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Vanguard has always been and assumed to be THE low-cost provider for mutual funds and index funds in the investing world. To be clear, they have had and still to do this day continue to have low expense ratios.
However, they are NO LONGER the lowest expense ratio investment provider… That title belongs to Fidelity. Fidelity has rolled out (4) separate ZERO Mutual Funds that have 0.00% expense ratios, which means the returns that you make on these index funds are 100% YOURS to keep! This video is a comparison between these (4) Fidelity ZERO mutual funds compared to the most relevant Vanguard Mutual Fund:
Fidelity® ZERO Large Cap Index Fund (FNILX) vs. Vanguard Large-Cap Index Fund (VLCAX)
Seeks to provide investment results that correspond to the total return of a broad range of large-capitalization U.S. companies
Fidelity® ZERO Extended Market Index Fund (FZIPX) vs. Vanguard Strategic Equity Fund (VSEQX)
Seeks to provide investment results that correspond to the total return of a broad range of mid- to small-capitalization U.S. companies.
Fidelity® ZERO Total Market Index Fund (FZROX) vs. Vanguard Total Stock Market Index Fund (VTSAX)
Seeks to provide investment results that correspond to the total return of a broad range of publicly traded companies in the US.
Fidelity® ZERO International Index Fund (FZILX) vs. Vanguard Total International Stock Index Fund (VTIAX)
Seeks to provide investment results that correspond to the total return of foreign developed and emerging stocks.
All of the Fidelity ZERO Mutual Funds listed have 0.00% expense ratios and also have a $0.00 minimum initial investment whereas the Vanguard Mutual Funds listed in the video all had a minimum $3,000 initial investment requirement. The Vanguard index funds listed had expense ratios ranging from .04% (VTSAX) up to .17% (VSEQX) which are definitely LOW expense ratios but they are not $0.00. A review of the YTD market returns and the 1 Year market returns for both the Fidelity Mutual Funds and Vanguard Index Funds were very similar though Fidelity did have higher market returns for the majority of the mutual funds.
WHY YOU MIGHT CHOOSE FIDELITY ZERO INDEX FUND MUTUAL FUNDS:
– Zero Expense Ratios
– No minimum required investment whereas Vanguard requires $3,000.00 as an initial investment
– Market returns are in line with Vanguard
WHY YOU MIGHT CHOOSE VANGUARD INDEX FUND MUTUAL FUNDS:
– You already have Vanguard investments so the $3,000 minimum investment doesn’t matter to you
– Vanguard still has really low expense ratios so it is not worth the effort to switch
– Vanguard has a long established history with their mutual funds whereas these index funds with Fidelity were opened in the past 12-24 months
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Fidelity and Vanguard are two of the biggest players in the investment world, especially when it comes to low-cost index funds. Both companies have a long history of offering high-quality, low-cost investment products that are popular with individual investors and financial advisors. But in recent years, Fidelity has made a bold move with the introduction of their Fidelity ZERO index funds, which offer expense ratios of 0%, taking the low-cost index fund battle to a whole new level. So, the question remains: who wins the low-cost index fund battle – Fidelity ZERO or Vanguard index funds?
First, let’s take a look at Vanguard, the pioneer of low-cost index funds. Vanguard’s index funds are known for their ultra-low expense ratios, which are typically among the lowest in the industry. The company offers a wide variety of index funds, covering domestic and international stocks, bonds, and other asset classes. Vanguard’s index funds are also well-established and have a strong track record of delivering solid returns to investors.
On the other hand, Fidelity ZERO index funds, which were introduced in 2018, have taken the industry by storm. These funds offer expense ratios of 0%, meaning that investors pay no management fees for these funds. The Fidelity ZERO index funds cover large-cap, mid-cap, and total stock market indexes, as well as international stocks, US bonds, and US high-quality bonds. This move by Fidelity has put pressure on other investment companies to lower their expenses and has disrupted the industry by offering a no-fee option for investors.
So, who wins the low-cost index fund battle? It’s a tough call. On one hand, Vanguard has a long history, a wide variety of index funds, and a proven track record of delivering solid returns to investors. On the other hand, Fidelity ZERO index funds offer the allure of zero expense ratios, which can save investors a significant amount of money over the long term.
Ultimately, the answer depends on the individual investor’s needs and preferences. Both Fidelity and Vanguard offer high-quality index funds at very low costs, and investors can’t go wrong with either option. Some investors may prefer the established track record of Vanguard, while others may be attracted to the zero-fee structure of Fidelity ZERO index funds.
In conclusion, the low-cost index fund battle between Fidelity ZERO and Vanguard is a close call. Both companies offer top-notch index funds at rock-bottom prices, and investors should carefully consider their own investment goals and preferences before making a decision. No matter which option they choose, investors can take comfort in the fact that they are accessing the benefits of low-cost, diversified investment options.
Question for you:
Which funds do you prefer, Vanguard or Fidelity? Did this video change your thought on which funds to use in the future?
This is a year later .. But , would it be likely that a product is available for free ? I dont see any business being able to do things for free .
Hello! Could someone answer me, if Vanguard is a company that creates ETFs? or is it just a broker that you could buy them from? Thank you!
Forgot to also factor in the transaction fee for Vanguard is $75.00 for most Index fund where as for Fidelity is $0.00
Thanks for the comparison. I learned from another youtuber that Fidelity automatically invests dividends for index funds as well. You both sold me on Fidelity.
Great video, Joe! I love both– I use Vanguard for my IRA and Fidelity for my 401k! Love them both
Thanks for the analysis!!
You didn't show dividend distribution schedule…major difference
Thank you so much!
This is great, How about when they pay out there Dividend so you can reinvest of have cash income if you are over 60 years age or younger. Annually, Quarterly, Monthly?
I am late to the game. I am 45 years old and just opened a Roth IRA(Vanguard). I plan to work until i am 70-75 years old (30 years) What funds do you recommend i start with? I also plan to do the max $6000.00 per year and $7000.00 when i hit 50.
Assume you should also compare the tracking error and exit charges if any. Also the ranking in the category.
Alright, after speaking to a bunch of firms, including vanguard, I think I've decided to go with fidelity. Thanks for the video and wish me luck, lol.
You do vanguard a unjust point on continuing to tout the admiral funds and the $3000 minimum. They have VLACX for lower initial cost investors.
VANGUARD HAS A BETTER LONG TERM PERFORMANCE AND WAS AWARDED AN AWARD / CLAIM . SOUNDS LIKE FIDELITY IS TRYING TO CATCH UP LIKE NO BID FEES WE WANT THE MARKET. WHO WOULD YOU TRUST WITH YOUR PERSONAL FUNDS. SOUND OR SLICK
Yeap ! Was helpful! Thanks !
vanguard better than fidelity
I just moved my 401k into an ira with JP Morgan chase, is fidelity still zero if I buy mutual funds through chase?
Check out this article on VTSAX compared to FZROX. It looks like VTSAX is the winner. VTSAX pays dividends quarterly and FZROX yearly. Over time it cost more to own FZROX even with a zero expense rate. Just pointing it out. https://www.reddit.com/r/investing/comments/dbpmsz/fidelitys_0_expense_ratio_index_funds_are_likely
Great info bro
Hi I am new to investing, I am 38 years old and would like to retire early. What strategy should I take? Index funds?
The comment with Fidelity fund having annual dividend vs Vanguard fund distributing dividend quarterly impacting returns is misinformation. The returns posted is for total returns in these no-load index funds with all distribution reinvested so the frequency of distribution has no impact to returns. These funds track slightly different index making the returns comparison inconclusive. FZROX has 2466 holding while VTSAX has 3531 holdings. A few advantages with Vanguard: 1. Vanguard index fund shares and ETF shares are the same fund with different fund class. ETF's have an advantage of having authorized participants purge low cost basis shares through in-kind exchange process to limit capital gains distribution. So in theory, Vanguard index fund can defer tax longer than Fidelity Index funds in a taxable account. 2. Vanguard shares 100% of its revenue generated from securities lending. Fidelity also participates in security lending but will not share 100% of the revenues back to its shareholder–however, I don't think it is generally enough to offset Fidelity's cost advantage entirely just based on the security lending revenue difference particularly for broader market index. While Index 500 fund at Fidelity has a 0.015% expense ratio thus is not in their zero expense ratio line-up, it has been outperforming Vanguard's Index 500 Admiral shares with 0.04% expense ratio for some time so I think that is an indication that yes, there's some measurable advantage for lower expense ratio for funds with nearly identical allocation. For other types of index, the revenue generated by securities lending can be higher for the smaller company shares so the difference might be smaller. Definitely would not sell a taxable position in a Vanguard fund just to try to get the lower expense with Fidelity. However, in a retirement account, chasing small expense ratio might pay off over very long holding periods but even in such case, be aware that each account transfer ends up with liquidating a position and buying another which you may miss a price swing in the process that could be positive or negative.
Comparing VTSAX and FZROX isn't accurate. They're not the same funds with Vanguard's fund being far more diversified. The correct comparison at Fidelity is FSKAX
The returns are very similar.
But Vanguard has always treated me well. I've had a few horror stories with the portion of my investments that were at Fidelity. Enough that I moved all of my IRA money out of Fidelity and consolidated at Vanguard. I've always had more confidence in Vanguard as a long-term investment, especially considering the unique structure of Vanguard as a company relative to Fidelity.
I still do my taxable investing at Fidelity. But I don't trust them with retirement money anymore.
I have account at both Fidelity and Vanguard. Fidelity mutual.funds did far better. Just look at the return over 1 , 3, 5 and 10 years. Fidelity Sector funds did remarkably well.
this video has a lot of dead time when youre writing in between each one. i recommend for future videos to cut between the writings and just explain them for a faster video and more content. thank you for making the video
You can't just look at expense ratios and an one year performances when comparing funds. For instance, VLCAX vs FNILX. The fidelity fund pays dividend only once a year vs Vanguard fund pays every quarter. Over the long-run, the funds that pay dividend more often usually win. Bottom line is, you usually get what you pay for. Don't fall for "free".