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Should I move my Fidelity funds?

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    #1

    Should I move my Fidelity funds?

    I know there are other threads on this topic so apologies if asked and answered elsewhere. I'm curious about the implications in my specific case for moving my money from my current Fidelity index funds to their new 'zero cost' funds.

    I currently have about $90k in a Roth IRA at Fidelity, split between a total market index fund (FSTVX @ ER 0.015%) and an international index fund (FSGDX @ ER 0.06%). If I were to move these to the new FZROX and FZILX funds, all within the Fidelity account (making no withdrawal), would I need to pay any tax on these? Is this a good idea?

    I know the expenses on my current funds are already very low, but I'm still 25-30 years from retirement, so it could make a difference. Would love to hear the opinions and advice of this forum.

    Thanks!
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    #2
    No tax implications since it is a Roth account.

    Rumors say that Fidelity might automatically move certain funds to these zero cost funds...

    Comment

      #3
      If you move funds within your Roth, there will be no tax implications.

      If the new zero-fee funds are fundamentally identical to your current funds as far as their portfolios are concerned, sure, go ahead and move them if you'd like. I probably would if I was with Fidelity.

      Keep in mind, of course, that you're not talking about a huge savings. For example, on a $1,000,000 investment, the difference between 0.015% and 0.00% is $150/year. Over 25 years, that's $3,750 (not accounting for growth over time). Assuming you don't have $1 million right now, the actual savings will be a lot less ($15 if you've got $100,000, for example). Still, paying less is always better, but it's not like you're talking about a difference that would have any significant impact on your retirement. But 25 years from now, that extra $1,000 might buy a nice dinner out .
      Steve

      * Despite the high cost of living, it remains very popular.
      * Why should I pay for my daughter's education when she already knows everything?
      * There are no shortcuts to anywhere worth going.

      Comment

        #4
        Is all of the money you're talking about in your Roth IRA? If so, then you can make the changes without any tax consequences at all. As long as the money stays within the IRA, sales/exchanges of shares are not taxable events.

        The question of "should you do it" is a more sticky one. I personally don't know anything about how these new funds are set up, but you need to make sure that you do. I'm of the opinion that there is no 'free lunch', so there is probably something undesirable about these funds... Unless they're meant as a loss-leader to bring in new clients...? Also, make sure that the new funds would still be appropriate for your asset allocation & investment strategy.

        Personal opinion, I don't think that the difference between .06% ER and 0% ER will make much difference. If you currently paid 1% or more in ER, I'd totally agree. But as is, 6 basis points is miniscule.
        "Praestantia per minutus" ... "Acta non verba"

        Comment

          #5
          Originally posted by kork13 View Post
          I'm of the opinion that there is no 'free lunch', so there is probably something undesirable about these funds... Unless they're meant as a loss-leader to bring in new clients...?
          My guess is that Fidelity will just be bombarding customers who invest in these funds with marketing pitches for other services.

          We love Ally bank, but I don't think a week goes by without emails and regular mail from them trying to sell us a home loan or HELOC or something else. That's the "price" we pay for their high savings rate and zero fees. They have to make their money somewhere.
          Steve

          * Despite the high cost of living, it remains very popular.
          * Why should I pay for my daughter's education when she already knows everything?
          * There are no shortcuts to anywhere worth going.

          Comment

            #6
            Thank you all!

            I think I'm going to leave the money where it is for now and see how things go.
            • 1 like

            Comment

              #7
              You could consider buying the new product going forward as you add to your ROTH

              Comment

                #8
                I decided to make a couple of small moves into FZILX and FZROX to test the waters.
                • 1 like

                Comment

                  #9
                  So...basically you're spreading your risk all over the place.

                  From Schwab:

                  FZILX: Foreign large-blend funds invest in a variety of big international stocks. Most of these
                  funds divide their assets among a dozen or more developed markets, including Japan, Britain, France, and
                  Germany. They tend to invest the rest in emerging markets such as Hong Kong, Brazil, Mexico and Thailand.
                  These funds typically will have less than 20% of assets invested in U.S. stocks.

                  FZROX: Large-blend funds have portfolios that are fairly representative of the overall stock
                  market in size, growth rates, and price. They tend to invest across the spectrum of U.S. industries and owing to
                  their broad exposure, the funds' returns are often similar to those of the S&P 500 Index.

                  Fidelity has been making some smart moves regarding cutting costs recently, so the funds are probably very efficient from a fee standpoint.
                  james.c.hendrickson@gmail.com
                  202.468.6043

                  Comment

                    #10
                    Originally posted by james.hendrickson View Post
                    So...basically you're spreading your risk all over the place.
                    Yes--that is what an INDEX fund does. But, we are just moving from one index fund to another with a lower cost.

                    The amount we invested in these 2 funds is relatively small at this point. I estimate we will save about $7.50 annually with this latest change.

                    From Schwab:

                    FZILX: Foreign large-blend funds invest in a variety of big international stocks. Most of these
                    funds divide their assets among a dozen or more developed markets, including Japan, Britain, France, and
                    Germany. They tend to invest the rest in emerging markets such as Hong Kong, Brazil, Mexico and Thailand.
                    These funds typically will have less than 20% of assets invested in U.S. stocks.

                    FZROX: Large-blend funds have portfolios that are fairly representative of the overall stock
                    market in size, growth rates, and price. They tend to invest across the spectrum of U.S. industries and owing to
                    their broad exposure, the funds' returns are often similar to those of the S&P 500 Index.

                    Fidelity has been making some smart moves regarding cutting costs recently, so the funds are probably very efficient from a fee standpoint.
                    https://fundresearch.fidelity.com/mu...mary/31635T609
                    FZILX: The Fidelity Global ex U.S. Index is a float-adjusted market capitalization-weighted index designed to reflect the performance of non-U.S. large- and mid-cap stocks.

                    https://fundresearch.fidelity.com/mu...mary/31635T708
                    FZROX:The Fidelity U.S. Total Investable Market Index, is a float-adjusted market capitalization-weighted index designed to reflect the performance of the U.S. equity market, including large-, mid- and small-capitalization stocks.

                    Comment

                      #11
                      Fidelity is a good solid mutual fund provider. The only thing I'd say to potentially broaden this conversation would be to comment that when I was looking at FZILX there wasn't a lot in schwabs web porthole on it. Is a new fund? And...does the lack of attention on the investment concern you at all?
                      james.c.hendrickson@gmail.com
                      202.468.6043

                      Comment

                        #12
                        Originally posted by james.hendrickson View Post
                        Fidelity is a good solid mutual fund provider. The only thing I'd say to potentially broaden this conversation would be to comment that when I was looking at FZILX there wasn't a lot in schwabs web porthole on it. Is a new fund? And...does the lack of attention on the investment concern you at all?
                        Here is a previous conversation about the new zero ER funds that Fidelity is now offering:
                        https://www.savingadvice.com/forums/...banking/75280-

                        I'm not sure what you mean about the lack of attention on the investment, could you elaborate?

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