Fidelity

Boglehead-style investing at Fidelity
Fidelity Investments is the marketing name for FMR LLC, a giant Boston-based mutual fund company and financial supermarket, and Vanguard's biggest competitor in recent years. Fidelity is sometimes credited with transforming the mutual fund business from a stodgy conservative world of funds managed by committee into the model of active funds managed by stock-picking superstar managers.

The building blocks of Boglehead-style investing are low-expense-ratio index mutual funds and/or ETFs. Vanguard fans would suggest that Vanguard has the best and most complete lineup of such funds, and that the most convenient place to hold Vanguard mutual funds is directly at Vanguard. Thus, the Bogleheads forum and Wiki tends to be Vanguard-oriented. But investing according to the Boglehead philosophy certainly does not require you to invest at Vanguard or use Vanguard products. Here are some notes on how to do it at Fidelity.

Tools for Boglehead-style investing

 * Don't overlook the 30 iShares ETFs for which Fidelity offers free online trades. They satisfy the criteria of "low-cost index ETFs" that cover most asset classes an ordinary investor would need.


 * Don't overlook the seven Fidelity Spartan mutual funds (Fidelity Spartan 500 Index and Fidelity US Equity Index have merged as of 01/22/2010). These are Fidelity's counterpart to Vanguard, very-low-expense-ratio index funds. The minimum required to invest in Spartan mutual funds is $10,000 per fund.


 * Fidelity Four-In-One Index Fund is an interesting possibility for a beginner's fund, with a low 0.23% expense ratio. It is a fund-of-funds, all index funds, with about 60% total domestic stock market (in two funds), 25% international, and 15% bonds.


 * For bonds, the closest thing to Vanguard Total Bond Market Index among Fidelity's own mutual funds is Fidelity's U. S. Bond Index Fund, FBIDX. Its expense ratio was lowered in 2011 to 0.22%. iShares Barclays Aggregate Bond ETF (ticker AGG), which trades free of commissions, is another alternative.


 * The closest thing to Vanguard Total International Stock Market Index among Fidelity's own mutual funds is Fidelity's Spartan International Index Fund, FSIIX. While its expense ratio, currently 0.10%, is lower than Vanguard's Investor and Admiral shares, this fund tracks a different index and does not include emerging markets. That does not mean it is necessarily worse, but it is different. It is not as close a replacement for its Vanguard counterpart as some of the others.


 * The transaction fees to buy Vanguard mutual funds at Fidelity are quite high --$75 for the first purchase, but subsequent purchases can be $5 per purchase if you set up an automatic investment plan. In addition, Vanguard has ETF equivalents for most of its index funds. Like other stocks and ETFs, Vanguard ETFs can be bought and sold at Fidelity for around $7.95--but check Fidelity for current fee details which may vary depending on your account size. If you want to use actual Vanguard products, using Vanguard ETF's is probably the cheapest way to do so at Fidelity.


 * Fidelity offers individual treasury bonds (both nominal and TIPS) at auction free of commission or any markup or fees if you place your orders online. There is no limit on account size. No separate account is needed. The minimum purchase is $1,000.

Fidelity tips, links, and general orientation
Whereas the default account at Vanguard is a mutual fund account, in which you can only buy Vanguard mutual funds (all other products require a separate Vanguard Brokerage Service account), the default account at Fidelity is a brokerage account. You can buy mutual funds (Fidelity and non-Fidelity funds), ETFs, individual stocks, bonds, and brokered CDs all within the same Fidelity account. As of November 2010:


 * Fidelity's online brokerage handbook has all the nitty-gritty details and fees and commissions and how Fidelity does business online.


 * Fidelity's full fee schedule is here.


 * Browse Fidelity Funds is a structured overview of all 175 Fidelity funds. Four and Five Star Fidelity Funds is a shorter overview of sorts, listing the recent good performers Fidelity wants you to know about. Fidelity's mutual fund search screen seems to be the best way to find specific Fidelity funds.