Fidelity slashes fees as funds battle for investors

NEW YORK — The price war among mutual fund companies is hitting a new frontier, to the further benefit of investors.

Fidelity says it will soon offer a pair of mutual funds that charge zero in expenses.

The new index funds are part of a suite of changes Fidelity is making to lower expenses and make investing easier, even for investors with smaller amounts to put into the market.

Mutual fund companies have been battling to attract customers, who have become increasingly aware of how much high fees can limit returns. Vanguard, the largest mutual fund provider, said last month it will stop charging commissions for online trades of most ETFs, for example.

The two zero-fee Fidelity index funds will be available Friday. One will cover the U.S. stock market, and the other will follow the international stock market. These kinds of funds often form the centerpiece of a retirement portfolio, along with bond funds.

Fees for mutual funds have been dropping steadily for years, and investors last year paid $59 of every $10,000 invested in stock mutual funds in expenses. That's down from $100 in 2003, according to the Investment Company Institute.

Investors have been flocking to the lowest-cost funds with the knowledge that high-fee funds have to perform that much better just to equal their after-fee returns. More than three quarters of all the money invested in stock mutual funds is in a fund that ranks in the bottom quarter of expenses, according to the Investment Company Institute.

Among other changes Fidelity is making: It set zero minimums to open accounts and zero account fees. It also is cutting expenses for its existing stock and bond index mutual funds by letting investors have the lowest-priced share class available, regardless of how much they have invested. Fidelity said the change will save shareholders about $47 million annually.

All the investor-friendly actions by Fidelity and others across the industry mean it's never been this cheap or easy to put money into the market. Perhaps the only downside is the timing: The stock market is more than nine years into one of its longest-ever upward runs, and some experts on Wall Street are questioning how much longer it can go.

One other potential drawback to making investing easier is that it could make investors more likely to try to time the market and jump quickly in and out of stocks, something that many investors get wrong.

You may also like these

EU trade commissioner says trade liberalization...

Jun 18, 2018

European Trade Commissioner Cecilia Malmstrom says trade liberalization continues to have global...

Australia awards UK's BAE $26 billion navy...

Jun 29, 2018

The Australian government says British defense company BAE Systems has won the contract to build...

Usain Bolt to make run at pro soccer in Australia

Jul 17, 2018

Trading spikes for boots, Usain Bolt ready to make run at pro soccer in Australia

Australia bans Huawei from 5G network over...

Aug 23, 2018

Chinese-owned telecommunications giant Huawei has been blocked from rolling out Australia's 5G...

World stocks slip as investors eye timing of Fed...

Aug 19, 2016

World stock markets have turned lower as investors speculate whether the U.S. Federal Reserve will...

Search
Financial Markets

About Us

Established in 2015, The Upstocker provides insights on financial reports, commentary, and investment data to traders so that you can make better investment decisions.

Contact us: sales[at]theupstocker.com

Subscribe Now!