FIDO's Zero Cost Index Funds

[Red Badger]

I gave my 20 YO niece a small stipend for her birthday and directed her to open a zero/zero at Fido. I also gave her a card with a Benjamin along with a copy of Millionaire Teacher (she's studying to be a teacher). Told her to spend the Benjamin on dinner and a movie with her SO.

My favorite uncle status is still secure.

[big-papa]

Quote:

Originally Posted by audreyh1 OK, so that’s happening today. I knew it would be in Nov. All 4 classes of index fund are switching to the institutional premium class ticker. All index fund ERs were already reduced to the lowest a few months ago. This is independent of the zero funds.

That's why I started the sentence with "BTW".

[Lawrencewendall]

Quote:

Originally Posted by Red Badger I gave my 20 YO niece a small stipend for her birthday and directed her to open a zero/zero at Fido. I also gave her a card with a Benjamin along with a copy of Millionaire Teacher (she's studying to be a teacher). Told her to spend the Benjamin on dinner and a movie with her SO. My favorite uncle status is still secure.

+1

[fvfire]

I have a small rollover IRA and Roth with Fido and have bought a bit of all three funds starting last month. My plan is to slowly sell my remaining existing positions to buy the zero funds. I’m not ashamed to pick up loose change when I see it.

[big-papa]

Quote:

Originally Posted by FVFIRE I have a small rollover IRA and Roth with Fido and have bought a bit of all three funds starting last month. My plan is to slowly sell my remaining existing positions to buy the zero funds. I’m not ashamed to pick up loose change when I see it.

Then you need to post more here so that you can be declared as somebody who recycles dryer sheets!

[tulak]

There’s no guarantee that these free funds will save you money. The reality is that index funds in this class all have low ERs. If there is a slight tracking error, then there goes the savings.

I was curious about this on another thread here and noticed that an equivalent Vanguard fund was “cheaper” even with a higher ER.

My take is that this a marketing ploy from Fidelity. It sounds good, but if you look closely, there’s not much there.

[Another Reader]

Quote:

Originally Posted by big-papa BTW recently, Fidelity reduced the e/r on many of their index funds. For example, all of their total market index funds now have the same e/r. And as of close of business today, many of the separate classes of their index funds will be consolidated into a single ticker.

Something to look forward to this weekend, along with the end of DST!

[teej1985]

Quote:

I was curious about this on another thread here and noticed that an equivalent Vanguard fund was “cheaper” even with a higher ER.

We won't know this until the Zero funds start distributing dividends. A lot of the "comparisons"in blogs using existing funds were from before Fidelity dropped their fees

[samclem]

Quote:

Originally Posted by tulak If there is a slight tracking error, then there goes the savings.

Tracking error can be positive or negative, it might leave you with higher returns than the targeted index. The issue would be the volatility you were exposed to: if you get higher returns than the targeted index, there's a good chance you also owned riskier stocks than the target index. And the reverse is true, also: if you got lower returns than the targeted index, you were likely in less volatile stocks. In general, anyway.
I think many people put too much emphasis on benchmarking. Unless the managers are engaged in shenanigans, risk-adjusted returns are probably the same as the index even if the returns themselves are not the same. Obviously, if the returns are wildly different from the index, it's worth figuring out if the error is random or systematic.

[Helen]

Does anyone know if these funds are transferable to other investment houses? I would hate to accrue capital gains then realize I would have to liquidate in order to switch brokerage houses.

[big-papa]

Quote:

Originally Posted by Helen Does anyone know if these funds are transferable to other investment houses? I would hate to accrue capital gains then realize I would have to liquidate in order to switch brokerage houses.

They are not. From the summary prospectus:
Shares of the fund are available only to individual retail investors who purchase their shares through a Fidelity brokerage account, including retail non-retirement accounts, retail retirement accounts (traditional, Roth and SEP Individual Retirement Accounts (IRAs)), health savings accounts (HSAs), and stock plan services accounts.