Debut of Zero-Fee Funds Puts Fidelity ETFs in the Spotlight Again


Fidelity ETFs - Debut of Zero-Fee Funds Puts Fidelity ETFs in the Spotlight Again

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Recently, Fidelity rocked the index fund universe by revealing plans to introduce two index funds with expense ratios of 0.00%. The Fidelity ZERO Total Market Index Fund (MUTF:FZROX) and Fidelity ZERO International Index Fund (MUTF:FZILX), are the no-fee products from Fidelity that are expected to debut this month.

But Fidelity’s zeroes do not end with those new funds.

Fidelity, one of the largest issuers of actively managed mutual funds, did away with investment minimums on mutual funds and 529 college savings plans. The company also axed account minimums and account fees, among other moves.

“In addition to offering the industry’s first self-indexed mutual funds with a zero expense ratio, Fidelity is reducing the pricing on its existing stock and bond index mutual funds,” said Fidelity in a statement. “Fidelity will provide investors the lowest priced share class available, ensuring every investor, regardless of how much they invest, will benefit from the lowest possible fees.”

Don’t Forget Fidelity ETFs

Fidelity is still a relatively new player in the exchange-traded funds space, but Fidelity ETFs have made their presence felt in recent years. As of Aug. 6, Fidelity ETFs had nearly $12 billion in combined assets under management, making the company the 15th-largest U.S. ETF sponsor.

While $12 billion is a far cry from the assets held by rivals such as iShares and Vanguard, Fidelity ETFs are gaining traction because the issuer is showing a willingness to compete on fees. A prime example of that trend is Fidelity ETFs that are dedicated to sectors, such as healthcare and technology. Fidelity ETFs, such as the Fidelity MSCI Health Care ETF (NYSEARCA:FHLC) and the Fidelity MSCI Technology ETF (NYSEARCA:FTEC), charge just 0.084% per year.

That is the equivalent of $8.40 per year for every $10,000 invested, meaning that — at least for now — Fidelity offers the cheapest batch of sector ETFs in the industry.

Fidelity also offers 10 smart beta ETFs, including some fixed income products. That group includes the Fidelity Dividend ETF for Rising Rates (NYSEARCA:FDRR) and the Fidelity High Dividend ETF (NYSEARCA:FDVV). FDVV and FDRR both charge 0.29% per year, the equivalent of $29 on a $10,000 investment. That puts those Fidelity ETFs slightly below the average domestic large-cap smart beta fund in terms of annual expenses.

Among the most expensive Fidelity ETFs are the Fidelity International Value Factor ETF (NYSEARCA:FIVA) and the Fidelity International High Dividend ETF (NYSEARCA:FIDI). Those Fidelity ETFs charge 0.39% per year, or $39 on $10,000 investments. That is still a fair fee among international dividend strategies.

No Commissions

Another area in which Fidelity has been willing to engage rivals such as Schwab and Vanguard is with commission-free ETFs. In fact, the firm’s clients do not pay commissions on Fidelity ETFs, including the aforementioned funds.

However, there are less Fidelity ETFs. The firm has supplemented its commission-free offering by partnering with BlackRock’s (NYSE:BLK) iShares unit, the world’s largest ETF sponsor.

Part of last week’s announcement include news that Fidelity will boost the number of iShares ETFs available on a commission-free basis to 240. Including Fidelity ETFs, the broker now offers nearly 270 ETFs on a commission-free basis. The complete list of iShares funds available to Fidelity clients without commissions is available here.

Of course, that is good news for Fidelity clients and more commission-free ETFs on the platform could lure more assets to Fidelity ETFs. However, Fidelity has a ways to go in the commission-free ETF arena. Some rival brokers offer close to (or more than) 300 ETFs from more than two issuers, commission-free. Earlier this year, one brokerage firm said it would offer more than 700 ETFs without commissions and Vanguard recently said it is eliminating commissions on nearly 1,800 ETFs.

As of this writing, Todd Shriber did not hold a position in any of the aforementioned securities.

Todd Shriber has been an InvestorPlace contributor since 2014.

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