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EdLaFave

Fidelity's 0% expense ratio total market funds.

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I don't want to speak prematurely, but this seems like a game changer. I don't know if I should restructure my portfolio or wait to see how things shake out. Will Vanguard respond? Is this not as great as it sounds?

...too bad a big chunk of my investments are in a taxable account with reasonably large capital gains.

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If Fidelity extends the no-fee funds to their ETF classes, and if Vanguard makes Fidelity ETFs no-transaction-fee (which I think they are doing), then it would be possible to hold the Fidelity ETFs for no fee within a Vanguard account.  We'll see.  I'll keep you guys posted when I determine whether my Fidelity 403b funds migrate to a zero expense ratio.

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12 minutes ago, whyme said:

I'll keep you guys posted when I determine whether my Fidelity 403b funds migrate to a zero expense ratio.

I definitely want to be kept up to date on that. I'd also like to know when/if they reduce the expense ratio of the other funds. For example, just a few days ago Fidelity's Total Market Index Fund (FSTVX) was listed as a 0.035% expense ratio, but Fidelity's site now shows it marked down to 0.015%. I'll be curious to see if the 403b/457b plans immediately benefit from this...that way I can update my site.

Overall, I think this might make Fidelity the best 403b/457b vendor in the industry. I want to see how everything shakes out.

The folks over on bogleheads are having a back and forth about the revenue generated from security lending and how it is added back into the fund as performance (rather than being subtracted from the expense ratio). The premise being is that you can't go by expense ratio alone....but if that had a significant impact then I don't understand why Vanguard's 500 Admiral shares consistently lag the S&P 500 (by an amount essentially equal to the expense ratio).

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Here is market watch's take: 

Fund fees have gotten so low that Vanguard has played down the importance of this issue when evaluating options. Instead, it has urged investors to consider other factors, like spreads, liquidity, and tax efficiency. 

I do think that Vanguard index funds have been more tax efficient and this might be something to consider in a taxable account. How do I know? I use to own identical taxable Index funds with both F and V . Also, you do realize in a taxable account you can't just jump over to Fidelity. You will have to pay taxes on gains. So if you have a significant account you won't make the move. Also don't be so sure you will get a zero expense ratio in a 403b 457b plan. Maybe you will but I'm not so sure yet. I'm waiting to see how Schwab, Blackrock , and Vanguard respond. I don't see Vanguard following  but I credit Vanguard for being responsible for fees going down across the board.

 

https://www.marketwatch.com/story/fund-fees-hit-milestone-as-fidelity-announces-products-charging-0-2018-08-01/print

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Just looked at my Fidelity 403b.  It does show the Total Market ER at 0.015%, down from the already-low figure you mention above, Ed.  I hold a fund called something like Global ex-us, not the one called Total International, but very similar (offhand, I don't recall why the "Global" one seemed preferable, but I had some small reason for preferring it).  That one hasn't changed--it still shows an ER of 0.06%.  

PS: It appears that several of the "PR" index funds have just had their ERs reduced, including Total International (now 0.045%) and Small Cap (if I remember correctly, that was down to 0.025%).  At first glance, it looks as though fee reductions are being passed on to 403b holders, though you never know what the future holds in these matters.

PPS: Here's a link to the current costs of Fidelity's line of low-cost index funds, in each case less than Vanguard.  https://www.fidelity.com/mutual-funds/investing-ideas/index-funds

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Don't know if this is related since its in the 401k world  but according to Investment News Fidelity did more than go to zero fees on two funds:

Fidelity the largest record keeper of assets held in defined-contribution plans, has just begun charging employers a fee on 401(k) assets held in Vanguard Group investment funds. Observers say such a fee also appears to be a competitive maneuver that will likely make Vanguard funds less attractive as a 401(k) option — especially among larger employers with big retirement plans — and could herald similar moves by record keepers beyond Fidelity. They also believe it speaks to Vanguard's overwhelming success in amassing 401(k) assets the past several years. "I've never seen it where a record keeper has singled out one fund company and decided to put a specific fee on that fund company," said Aaron Pottichen, retirement services practice leader at the advisory firm CLS Partners. "It speaks to how dominating Vanguard is right now across the entire 401(k) landscape, and really how threatened everyone is by that."  

I wish the 403b landscape was dominated by Vanguard, we would all be better served!!! I still think like Moe Money mentioned they may very well have been blacklisted , omitted or under promoted in SOME 403b plans. Now its happening in  the 401 K world and there its no speculation-its absolutely true!!

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1 hour ago, tony said:

Don't know if this is related since its in the 401k world  but according to Investment News Fidelity did more than go to zero fees on two funds:

Fidelity the largest record keeper of assets held in defined-contribution plans, has just begun charging employers a fee on 401(k) assets held in Vanguard Group investment funds. Observers say such a fee also appears to be a competitive maneuver that will likely make Vanguard funds less attractive as a 401(k) option — especially among larger employers with big retirement plans — and could herald similar moves by record keepers beyond Fidelity. They also believe it speaks to Vanguard's overwhelming success in amassing 401(k) assets the past several years. "I've never seen it where a record keeper has singled out one fund company and decided to put a specific fee on that fund company," said Aaron Pottichen, retirement services practice leader at the advisory firm CLS Partners. "It speaks to how dominating Vanguard is right now across the entire 401(k) landscape, and really how threatened everyone is by that."  

I wish the 403b landscape was dominated by Vanguard, we would all be better served!!! I still think like Moe Money mentioned they may very well have been blacklisted , omitted or under promoted in SOME 403b plans. Now its happening in  the 401 K world and there its no speculation-its absolutely true!!

One more point. Its more of a principle than anything else: Only two major investment companies that I know of which are not subjected to shareholder demands, Vanguard and TIAA. So they can focus on the clients best interests.  

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On 8/1/2018 at 5:47 PM, whyme said:

If Fidelity extends the no-fee funds to their ETF classes, and if Vanguard makes Fidelity ETFs no-transaction-fee (which I think they are doing), then it would be possible to hold the Fidelity ETFs for no fee within a Vanguard account.  

I think they will and I think you will be able to.

 

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They are already advertising all these changes everywhere. I received this e-mail today andI don't have an active account anymore with Fidelity.This has to be a s h o t across the bow at Vanguard. But personally I am staying with Vanguard regardless. I believe in Vanguard's corporate mission and philosophy. To me all this Fidelity stuff looks like a marketing ploy to draw attention to Fidelity and away from Vanguard. But Fidelity funds overall have high fees and market timing managers.Fidelity will never be a Vanguard.More than the no fees on two funds I find the Fidelity no account minimums as the best move and one Vanguard should adopt. We should never forget that Vanguard has made the fee collapse ACROSS THE INDUSTRY all possible in the first place. I'm not usually brand loyal. But with Vanguard I am.

 
Updates regarding account fees, minimums, and expense ratios
As of August 1, 2018, we introduced the following changes, which will be automatically applied to your affected Fidelity accounts:
  Removed account fees and minimums1
  Eliminated domestic money movement fees
  Lowered expense ratios on all Fidelity stock and bond index mutual funds
  Introduced two index mutual funds (FZROX and FZILX) with a zero expense ratio2
 
No action is required on your part.
If you have questions about these changes, please call an investment professional at 800-343-3548.

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On 8/1/2018 at 9:48 PM, whyme said:

Just looked at my Fidelity 403b.

Hey whyme, you've already answered some of this, but can you confirm the following is true in the 403b:

Reduced
Fidelity Total Market Index Fund (FSTVX) = 0.015%
Fidelity Total International Index Fund (FTIPX) = 0.06%
Fidelity U.S. Bond Index Fund (FSITX) = 0.025%

Not Reduced
Fidelity Freedom Index (FJIFX, FIHFX, FDKLX, etc) = 0.14%
Fidelity Four-in-One Index Fund (FFNOX) = 0.11%

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Here you go:

Fidelity Total Market Index Fund (FSTVX) = 0.015% 
Fidelity Total International Index Fund (FTIPX) = 0.045%    0.06%. 
Fidelity U.S. Bond Index Fund (FSITX) = 0.025%
Fidelity Freedom Index (FJIFX, FIHFX, FDKLX, etc) = 0.14% (net ER, shows a gross ER of .18)
Fidelity Four-in-One Index Fund (FFNOX) = 0.11%  (net ER, shows a gross ER of .13)

Note that the Total International ER differs from your figures, Ed.   Total Int'l is 0.06%.  It looks as though the two zero ER offerings will be introduced as distinct funds, not simply rolled over from the current total market funds.  Those zero funds do not yet show up among the 403b offerings.

FYI, reduced price index funds include 0.025% ER on the Mid Cap and Small Cap funds.  0.03% on Short, Intermediate and Long Term Treasury Bonds. Emerging Markets, 0.08%.

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5 minutes ago, whyme said:

Fidelity Total International Index Fund (FTIPX) = 0.045%

That is quite surprising. The Fidelity site lists it as 0.06%. I wonder why it is 0.015% cheaper in a 403b...is it possible one of us is confused or is this just odd?

7 minutes ago, whyme said:

Those zero funds do not yet show up among the 403b offerings.

I guess today is the first day they're "open" so it'll be interesting to see if that changes. When I try to pull them up on Morningstar, I still get a blank page.

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