Fidelity Investments just beat all of the low-fee index fund competition to a move long expected: It will be the first fund company to offer core index funds without any management fee.
On Wednesday, Fidelity announced the Fidelity Zero Total Market Index Fund and the Fidelity Zero International Index Fund will be available to investors on Friday. "Investors will pay a 0.00 percent fee, regardless of how much they invest in either fund, while gaining exposure to nearly the entire global stock market," Fidelity said in a release.
The major index fund companies and discount brokers have been engaged in what investing experts call an "endless" fee war, with Vanguard Group, Charles Schwab and BlackRock's iShares ETF families constantly setting new bars for the lowest management fees on core ETFs. Lately, some of the biggest Wall Street banks have been encroaching on their turf as well, with Goldman Sachs and J. P. Morgan introducing ETFs with competitive expense ratios.
Many index fund and ETF experts have argued that it would ultimately make sense for fund managers to offer the "building blocks" — the core market exposures — for free and charge fees for less generic investment products as individuals and advisors fill out their portfolios.
"Investors are increasingly fee-conscious and shifting toward passive products," said Todd Rosenbluth, the director of ETF and mutual fund research at CFRA. "While ETFs get much of the attention from a competitive perspective, demand for index mutual funds remains strong. Fidelity's move makes it easier and cheaper to invest in well-diversified mutual funds."