This week, Fidelity announced the release of the cheapest Fidelity index funds yet, with total expense ratios of just 0.12%. The moves gives Fidelity an advantage over sector index fund competition from other fund families.
In fact, the expense ratios on the 10 new Fidelity index funds make them the cheapest sector index funds in the industry. And they are 80% below the industry average for passive sector ETFs.
The new Fidelity index funds just started trading on the NYSE yesterday.
The new Fidelity index funds will track the 10 major equity sectors — consumer discretionary, consumer staples, energy, financials, health care, industrials, information technology, materials, telecommunication services and utilities.
These Fidelity index funds track many of the same MSCI benchmark indexes that their Vanguard counterparts do.
Dan Wiener, the editor behind the Independent Adviser for Vanguard Investors, writes that only time will tell if BlackRock, the manager assigned to these new Fidelity index funds, will be able to follow the benchmark indices closely enough for the low expense ratio to make a difference:
“The question remains whether BlackRock, which as subadvisor to Fidelity’s ETFs will be managing the portfolios, will be able to track the MSCI indexes closely enough to keep the 2 basis point advantage. Vanguard, as you know, is world-class in its ability to track indexes and BlackRock will need to take great pains to keep from erasing Fidelity’s cost advantage.
The proof will be in the performance.”
In their first day of trading, the top performer among these new Fidelity index funds was the Fidelity MSCI Consumer Staples Index ETF (FSTA) with a gain of 2.4% and the low performer was the Fidelity MSCI Industrials Index ETF (FIDU) with a 0.5% gain. Both surpassed their benchmark indices for the day.
Time will tell if they can keep it up.
As of this writing, Robert Martin did not hold a position in any of the aforementioned securities.