World’s First Zero-Fee Index Funds Announced By Fidelity

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In a move announced Wednesday, September 1st, Fidelity Investments Inc shocked the investment community by introducing a world’s-first: a ZERO fee index fund.



Investing, it seems, is getting cheaper.

The move comes as just the latest addition to an ongoing “fee war” between the biggest brokerage and mutual fund providers in the industry. Fidelity, Vanguard, BlackRock and Charles Schwab have long been one-upping one another, hoping to have the lowest fees in the industry.



Now, what once seemed impossible has become reality: an index fund with zero management fees, zero upfront fees, and zero investment minimum.



Fidelity ZERO Index Funds

In the September 1st announcement, Fidelity outlined plans for 2 new index funds:



Fidelity ZERO Total Market Index Fund (FZROX), which seeks to track the broad US stock market.

Fidelity ZERO International Index Fund (FZILX), which seeks to track the broad international stock market.

Both funds have a 0.00% expense ratio, zero minimum to invest and no minimum to open an account.



While the zero expense ratio is obviously the most significant, it’s also quite impressive that Fidelity has chosen to offer these funds with a $ 0 minimum investment. For comparison, many fund providers require a minimum of $2,500, pricing many people out of investing in these funds.

Proprietary Indexing

Most index funds track a particular established index, such as the S&P500. To do this, they pay licensing fees to the company who manages the index (in this case, Standard & Poors). This fee is passed on to individual investors in the form of higher expense ratios, which also include a percentage for the index fund provider.

One way Fidelity is able to eliminate these fees altogether is by creating their own index to track. Schwab and several others have done the same, leading index providers to change their strategy.

Lowered Fees Across the Board

In addition to these two new zero-fee index funds, Fidelity also announced that they would be slashing expense ratios on existing mutual fund products. A Fidelity rep stated that fees would be slashed by an average of 35%.

In addition to lower fees, Fidelity also will now allow new clients to open accounts with no minimum investment required. Fidelity specifically called out competitors, noting the now-significant differences not only in fees, but in investment minimums.

A Win for Investors

The move is widely considered to be a significant win for investors of all shapes and sizes. Never before has it been possible to gain exposure to essentially the entire global stock market, while paying nothing in fees. The elimination of minimum account balances should also help spur new investors to make their first investment.

Shares in Fidelity’s chief rivals, BlackRock and Schwab, dipped on the news of the announcement. Many analysts believe that rivals will soon follow suit, offering zero-fee funds of their own.

No matter how this all plays out, one thing is certain: the news is a huge win for investors seeking to lower expenses and simplify the investing process.

FAQ

What is the best Fidelity index fund?

All-In-One: Fidelity Freedom Index FundsFidelity Freedom Index 2045 Fund (FIOFX, 0.12% net expense ratio)Fidelity Freedom Index 2050 Fund (FIPFX, 0.12% net expense ratio)Fidelity Freedom Index 2055 Fund (FDEWX, 0.12% net expense ratio)Fidelity Freedom Index 2060 Fund (FDKLX, 0.12% net expense ratio)More items...•Jun 30, 2020thefinancebuff.com › best-index-funds-and-etfs-at-fidelityBest Index Funds and ETFs at Fidelity - The Finance Buffthefinancebuff.com › best-index-funds-and-etfs-at-fidelity

Does Fidelity have no load funds?

A mutual fund that does not charge front-end or deferred sales loads is called a "no-load fund." A number of no-load and load-waived funds are available through FundsNetwork without paying a transaction fee to Fidelity. ... You do not pay a transaction fee to Fidelity.

Are Fidelity zero funds good?

The good news is that the bait — Fidelity Zero Total Market Index Fund and Fidelity Zero International Index Fund — is as advertised: There are no hidden fees, and costs are not simply waived temporarily. ... Beyond the free funds, Fidelity has introduced other changes that make it easier and cheaper to invest.

Does Fidelity have index funds?

Index funds typically provide broad market exposure and low costs. Fidelity is the fourth-largest asset-management firm in the U.S., surpassed only by Vanguard, Pimco and BlackRock. Because of that size, it offers a big menu of cheap index mutual funds and exchange-traded funds for investors.

Does Fidelity offer index funds?

Fidelity's zero-fee funds covering the U.S. and international stock market have no management fee, also known as a fund expense ratio. The Fidelity ZERO Total Market Index Fund (FZROX) has taken in 3 million, according to Fidelity's website.

Are Fidelity zero funds good?

The good news is that the bait — Fidelity Zero Total Market Index Fund and Fidelity Zero International Index Fund — is as advertised: There are no hidden fees, and costs are not simply waived temporarily. ... Beyond the free funds, Fidelity has introduced other changes that make it easier and cheaper to invest.

What is the best Fidelity index fund?

All-In-One: Fidelity Freedom Index FundsFidelity Freedom Index 2045 Fund (FIOFX, 0.12% net expense ratio)Fidelity Freedom Index 2050 Fund (FIPFX, 0.12% net expense ratio)Fidelity Freedom Index 2055 Fund (FDEWX, 0.12% net expense ratio)Fidelity Freedom Index 2060 Fund (FDKLX, 0.12% net expense ratio)More items...•Jun 30, 2020thefinancebuff.com › best-index-funds-and-etfs-at-fidelityBest Index Funds and ETFs at Fidelity - The Finance Buffthefinancebuff.com › best-index-funds-and-etfs-at-fidelity

Does fidelity have a S&P 500 index fund?

About FXAIX. The Fidelity 500 Index Fund tracks the S&P 500 index, one of the main benchmarks for U.S. stocks. The index covers about 80% of the investable market capitalization of the U.S. equity market.

Are Fidelity zero funds good?

The good news is that the bait — Fidelity Zero Total Market Index Fund and Fidelity Zero International Index Fund — is as advertised: There are no hidden fees, and costs are not simply waived temporarily. ... Beyond the free funds, Fidelity has introduced other changes that make it easier and cheaper to invest.

Which Fidelity funds have no fees?

There's no match for Fidelity in index investing – not even Vanguard.Fidelity Index FundsVanguard Index Funds

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