What’s The Deal with the Fidelity Zero Fee Funds?
What’s the deal with the Fidelity Zero Fee Funds? Thinking about this long and hard, I can only see one reason to give these funds away for free. That is gaining more customers.
There are four Fidelity Zero Fee Funds out there.
1. FZROX: The Fidelity ZERO Total Market Index Fund This is probably the best of the Fidelity Zero Fee funds. People flock to this fund because it covers the total stock market index.
2. FNILX: Fidelity ZERO Large Cap Index Fund Fidelity uses the name “Large Cap Index Fund” to save money on the fund in a cost-saving measure.
3. FZIPX: Fidelity ZERO Extended Market Index Fund This fund is the small-caps fund to pair with the large caps fund.
4. FZILX: Fidelity ZERO International Index Fund To help diversify your portfolio, an international index fund helps pick up companies, not on the U.S. stock market.
How Do these Fidelity Zero Fee Funds Make Money? These Zero Fee Funds are a way to get new customers in the door. Their competitors are Vanguard and Schwab and they offer some significant funds that can keep people working with them, but sometimes people may switch just because of cost.
The Lack of ETF (Exchange Traded Funds)
These Fidelity Zero Fee Funds lack any ETFs, and this can affect the tax efficiency of these funds. As I have researched, FZROX tends to have some short-term capital gains that can cost you money in the long term.
Would I invest in the Zero Fee Funds? If I were a beginner in investing, these Zero Fee Funds would be my gateway into the investing world. They would allow me to invest without costing me extra money. At that time, I would increase my financial knowledge, make more investments, and do what is needed to secure my financial future.
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