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Fidelity Expands Price War With Vanguard With New Index Fund Launches

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Fidelity Investments is expanding its price war with Vanguard with the launch of four new core equity index mutual funds that charge a net expense fee of 0.05% each and one new muni bond index fund that charges 0.07%.

The comparable Vanguard funds charge two basis points more, but those Admiral shares require a $3,000 minimum while these Fidelity index funds, as with all of the firm’s index funds, have no minimums.

The new Fidelity index funds are available to individual investors, financial advisors and workplace retirement plans.

“Fidelity’s goal is to provide exceptional value, simplicity and choice for our customers,” said Colby Penzone, senior vice president of Investment Product at Fidelity. “We saw an opportunity to further expand our robust index fund lineup and bring our expertise into these areas of the market.”

Fidelity’s latest salvo in the index fund price war follows the introduction of four no-fee equity index funds last August and September — for large-cap stocks, small- and mid-caps, international stocks and total stock market market — the elimination of minimum investments for almost all its mutual funds, and the elimination of higher retail fees for multiple index funds in favor of institutional fees.

In addition, this past June Fidelity reduced the expense ratios on the entry-level share classes of its target date funds for individual investors, known as Fidelity Freedom Index Funds, to 12 basis points from 14, as of June 1, undercutting Vanguard’s fees by one to three basis points.

Todd Rosenbluth, head of ETF and mutual fund research at CFRA, says Fidelity’s expanded low-cost mutual index fund lineup indicates that “despite a long history with actively managed mutual funds, the firm has embraced the index world and broadened their offerings to meet growing investor demand.”

He adds that “though the battle for ETF assets garners more attention, Fidelity is looking to take share away from Vanguard and Schwab that have a strong index mutual fund presence.”

Indeed, in its press release Fidelity notes that in addition to the five new index funds, it has 53 other stock and bond index funds and 11 sector ETFs that have lower expense ratios than comparable funds at Vanguard.

A Vanguard spokeswoman declined to comment on Fidelity’s statement but noted that the firm, which is owned by its funds that in turn are owned by their shareholders, is “committed to lowering our expenses across-the-board – index and active, stock and bond, ETFs and mutual funds.”

She added that in the past year, Vanguard eliminated commissions on ETF trading, lowered the investment minimums of low-cost Admiral Shares and the expense ratios on a range of funds and ETFs and introduced several low-cost funds, including an actively managed bond fund and commodity fund and active and passive ESG funds.

The new low-cost Fidelity index funds, along with their trading symbols and expense ratios are:

  • Fidelity Mid Cap Growth Index Fund   (FMDGX)    0.05%
  • Fidelity Mid Cap Value Index Fund       (FIMVX)      0.05%
  • Fidelity Small Cap Growth Index Fund (FECGX)     0.05%
  • Fidelity Small Cap Value Index Fund    (FISVX)        0.05%
  • Fidelity Municipal Bond Index Fund    (FMBIX)       0.07%

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