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ZERO Fee Funds Making Investors Nervous

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An important new milestone was reached in financial markets this year: For the first time, a financial company—Fidelity—offered a mutual fund that didn’t charge management fees, the first zero-fee funds.

Over the last 20 years fund fees have been trending down as more investors have discovered the benefits of passive investing, a strategy where a mutual fund is assembled out of stocks according to their placement in a pre-specified index. After years of charging investors high fees to select their stocks, investment managers are now racing to offer the lowest fees. Now, as actively managed funds are falling out of favor, some asset managers and economists are wondering if this is too much of a good thing.


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I will evaluate Fidelity’s ZERO funds in September of 2019. I’m currently inclined to abandon Vanguard for my tax advantaged accounts and direct all new money to Fidelity in my tax advantaged accounts.

I move slowly on purpose. I am curious about how tax efficient Fidelity is and I’m always paranoid about them doing something that would make me want to sell (like raise fees), which might leave me stuck as far as my taxable account is concerned.

I wish Vanguard would respond because I have so much more trust in them...maybe misplaced, who knows?

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