Fidelity Announces First Ever Zero-Expense Index Funds

by | Aug 6, 2018 | NEWS

Fidelity Investments announced Wednesday that they will now be offering zero expense ratio index funds for individual investors – making them the first brokerage firm to offer no-fee index funds.

The move is a bold one and sets Fidelity apart from other traditional brokerage firms like Vanguard and Charles Schwab.

In a press release detailing the announcement, Kathleen Murphy, president of Fidelity’s personal investing business, stated, “We are charting a new course in index investing that benefits investors of all ages – from millennials to baby boomers – and at all affluence levels and stages of their lives. The ground-breaking zero expense ratio index funds combined with industry-leading zero minimums for account opening, zero investment minimums, zero account fees, zero domestic money movement fees and significantly reduced index pricing are unmatched by any other financial services company.”

The other “zero” programs Murphy addresses are new as well.

In an interview with CNBC Wednesday afternoon, Murphy was asked about the reasoning behind the move and the ability of Fidelity to make money with the new approach, she cited the company’s long-term relationship with its customers as an answer to both questions.

The zero-fee funds provide investors with exposure to the entire market. The Fidelity ZERO Total Market Index Fund (FZROX) covers the U.S. market, and the Fidelity ZERO International Index Fund (FZILX) covers the international market.

While there are now several small brokerages and apps that allow investors to purchase stock at no cost, Fidelity is the first to offer index funds with no fees. This gives them an edge over both the traditional brokerage firms and the new no/low-cost investment apps.

Fidelity has a reputation as a solid brokerage firm with a history of providing value and education to investors. Coupled with the changes Fidelity has made – especially the new index funds, zero account fees, and zero account minimums – this company is setting itself up for long-term success.