Jump to content
tony

Are No Fee Fidelity Funds Really a Good Deal?

Recommended Posts

Obviously this has been in the news .Since fees  are a  BIG DEAL here  is  a take on this latest no fee Fidelity move.  Actually back in April Fidelity introduced The Fidelity Flex  funds, which were first filed last year,  also have expense ratios of zero. But we find out later that they  are available in only certain fee-based managed accounts offered by Fidelity. Not saying thats whats happening here but keep your antennas up about all these changes coming..

Quote

 Until we have some evidence of performance from these funds, I think most investors would do just fine to continue investing in the existing low-cost funds out there. Furthermore, this first foray into no-fee funds will probably be followed by more options from competitors. 

https://www.fool.com/investing/2018/08/05/are-fidelitys-zero-fee-index-funds-really-a-good-d.aspx

Share this post


Link to post
Share on other sites

Yes, fees are a big deal, but investment fees have been low across the board for over a decade now. If people want to move money to Fidelity, that's fine. But to beat up on Vanguard because they charge a few basis points more than fidelity is ridiculous. Let's not forget the many fiduciary financial advisors charge 1.0% AUM or more. Now the AUM fee is a fee to be really obsessed about. 

Share this post


Link to post
Share on other sites
10 minutes ago, sschullo said:

But to beat up on Vanguard because they charge a few basis points more than fidelity is ridiculous.

I agree but I don't pick up people beating up on Vanguard but maybe that is happening on Boglehead? I haven't checked. In my opinion this is a great  big nothing burger . I keep fees in perspective. Lord! I was paying 2% plus for my 403b years ago plus surrender fees and management fees too and I am now paying  0.08% - or something around that on average. I am happy. My money has compounded !! Plus I have totally bought in to Vanguard Company /Corporate Philosphy -Mission Statement which I admire and respect and that has to count for something. For them low fees are a given across the board-all funds not a select few. I  think you mentioned Steve that they do not have to answer to shareholder demands. I admire that too.

 

Share this post


Link to post
Share on other sites

Here is an update.

Buyer beware of these so-called zero fee or now some are called negative fee funds. In other words, they pay you to invest! This is getting too obvious. Nothing is free! So before anybody moves all of their money from Vanguard to Fidelity read this. For my money, I am sticking with Vanguard for so many philosophical and monetary reasons, and also important they don't have shareholders to please, they focus on just us ordinary investors. 

http://fiduciarynews.com/2019/06/the-fiduciary-duty-to-investigate-conflicts-of-interests-with-zero-and-negative-fee-funds/?utm_source=BenefitsPro&utm_medium=NoLunchisEverFree&utm_campaign=060619z&ct=t(EMAIL_CAMPAIGN_6_4_2019_23_24)

Share this post


Link to post
Share on other sites

There is no free lunch.  I prefer an inexpensive, healthy, and delicious lunch that I know won't cause me digestive issues later.  I certainly don't want a lunch that someone is willing to pay me to eat.

And seriously,  zero isn't that much better than 5-10 basis points, especially when many people may be paying 2-3% annually on their investments.

 

 

Share this post


Link to post
Share on other sites

Is a 0% fund a good deal? Of course.

I will more than likely own the Fidelity ZERO funds in a year or so. The only reason I don’t own them now is because part of my financial strategy is to always move slowly and cautiously. 

Share this post


Link to post
Share on other sites

There truly is no free lunch. MN Gopher is correct. Sure you can buy one or two Fidelity funds cheaper than just about anyone else but is that enough to sustain your total investment needs over a lifetime? Probably not. And, fees alone doesn't define investment success.Certainly it's important but investing  is  a bit more complicated than that. The lowest cost fund in the world won't help you if you display the wrong investment behaviors .

 

Share this post


Link to post
Share on other sites

I think a couple 0% funds are enough to sustain my lifetime investment needs and if not I can just as easily purchase another type of fund from a different vendor.

I will agree with the sentiment that saving 0.06% per year is far less important than things like maximizing income, maxing our tax advantaged accounts, properly assessing your risk profile, and so on. However, if you’re doing all that then why not take the extra 0.06%?

I’ve read people wondering if Fidelity’s ZERO funds will be as tax efficient as Vanguard’s. I’m wondering that too, but it really only matters in a taxable account.

I’ve also wondered what would happen if Fidelity shut down the funds because they were losing too much money on them. Again, that’s only consequential in a taxable account.

My biggest concern is whether or not Fidelity’s funds will properly track the total market because one of the ways they save money is by NOT tracking a pre-existing index. They’re essentially following their own index (or so I read). I’m not sure how to evaluate the quality of the index. Maybe just review a long enough track record of performance?

Share this post


Link to post
Share on other sites

I'm mad at Steve for reigniting this thread. Not really but this topic is exactly were we left off when I disappeared for several months. 

Ed, you and me are equally stubborn.

Share this post


Link to post
Share on other sites

Ed, why don't you practice what you preach? Why wait? You put in a lot of time arguing that Fidelity and zero fees are better. OK go for it now. I wouldn't wait. You are paying fees now. 

As the article says, those fees may be lower now but what if Fidelity raised their fees after a billion or so assets come into their plan? And after the new investors are settled then the brokers go to work trying to convince them to move to one of their expensive funds?

The zero fee is a sales pitch. I respect fidelity more if they were more honest about what was going on. As the article implied, you cannot trust anybody with zero fees. It is unsustainable. Something is going on that I am not unaware of.

I am keeping my money in Vanguard and TIAA. 

Share this post


Link to post
Share on other sites

What I preach is:

1. Vanguard and Fidelity are tied for first place in the 403b space.

2. Any changes I make to my portfolio are done slowly.

So I am following my approach. I expect to own Fidelity’s ZERO funds after another year or so.

If Fidelity were to raise the price, I’d simply exchange them for something else. Easy.

There is no evidence to suggest that Fidelity is being dishonest about anything.

...Fidelity is able to generate revenue from a ZERO fund due to securities lending.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

×
×
  • Create New...