. 0.03% is $30 per $100,000 invested per year. Even compounded over many years, this is not going to make a significant difference (50 x 30 = $1500).
This isn't how you would calculate the lost value. This is saying it'd be $30 per year, but contributions and previous shrinkages would both affect this loss each year.

0.03% expense ratio means you capture 0.9997 of the value each year. Using your example of 50 years, you'd have 0.9997^50 = 0.985 times what you'd otherwise have with a 0% expense ratio, or just about 1.5% less. If you let $10k compound at 7% real each year, it's the difference between $294,570 and about $290,184. Over 30 years, it's the difference between $76,122 and $74,890.

Which may not be very much of the grand scheme of things. But for international stocks with an expense ratio roughly double that, and with larger sums of money, we could easily hit differences of 5 figures. Not bad for submitting one single-paged form and twiddling your thumbs. Certainly better time-adjusted return than credit card churning or cutting off a few dozen bucks from tax software.

Full disclosure, I moved from Vanguard to Fidelity for zero ER international funds. Was very simple, very easy, and have no regrets.
For the tiny bit of lower costs, you are taking on a tiny bit of extra risk that Fidelity’s proprietary indexes won’t return as much over the next 30 years because the stocks they choose don’t do as well. And you don’t have the transparency of other indexes to see what changes are being made. I am fine paying a bit more to remove the potential conflict of interest.
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by feh »

sycamore wrote: Tue Feb 04, 2025 7:51 am Another single data point: from 1/2019 (1st full month after FZROX inception) through 1/2025
SPTM (S&P 1500 Index) beat FZROX and VTSAX/VTI and SCHB (Schwab Broad Market Index).

PV: https://www.portfoliovisualizer.com/bac ... SQs7rfVYZo
testfolio: https://testfol.io/?s=dGHlfC5qHbt
The two backtests don't exactly match but are close. I don't know which is right. Maybe both are wrong. But both show SPTM winning.

No need to move to a different brokerage! :)
FZROX is total market, not S&P 500. Apples to oranges.
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by Minty »

rkhusky wrote: Tue Feb 04, 2025 8:28 am
JMACatfish wrote: Mon Feb 03, 2025 10:19 pm

This isn't how you would calculate the lost value. This is saying it'd be $30 per year, but contributions and previous shrinkages would both affect this loss each year.

0.03% expense ratio means you capture 0.9997 of the value each year. Using your example of 50 years, you'd have 0.9997^50 = 0.985 times what you'd otherwise have with a 0% expense ratio, or just about 1.5% less. If you let $10k compound at 7% real each year, it's the difference between $294,570 and about $290,184. Over 30 years, it's the difference between $76,122 and $74,890.

Which may not be very much of the grand scheme of things. But for international stocks with an expense ratio roughly double that, and with larger sums of money, we could easily hit differences of 5 figures. Not bad for submitting one single-paged form and twiddling your thumbs. Certainly better time-adjusted return than credit card churning or cutting off a few dozen bucks from tax software.

Full disclosure, I moved from Vanguard to Fidelity for zero ER international funds. Was very simple, very easy, and have no regrets.
For the tiny bit of lower costs, you are taking on a tiny bit of extra risk that Fidelity’s proprietary indexes won’t return as much over the next 30 years because the stocks they choose don’t do as well. And you don’t have the transparency of other indexes to see what changes are being made. I am fine paying a bit more to remove the potential conflict of interest.
Can you elaborate? Isn't it equally "risky" that any given fund will outperform the benchmark, than that they will underperform? Or that any given index will fail to capture the returns of the total investible U.S. market, but either by over- or under-performing?
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rkhusky
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by rkhusky »

Minty wrote: Tue Feb 04, 2025 9:17 am
rkhusky wrote: Tue Feb 04, 2025 8:28 am
For the tiny bit of lower costs, you are taking on a tiny bit of extra risk that Fidelity’s proprietary indexes won’t return as much over the next 30 years because the stocks they choose don’t do as well. And you don’t have the transparency of other indexes to see what changes are being made. I am fine paying a bit more to remove the potential conflict of interest.
Can you elaborate? Isn't it equally "risky" that any given fund will outperform the benchmark, than that they will underperform? Or that any given index will fail to capture the returns of the total investible U.S. market, but either by over- or under-performing?
Since it’s a proprietary index you don’t know the sampling technique or the criteria for inclusion. Fidelity could prioritize their profit vs fund performance and you wouldn’t know the difference. Perhaps it will outperform, but you won’t know that for 10-20 years. A full replication index won’t underperform.

And the risk is tiny in keeping with the tiny cost savings. So I wouldn’t really worry about it.
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by Minty »

rkhusky wrote: Tue Feb 04, 2025 10:59 am
Minty wrote: Tue Feb 04, 2025 9:17 am Can you elaborate? Isn't it equally "risky" that any given fund will outperform the benchmark, than that they will underperform? Or that any given index will fail to capture the returns of the total investible U.S. market, but either by over- or under-performing?
Since it’s a proprietary index you don’t know the sampling technique or the criteria for inclusion. Fidelity could prioritize their profit vs fund performance and you wouldn’t know the difference. Perhaps it will outperform, but you won’t know that for 10-20 years. A full replication index won’t underperform.

And the risk is tiny in keeping with the tiny cost savings. So I wouldn’t really worry about it.
Ah, I see the point. Of course, the holdings of the funds are disclosed, yet cheating is always possible, such as intentionally overpaying a related party. But isn't that a risk with any fund, regardless of the index or benchmark?
Core Four w/ nominal bonds & TIPS. Refi Rampage: Purchase: 3.875% 30 -> R1 3% 20 -> R2 2.375% 15 -> R3 1.99% 15 -> R4 1.875% 15
rkhusky
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by rkhusky »

Minty wrote: Tue Feb 04, 2025 11:40 am
rkhusky wrote: Tue Feb 04, 2025 10:59 am
Since it’s a proprietary index you don’t know the sampling technique or the criteria for inclusion. Fidelity could prioritize their profit vs fund performance and you wouldn’t know the difference. Perhaps it will outperform, but you won’t know that for 10-20 years. A full replication index won’t underperform.

And the risk is tiny in keeping with the tiny cost savings. So I wouldn’t really worry about it.
Ah, I see the point. Of course, the holdings of the funds are disclosed, yet cheating is always possible, such as intentionally overpaying a related party. But isn't that a risk with any fund, regardless of the index or benchmark?
An independent index provider has no incentive.
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by GoldStar »

rkhusky wrote: Tue Feb 04, 2025 12:11 pm
Minty wrote: Tue Feb 04, 2025 11:40 am
Ah, I see the point. Of course, the holdings of the funds are disclosed, yet cheating is always possible, such as intentionally overpaying a related party. But isn't that a risk with any fund, regardless of the index or benchmark?
An independent index provider has no incentive.
This argument is a red herring and has been debunked in other threads here on bogleheads over the years.
The FPS index is maintained/managed by Dow Jones. It is no secret and is stated right in the prospectus.
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by JMACatfish »

rkhusky wrote: Tue Feb 04, 2025 8:28 am
JMACatfish wrote: Mon Feb 03, 2025 10:19 pm

This isn't how you would calculate the lost value. This is saying it'd be $30 per year, but contributions and previous shrinkages would both affect this loss each year.

0.03% expense ratio means you capture 0.9997 of the value each year. Using your example of 50 years, you'd have 0.9997^50 = 0.985 times what you'd otherwise have with a 0% expense ratio, or just about 1.5% less. If you let $10k compound at 7% real each year, it's the difference between $294,570 and about $290,184. Over 30 years, it's the difference between $76,122 and $74,890.

Which may not be very much of the grand scheme of things. But for international stocks with an expense ratio roughly double that, and with larger sums of money, we could easily hit differences of 5 figures. Not bad for submitting one single-paged form and twiddling your thumbs. Certainly better time-adjusted return than credit card churning or cutting off a few dozen bucks from tax software.

Full disclosure, I moved from Vanguard to Fidelity for zero ER international funds. Was very simple, very easy, and have no regrets.
For the tiny bit of lower costs, you are taking on a tiny bit of extra risk that Fidelity’s proprietary indexes won’t return as much over the next 30 years because the stocks they choose don’t do as well. And you don’t have the transparency of other indexes to see what changes are being made. I am fine paying a bit more to remove the potential conflict of interest.
As far as I know their index is composed from "sampling" the target index. While there certainly would be some room for tracking error, I don't see why there'd be any more reason to think it'd turn out worse rather than better if the sampling is representative of the index (ie, if the expected value of the returns of their proprietary index closely resembles the expected value of the returns of the underlying).

I'd agree tracking error and lesser transparency are valid concerns. Just not ones I personally am worried about, honestly.

Could you clarify what the conflict of interest here would be on Fidelity's part? Didn't see discussion on this upthread, my bad.
Last edited by JMACatfish on Tue Feb 04, 2025 1:52 pm, edited 1 time in total.
GoldStar
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by GoldStar »

JMACatfish wrote: Tue Feb 04, 2025 1:29 pm
rkhusky wrote: Tue Feb 04, 2025 8:28 am
For the tiny bit of lower costs, you are taking on a tiny bit of extra risk that Fidelity’s proprietary indexes won’t return as much over the next 30 years because the stocks they choose don’t do as well. And you don’t have the transparency of other indexes to see what changes are being made. I am fine paying a bit more to remove the potential conflict of interest.
As far as I know their index is composed from "sampling" the target index. While there certainly would be some room for tracking error, I don't see why there'd be any more reason to think it'd turn out worse rather than better if the sampling is representative of the index (ie, if the expected value of the returns of their proprietary index closely resembles the expected value of the returns of the underlying).

I'd agree tracking error and lesser transparency are valid concerns. Just not ones I personally am worried about, honestly.

Could you clarify what the conflict of interest here would be on Fidelity's part?
I believe this is another case of much ado about nothing.

The perspective states:
The index or indices are the property of FPS, which has contracted with S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC) to calculate and maintain the index or indices.
To insinuate Fidelity will somehow manipulative the index for their own gain is simply another attempt to spread FUD.
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by nalor511 »

GoldStar wrote: Tue Feb 04, 2025 1:50 pm
The perspective states:
The index or indices are the property of FPS, which has contracted with S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC) to calculate and maintain the index or indices.
To insinuate Fidelity will somehow manipulative the index for their own gain is simply another attempt to spread FUD.
The index fidelity is using is private/proprietary, and not published. The cost of running a fund is not zero. You don't know what fidelity is doing behind the curtain, and neither does anyone else. The performance of VTSAX and FZROX is effectively equal, each one wins in a small fashion depending which dates are picked. This discussion goes nowhere, because the management of FZ funds are a black box. Nobody knows. Both choices are fine.

You can pretend to know exactly what fidelity is doing based on what's in the prospectus, but it's not enough info to actually know. Fidelity is fine. Vanguard is fine. Neither fidelity nor vanguard are charities - they are *BOTH* in it to make money. To imply they're not is ridiculous.
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by rkhusky »

JMACatfish wrote: Tue Feb 04, 2025 1:29 pm I'd agree tracking error and lesser transparency are valid concerns. Just not ones I personally am worried about, honestly.
I’m not worried about it either, just like I’m not worried about the tiny difference in ER. They go hand in hand.
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by LadyGeek »

I removed an off-topic post and reply. As a reminder, see: General Etiquette
At all times we must conduct ourselves in a respectful manner to other posters. Attacks on individuals, insults, name calling, trolling, baiting or other attempts to sow dissension are not acceptable.
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sycamore
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by sycamore »

feh wrote: Tue Feb 04, 2025 8:37 am
sycamore wrote: Tue Feb 04, 2025 7:51 am Another single data point: from 1/2019 (1st full month after FZROX inception) through 1/2025
SPTM (S&P 1500 Index) beat FZROX and VTSAX/VTI and SCHB (Schwab Broad Market Index).

PV: https://www.portfoliovisualizer.com/bac ... SQs7rfVYZo
testfolio: https://testfol.io/?s=dGHlfC5qHbt
The two backtests don't exactly match but are close. I don't know which is right. Maybe both are wrong. But both show SPTM winning.

No need to move to a different brokerage! :)
FZROX is total market, not S&P 500. Apples to oranges.
Check your glasses :)
SPTM isn't S&P 500; it's S&P 1500.

https://www.ssga.com/us/en/individual/e ... t-etf-sptm
"The Index represents approximately 90% of the investable US equity market"
90% may not be enough for everyone of course.
feh
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by feh »

sycamore wrote: Tue Feb 04, 2025 4:26 pm
feh wrote: Tue Feb 04, 2025 8:37 am

FZROX is total market, not S&P 500. Apples to oranges.
Check your glasses :)
SPTM isn't S&P 500; it's S&P 1500.

https://www.ssga.com/us/en/individual/e ... t-etf-sptm
"The Index represents approximately 90% of the investable US equity market"
90% may not be enough for everyone of course.
Ok; still apples and oranges.
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by kidshrink »

Geologist wrote: Mon Feb 03, 2025 6:48 pm
kidshrink wrote: Mon Feb 03, 2025 6:21 pm

If the difference is immaterial, what’s the rationale for Vanguard not charging zero expense ratio like Fidelity?
The zero funds still have expenses. Fidelity's parent company (FMR) is paying these expenses. Based on Fidelity's comparable funds, these expenses amount to millions of dollars a year. Where would Vanguard get this money? FMR gets it by making a profit on rather higher expenses for other funds (for example, SPAXX and FZFXX, two of its main money market funds have expense ratios of 0.42%).

The difference in expense ratio between investing in these Fidelity money market funds and Vanguard's (0.11% or lower) is highly material.
All fair points. So my takeaway is that, while the OP may not benefit much by moving VG funds, the OP could invest new funds with Fidelity’s zero funds and get the best of both worlds.
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by invest4 »

I already have investments with low expense ratios. I begrudge no one for trying to save a few bucks, but is not worth it to me including having to dump the Fidelity zero funds if you leave them and go somewhere else.
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dave.m
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by dave.m »

sycamore wrote: Fri Jan 31, 2025 6:56 am
dave.m wrote: Thu Jan 30, 2025 3:01 pm ...
The expense was extremely low for VTSAX, however, it’s not zero.
...
It appears the Fidelity ZERO Large Cap Index Fund (FNILX) more closely resembles the S&P 500 index vanguard offers...
If you want zero ER and something that tracks the S&P 500, how about BNY Mellon US Large Cap Core Equity ETF , ticker BKLC?

You can trade it at any brokerage. It won't suffer from the lock-in of the Fidelity Zero mutual funds.
That’s a helpful idea.
Do you invest in BKLC? Is there a catch? Do they have an unusual Bid/ask spread?

I did see some articles about the possibility that fees eventually increase but that wouldn’t matter inside a Roth as I could just swap later if that ever happened. So this might be exactly what I was looking for. But before I execute is there any hidden type fee to note?
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by Cocoa Beach Bum »

sycamore wrote: Fri Jan 31, 2025 6:56 am If you want zero ER and something that tracks the S&P 500, how about BNY Mellon US Large Cap Core Equity ETF , ticker BKLC?

You can trade it at any brokerage. It won't suffer from the lock-in of the Fidelity Zero mutual funds.
According to the BNY webpage, BKLC "seeks to match the performance of the Solactive GBS United States 500 Index TR." There's no mention of S&P 500. But I do agree that BKLC is a good portable alternative to FNILX - Fidelity ZERO Large Cap Index Fund.
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by Cocoa Beach Bum »

For those interested in 0.00% ER funds, BNY Investments also offers BKAG - BNY Mellon Core Bond ETF. BKAG "seeks to match the performance of the Bloomberg US Aggregate Total Return Index." I believe this is essentially the same index tracked by BND and AGG ETFs. BKAG has about $2B in assets, so it should be easy to trade.
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by sycamore »

dave.m wrote: Fri Feb 07, 2025 11:01 pm
sycamore wrote: Fri Jan 31, 2025 6:56 am
If you want zero ER and something that tracks the S&P 500, how about BNY Mellon US Large Cap Core Equity ETF , ticker BKLC?

You can trade it at any brokerage. It won't suffer from the lock-in of the Fidelity Zero mutual funds.
That’s a helpful idea.
Do you invest in BKLC? Is there a catch? Do they have an unusual Bid/ask spread?

I did see some articles about the possibility that fees eventually increase but that wouldn’t matter inside a Roth as I could just swap later if that ever happened. So this might be exactly what I was looking for. But before I execute is there any hidden type fee to note?
For broad-market US stocks I own VTI and SPTM. I prefer them over S&P 500 as they provide exposure to small and mid caps.

But I don't think there's a catch with BKLC. No commissions these days for ETFs at all the major brokerages. But I haven't checked its bid/ask spread or whether it's more likely to trade at a premium to NAV compared with other ETFs.

Remember there's more to consider than a fund's expense ratio. Some funds lend out some of their shares and in return are paid by the borrowers (share lending, a common industry practice). Some funds retain more of that income for shareholders than other funds. The income is not reflected in the expense ratio but it is reflected in the fund's total return. This is one reason why a fund with 0.03 or 0.04% ER can have better performance than a 0.00% ER fund.
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by dave.m »

sycamore wrote: Sat Feb 08, 2025 7:56 am
Remember there's more to consider than a fund's expense ratio. Some funds lend out some of their shares and in return are paid by the borrowers (share lending, a common industry practice). Some funds retain more of that income for shareholders than other funds. The income is not reflected in the expense ratio but it is reflected in the fund's total return. This is one reason why a fund with 0.03 or 0.04% ER can have better performance than a 0.00% ER fund.
Unfortunately for me, that isn’t something I’m familiar with, so I’ll look into “share landing”. Can you provide me with any other terms or practices that I may find helpful to educate myself about?
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by sycamore »

dave.m wrote: Sat Feb 08, 2025 3:12 pm
sycamore wrote: Sat Feb 08, 2025 7:56 am
Remember there's more to consider than a fund's expense ratio. Some funds lend out some of their shares and in return are paid by the borrowers (share lending, a common industry practice). Some funds retain more of that income for shareholders than other funds. The income is not reflected in the expense ratio but it is reflected in the fund's total return. This is one reason why a fund with 0.03 or 0.04% ER can have better performance than a 0.00% ER fund.
Unfortunately for me, that isn’t something I’m familiar with, so I’ll look into “share landing”. Can you provide me with any other terms or practices that I may find helpful to educate myself about?
Sorry, I used the wrong term. The correct one is securities lending.

Here's a couple of Vanguard articles about it:
- The value of securities lending in three charts
- A client-centric approach to securities lending

Here's a related article I came across while reading those two. The five factors that make up total ETF costs -- sounds like something you might be interested in!
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Re: Move VG Roth to Fidelity for ZERO fund?

Post by sycamore »

sycamore wrote: Sat Feb 08, 2025 3:50 pm
dave.m wrote: Sat Feb 08, 2025 3:12 pm

Unfortunately for me, that isn’t something I’m familiar with, so I’ll look into “share landing”. Can you provide me with any other terms or practices that I may find helpful to educate myself about?
Sorry, I used the wrong term. The correct one is securities lending.

Here's a couple of Vanguard articles about it:
- The value of securities lending in three charts
- A client-centric approach to securities lending

Here's a related article I came across while reading those two. The five factors that make up total ETF costs -- sounds like something you might be interested in!
dave.m,

Here's another article discussing securities lending, this one from Morningstar on 2/11 ETFs That Pay You to Invest, subtitled "How securities lending benefits ETF investors and ETF firms."
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