Are Fidelity Zero Funds A Scam?

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 *

screenshot 20200123 105100  011544811069990858125

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**

screenshot 20200123 105450  011174362870847300733

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***

screenshot 20200123 1653004646235933118231138

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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