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Are Fidelity Zero Funds A Scam?

Free, we all love this word. Imagine if you can buy Index funds & with no minimums\ no fees. Now with through Fidelity you can. But are these funds to good be true? let’s take a look at 2 Funds – the zero total market index fund & the fidelity zero International index fund.

Fidelity ZERO SM Total Market Index Fund
(FZROX)

Features of this fund:
 • No Transaction Fee
 • No min deposit
 • Fund Inception 8/2/2018

Average Annual Returns
YTD (Daily) *
 • +2.73%

1 Yr +31.15%
 • 3 Yrs —
 • 5 Yrs —
 • Life +11.05%

12 Month Low-High
 • $8.58 – $11.37 *

Fidelity ZERO International Index Fund
(FZILX)

This fund created in aug 2018. This Fund will give you exposure to the US market as whole.

Features of this fund:
 • No Transaction Fee
 • No min deposit
 • Fund Inception 8/2/2018

Average Annual Returns
YTD (Daily)**
 • +1.06%

1 Yr +21.67%
 • 3 Yrs —
 • 5 Yrs —
 • Life +5.18%

12 Month Low-High
 • $8.66 – $10.46**

So those are the 2 zero index funds from Fidelity. A 3 fund portfolio is not complete without a bond index fund. Unfortunately, Fidelity is not offering a zero bond fund, but they do have a low cost fund – let’s have a look at it.

Fidelity U. S. Bond Index Fund (FXNAX)

Features of this fund:
 • Annual Exp Ratio of 0.025% (down from 0.045%)
 • No min deposit
 • Fund Inception 8/2/2018

Average Annual Returns
YTD (Daily) ***
 • +1.00%

1 Yr +8.48%
 • 3 Yrs +3.94%
 • 5 Yrs +2.99%
 • 10 Yrs +3.67% (note: during a bull market Ave returns on bond funds typically lag behind stock funds)

12 Month Low-High
$11.25 – $12.10***

1st The Cons

Now that we’ve had a good look at these funds, what’s the verdict? Are the zero funds a scam? Not at all. But here’s the problem. If you are thinking of moving from Schwab or Vanguard to take advantage of these 2 funds – don’t, it’s not worth the time or effort. Both of Schwab & Vanguard already offer low exp ratio funds. Not to mention if you do decide to switch brokerages & you are using a taxable account, taxes will come into play. Besides, if Fidelity is able to snatch market share away from these 2 competitors look for them to offer their own zero funds in the future.

One last con, it’s still too early. Both funds were only created recently (inception 8/2018) & only time will tell if these funds will be around long-term.

Now the Pros

There are some good things about this fund:

No Fees – free is as I said before is everybody’s favorite word. Even if you already have a brokerage account, I see no harm in grabbing these 2 funds – that is if you have some spare cash just laying around.

Great for newbies – new to investing, opening up a Fidelity account with these too – plus the bond fund as a hedge – can get you started on the market. No minimum means anyone can get started for no\low fees.

In conclusion, this could be a perfect fund for first time investors, looking to get started in the market.

Sample Portfolio:

Cash – 20%

FZROX – Total Fund 50%

FZILX – Int’l Fund 20%

FXNAX – Bond Fund 10%

(.0025% exp. Ratio)

*AS OF 1/22/2020 *from 12/31/2019 – now

**AS OF 1/22/2020    **from 12/31/2019 – now

***AS OF 1/22/2020         ***from 12/31/2019 – now

Disclaimer: All content on this website, is for info-tainment purposes only. This information should not be considered complete, up to date, & is not intended to be used in place of professional, consultation, or advice of a financial advisor.

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