As the race to the first trillion dollar company reached its end... Another race in the financial world came to an end as well: The race to zero fees! Fidelity became the first broker/ index fund provider to offer core index funds without any management fee. In addition, all account fees and minimums were removed, they eliminated all domestic money transfer fees, and lastly they lowered the expense ratios on all Fidelity stock and bond index mutual funds.
"Investors will pay a 0.00 percent fee, regardless of how much they invest in either fund, while gaining exposure to nearly the entire global stock market," Fidelity said in a release.
The two free index funds will track market cap-weighted Fidelity indexes. The Fidelity ZERO Total Market Index Fund will invest in the largest 3,000 U.S. companies based on float-adjusted market cap. The Fidelity ZERO International Index Fund will hold the top 90 percent of stocks within various developed international and emerging countries.
The new fees on their stock and bond index mutual funds reduces them to below their major competitors. Only so many firms have the scale to follow Fidelity’s lead. And many that do, such as Vanguard, BlackRock, and Schwab, already offer comparably priced funds.
Fidelity is second to Vanguard in index funds in the US and Blackrock iShares is the largest ETF provider. So time will tell where this race to zero will continue now that zero has been achieved.
One thing is certain: the retail investor is the big winner here as nothing eats away at long term gains more than fees. Even a small change can have a large effect over time. Remember, an investor pays an increasing amount of fees over time since they're calculated on a percentage of assets. Nerdwallet, an financial blog, did an analysis and found that even a drop from .1% to .05% could mean the difference between retiring at age 70 versus retiring at 73.
So, while it may not seem like a lot, it could have profound effects on your portfolio over several decades.
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1) Alpha Gen Capital - I am a former financial advisor and investor. Not someone from another career doing this on the side. My analysis is meant to provide safe and actionable insight without the fluff or risky ideas of most other letters. My goal is to provide a relatively safer income stream with CEFs and mutual funds. We also help investors learn about investing and how to properly construct a portfolio.2) George Spritzer - Another career financial guru who runs a registered investment advisor with a specialization in closed-end funds for individuals. George uses the following investment strategies:1) Opportunistic Closed-end fund investing: Buy CEFs at larger than normal discounts to NAV and sell them when the discounts narrow. 2) Exploit special situations: tender offers, fund terminations, fund activism, rights offerings etc.
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