Fidelity Investments is launching a new line of zero-expense ratio mutual funds for individual investors. Known as Fidelity ZERO Index Funds, the firm claims these are the first-ever zero expense ratio self-indexed funds for individual investors on the market, according a company press release.
The $7 trillion firm, which is one of the largest providers of index mutual funds. Fidelity's president of personal investing business, Kathleen Murphy, described the move as "rewriting the rules of investing to deliver the unparalleled value and straightforward investing options that individuals need and deserve," per the announcement.
Select Fidelity funds will require zero minimums in order for clients to open accounts, zero in account fees and no charges for domestic money movement. For Fidelity retail and advisor mutual funds and 529 plans, there will also be zero investment minimums. Finally, the firm indicates that it is significantly reducing and simplifying the pricing for existing Fidelity index mutual funds.
The first self-indexed mutual funds with zero expense ratios marketed for individual investors are the company's Fidelity ZERO Total Market Index Fund (FZROX) and Fidelity ZERO International Index Fund (FZILX). The funds are available as of Aug. 3, 2018. (See also: Pay Attention to Your Fund’s Expense Ratio.)
"Benefits Investors of All Ages"
Fidelity's move may be an effort to court the millennial investor base, which has so far been reluctant to take part in mainstream investing to the same degree as older generations. Murphy explains that the company is "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." She continued by saying that "Fidelity's relentless focus on enhancing the value we provide to investors, combined with our award-winning platforms and broad-based financial planning and advisory services, demonstrate the clear advantage of investing with Fidelity." (For more, see: Millennials Aren't Investing, but They Should Be.)
Fidelity's move to zero out minimums on accounts, fees and money movement charges also aims to attract investors who may otherwise be scared away by complicated rules and systems. Investors holding these accounts will no longer be subject to fees for domestic bank wires, check stop payments, low balance maintenance and returned checks. The changes to this policy took effect as of Aug. 1, 2018.
Fidelity suggests that it 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." Overall, the average asset-weighted annual expense across the company's stock and bond index fund lineup will fall by 35% as a result of the change in policy. (For additional reading, check out: Fund Costs and Expenses.)