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  • Fidelity Index Funds

    Fidelity recently reduced the expense ratios on their index funds so that they are lower than Vanguard.  Would you recommend switching over to Fidelity from Vanguard?

  • #2
    No. The expense ratios of both companies are in the range of "good enough."
    Helping those who wear the white coat get a fair shake on Wall Street since 2011

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    • #3
      Also, Fidelity lowered them because they HAD to, to compete with Vanguard. Vanguard lowers the consistently due to their corporate structure. I still feel more comfortable that Vanguard will always be the lowest or near the lowest in fees, thus favor them particularly in my taxable account.

      The index fee cut was a welcome bonus to my Fidelity 529s though.

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      • #4
        Here's a link to the funds from low to high ER.

        It's good to know, but not a good enough reason to switch. If I were a new investor, I might choose Fidelity over Vanguard though. If I could lower my average ER from 0.08 (current) to 0.06, that would save me $200 per year per million.

        If I were to retire with $3 million, that would be $600 per year, and likely growing with the portfolio. A tiny sum compared to the balance, but that's a couple roundtrip flights or a decent bicycle or whatever I want to spend an extra $600 on.

        It would be nice to see Vanguard match the low rates, and that may happen as they do occasionally lower their rates, but they don't have the expensive funds to offset the loss leaders, which is essentially what Fidelity's index funds are.

        Best,

        -PoF

         

         

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        • #5
          I'm a big fan of FXSIX myself in my wife's 403b through Fidelity, #4/135 of 5-year Lipper for S&P 500 trackers, ER 3.5 bp...but if I was holding Vanguard (e.g. VFIAX), which I hold in my IRA, I wouldn't switch.

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          • #6
            Not a bad idea to split ones assets between at least two seperate accounts with Vanguard and Fidelity my favorites, if for only for peace of mind against the rare identity theft breach or IT snafu. Many of us do this by accident anyway. Also, nice to have seperate Roth accounts for conversions and recharacterization sod different asset classes.

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            • #7
              I have most of my money in Fidelity index funds, but beware:  First of all, on their least expensive fund, the Total Market Index fund, they describe their ER as being .07%, and then say that they charge 0.45%.  To me that means that they reserve the right to raise their rates at any time.  Also, many of their other funds are more expensive than the corresponding Vanguard fund.

              Vanguard has an ER of 0.05%, now Fidelity is down to 0.045%.  That's a difference of $50 per million per year.   I don't think that amount of money is reason enough to move.

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              • #8
                Also, when you get down that low, execution matters more than ER. Vanguard's execution is a few basis points better than Fidelity's in my view. Three things matter in index funds:

                1) What index

                2) How well is that indexed tracked

                3)  At what cost is the index tracked

                When the cost difference is large, pay attention to that. When it isn't, then look at the other stuff.

                For example, if you look at Fidelity's TSM (Premium, FSTVX, ER 0.05%) it has returns of 8.23% over the last 10 years. Vanguard's TSM admiral shares (VTSAX, ER 0.05%) have returns of 8.30% per year.

                There's a bit more to index funds than just ER. But do 7 basis points matter in the long run? Probably not. Just switch away from Vanguard for half a basis point? No way.
                Helping those who wear the white coat get a fair shake on Wall Street since 2011

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                • #9




                  Not a bad idea to split ones assets between at least two seperate accounts with Vanguard and Fidelity my favorites, if for only for peace of mind against the rare identity theft breach or IT snafu. Many of us do this by accident anyway. Also, nice to have seperate Roth accounts for conversions and recharacterization sod different asset classes.
                  Click to expand...


                  Sorry to resurrect an old thread. The recent thread on net worth got me thinking.

                  About half my net worth is in real estate holdings (primary home and investment property)

                  The other 45% is at Vanguard:

                  - Taxable account (retirement, where I try to put the bulk of the 20% of gross income saved/paycheck)

                  - Roth IRA

                  - 529

                  - Taxable account ("excess funds", invested more aggressively as I don't plan to touch it. Perhaps would be moving as per below?)

                   

                  Is it worth diversifying between different investment firms? I was thinking about moving my more aggressive subset of "excess funds" to a different company. My father loves to point to the Lehman Brothers as an example of the fallacy of too big to disappear.

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                  • #10







                    Not a bad idea to split ones assets between at least two seperate accounts with Vanguard and Fidelity my favorites, if for only for peace of mind against the rare identity theft breach or IT snafu. Many of us do this by accident anyway. Also, nice to have seperate Roth accounts for conversions and recharacterization sod different asset classes.
                    Click to expand…


                    Sorry to resurrect an old thread. The recent thread on net worth got me thinking.

                    About half my net worth is in real estate holdings (primary home and investment property)

                    The other 45% is at Vanguard:

                    – Taxable account (retirement, where I try to put the bulk of the 20% of gross income saved/paycheck)

                    – Roth IRA

                    – 529

                    – Taxable account (“excess funds”, invested more aggressively as I don’t plan to touch it. Perhaps would be moving as per below?)

                     

                    Is it worth diversifying between different investment firms? I was thinking about moving my more aggressive subset of “excess funds” to a different company. My father loves to point to the Lehman Brothers as an example of the fallacy of too big to disappear.
                    Click to expand...


                    Lehman Brothers, as a company, failed, but the investors' accounts remained intact (so long as they were not invested in Lehman stock!).

                    I use primarily Fidelity, and to a lesser extent, Vanguard, about 80:20, for various historic reasons, much of it based on where employer retirement accounts are located. I could easily see using one or the other exclusively.

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