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Started By
Message
Fidelity announces no fee index funds.
Posted on 8/1/18 at 6:19 pm
Posted on 8/1/18 at 6:19 pm
SIAP, but is there any good reason not to use these?
No affiliation with Fidelity here. Was just about to open a Schwab Roth IRA with .03% index ETF's in fact before seeing this.
No affiliation with Fidelity here. Was just about to open a Schwab Roth IRA with .03% index ETF's in fact before seeing this.
5
Posted on 8/1/18 at 6:38 pm to timdonaghyswhistle
Curious if they're much different
This post was edited on 8/2/18 at 3:06 pm
Posted on 8/1/18 at 7:07 pm to timdonaghyswhistle
Zero Total Market Index Fund and Zero International Index Fund available Friday.
Posted on 8/1/18 at 7:34 pm to timdonaghyswhistle
I'm a long-time Schwab customer and will stay with them, the difference is tiny and probably they'll go to zero before long anyway.
Posted on 8/1/18 at 8:43 pm to foshizzle
The zero international has my eye. Generally, international funds have higher expense ratios. SCHF is only 0.06% but it doesn’t get emerging market exposure. SCHE is 0.12% IIRC.
Posted on 8/2/18 at 12:44 pm to timdonaghyswhistle
Interesting reading about how low these fees have gotten. 0% is great, but it's not a huge drop from where many are now. What I want to know is how to evaluate the other costs of a fund.
LINK
LINK
quote:
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.
LINK
quote:
“Investors should focus on what’s inside and how the ETF trades and not just the fund’s expense ratio” said Todd Rosenbluth, director of ETF and mutual fund research at CFRA. He noted the iShares investment-grade ETF “trades on average 7 million shares daily with a $0.01 bid/ask spread,” which the Vanguard fund may have difficulty matching unless it amasses a lot in assets or proves to be widely traded.
LINK
Posted on 8/2/18 at 12:55 pm to seawolf06
Bid/Ask spread is narrow on any of the larger ETFs during trading hours (the spread gets really wide after hours though). For longer term investors, the bid/ask spread shouldn't be a big deal. Place a limit order at a price you are willing to accept and roll with it.
Posted on 8/2/18 at 1:09 pm to seawolf06
My first thought was how will they make any money from these funds? The below quote is from the first of your links.
I understand the possibility of clients buying other services but I don't understand the process of earning income by lending securities out to broker dealers.... I would appreciate it if anyone can tell me what this means. By securities do they mean the actual mutual fund?
quote:
(The funds will earn income by lending securities out to broker-dealers and other institutions, and there’s also the possibility clients will buy other services.)
I understand the possibility of clients buying other services but I don't understand the process of earning income by lending securities out to broker dealers.... I would appreciate it if anyone can tell me what this means. By securities do they mean the actual mutual fund?
Posted on 8/3/18 at 11:03 pm to seawolf06
Thanks for the links, and this was my main concern-- the hidden hidden fees.
This post was edited on 8/6/18 at 3:06 am
Posted on 8/7/18 at 7:33 pm to PlanoPrivateer
So I sent an email to Fidelity asking them what this meant. Here is the response:
"Securities lending is an arrangement where individual stocks are lent to another firm or investor and that outside party pays a fee or interest for this service. Shares of the mutual fund itself are not being lent in this arrangement.
For more specifics of how these arrangements work the best option is to do an internet search regarding securities lending."
This doesn't seem to answer the question of how does Fidelity make money? Surely if the fund lends stocks within the mutual fund then the fees or interest earned should go to the mutual fund not Fidelity.
"Securities lending is an arrangement where individual stocks are lent to another firm or investor and that outside party pays a fee or interest for this service. Shares of the mutual fund itself are not being lent in this arrangement.
For more specifics of how these arrangements work the best option is to do an internet search regarding securities lending."
This doesn't seem to answer the question of how does Fidelity make money? Surely if the fund lends stocks within the mutual fund then the fees or interest earned should go to the mutual fund not Fidelity.
Posted on 8/7/18 at 11:08 pm to PlanoPrivateer
quote:
This doesn't seem to answer the question of how does Fidelity make money? Surely if the fund lends stocks within the mutual fund then the fees or interest earned should go to the mutual fund not Fidelity.
I'd imagine Fidelity takes a cut for facilitating the practice. The many funds do this and have higher yields as a result.
Posted on 8/8/18 at 12:29 am to timdonaghyswhistle
do you have a link to a prospectus? Even if they don't charge fees to you up front, your paying them somewhere along the way.
Posted on 8/8/18 at 4:49 am to athenslife101
quote:
do you have a link to a prospectus? Even if they don't charge fees to you up front, your paying them somewhere along the way.
Trading desk maybe?
Posted on 8/8/18 at 7:33 am to Janky
I'm in on both of them. Both around 10 dollars. Why not?
Posted on 8/8/18 at 8:18 am to athenslife101
quote:
do you have a link to a prospectus? Even if they don't charge fees to you up front, your paying them somewhere along the way.
I don't necessarily think this is true. I'd compare this more to a free checking account where they hope you use the bank for mortgage, car loan, HELOC, etc. but where they're hoping you'll come to Fidelity (instead of Robinhood) and use their other features that they make more money off (regular stock trading, margin accounts, etc.). The fees were so low anyway, it doesn't make that big of a difference.
Posted on 8/8/18 at 10:45 am to yellowhammer2098
Yeah, everything I've read basically says this is a loss leader for Fidelity.
Posted on 8/8/18 at 11:12 am to yellowhammer2098
I need to see the prospectus. I don't know enough about index funds and/or investor fees but I'm pretty familiar with traditional mutual funds setup. I can answer better when I see it. A fund is paying anywhere from 40k to millions of dollars of fees every day for the massive funds. That is trickling down to the investor one way or another.
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