Fidelity Lowers Fees on 27 Index Mutual Funds, ETFs

Jonathan Weiss /

The second-largest mutual fund company is about to lower its fees for 27 index funds.

Fidelity Investments announced this week that it will lower total expenses on 16 index mutual funds and 11 index exchange-traded funds (ETFs) starting Friday, July 1.

Colby Penzone, senior vice president for Fidelity’s Investment Product Group, says in the announcement:

“We are taking already one of the lowest cost index fund offerings in the industry and making it even more compelling.”

As a result of the change, average expenses across all of Fidelity’s index funds will fall from 0.116 percent (11.6 basis points) to 0.102 percent (10.2 basis points). The company expects current shareholders will save around $20 million per year.

Expenses for the Fidelity 500 Index Fund, for example, will fall from 0.095 percent to 0.09 percent. That’s lower than the equivalent fund from the largest mutual fund company, Vanguard Group, which is known for ultra-low fees. The Vanguard 500 Index Fund costs 0.16 percent.

The Wall Street Journal reports that Fidelity’s decreased expenses will bring the company’s fees below or on par with those of Vanguard and Charles Schwab Corp., which is also known for ultra-low expenses.

The Journal continues:

The discounts are part of a broader reduction in the price of investing as firms duel for increasingly cost-sensitive clients and undercut each other on price. … In recent years, [Fidelity] has lost some business to rivals emphasizing so-called passive investments that mimic indexes for a fraction of the cost of a typical mutual fund.

Index funds are one of two main types of mutual funds:

  • Actively managed mutual funds, which are run by financial professionals who decide which individual stocks or bonds to buy and sell within the fund. They aim to outperform stock market indices — and charge higher fees for their effort.
  • Passively managed mutual funds, often referred to as index funds, simply aim to mirror a stock market index such as the S&P 500. Fees are therefore minimal.

Study after study has shown that index funds historically have performed better — at a lower cost to the investor — than managed funds over a long period of time.

If you’re just getting started as a mutual fund investor, check out these tips from Money Talks News founder Stacy Johnson. Stacy also has some thoughts about the wisdom of investing in index funds over more exotic options, such as hedge funds.

What’s your take on Fidelity’s lowering its expenses? Share your thoughts below or on Facebook.

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