Fidelity ‘Fixxed’ By Less Than Zero

November 28, 2018

If, like me, you were around clubs in the 1980s listening to alternative rock, you probably know The Fixx. That’s the band best known for songs like “One Thing Leads to Another,” “Red Skies,” “Stand or Fall.”

The Fixx is also known for the commercially successful hit “Saved by Zero,” a concept resurrected by Fidelity Investments this year for its zero-fee index investing campaign commercials.

I first came across Fidelity’s zero-fee commercials during NFL and college football games during Thanksgiving week. These ads show just how committed Fidelity is to raising awareness about index investing, which, by the way, is free to do every year on its platform.

Zero Your Hero

Fidelity’s campaign to promote the first zero-fee mutual funds has been smart, pointed at a general broad audience. That “for everyone and anyone” approach may be one reason these funds have seen more than $2.2 billion in new assets since launching in September.

The marketing campaign strikes a chord with the masses—the idea you can invest for dirt cheap or free is appealing.

While we at ETF.com don’t concentrate on the fee-heavy mutual fund industry, Fidelity’s move to free is the perfect pivot to do so. There’s no zero-fee ETF yet. The closest we’ve come to that is with the Cambria Global Asset Allocation ETF (GAA), the only ETF in the market to charge a zero management fee. The fund only charges acquired fund fees amounting to a 0.33% expense ratio.

But there are four zero-fee mutual funds from Fidelity that cover all the equity sleeves:

  • Fidelity ZERO Total Market Index Fund (FZROX) 
  • Fidelity ZERO International Index Fund (FZILX)
  • Fidelity ZERO Large Cap Index Fund (FNILX)
  • Fidelity ZERO Extended Market Index Fund (FZIPX)

Why Zero Matters

About 10 years ago, mutual fund fees were first required to disclose their expense ratios—yes, you pay for your 401(k). And with the fallout from the financial crisis, investors have become ever so keen on not just what they invest in but how much those investments cost.

What I find interesting is that a mutual fund beat the ETF industry to the zero-fee punch.

You could argue there’s not much of a difference between a zero-fee fund like the Fidelity ZERO Large Cap Index Fund (FNILX) and the almost-free (0.03%) Schwab U.S. Broad Market ETF (SCHB), but how you sell that to your audience is important.

‘Saved By Zero’

Index funds either in a mutual fund wrapper or in an ETF are the building blocks to an investment future, and being able to build your portfolio with free vehicles is awesome. Time for the ETF industry to get into the “free” expense ratio game. Which ETF issuer will be first?

Fidelity has taken a loss-leader approach to attract investors, and it’s showing that going with zero is actually paying off big time. Not only can the firm make money on other products and services, but the higher ideal is that people watching football are seeing a way to invest for free. That’s a good thing.

Drew Voros can be reached at [email protected]

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