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Fidelity Launches More Zero-Fee Funds As First Two Amass $1 Billion

The asset manager also eliminated minimums and cut other fees this week.

Fidelity Investments is launching two more zero-fee mutual funds after its first two amassed more than $1 billion in less than one month since their debut.

The Boston-based financial services firm with more than $7 trillion in client assets will make the new Fidelity ZERO Large Cap Index Fund (FNILX) and Fidelity ZERO Extended Market Index Fund (FZIPX) available beginning Sept. 18, the money manager said in a statement on Wednesday.

Both will be available to individual investors and are zero expense ratio funds, absent management fees and investment minimums. They will offer exposure to over two-thirds of industry index assets–the FNILX fund will track results corresponding to the total return of stocks of large-capitalization U.S. companies and the FZIPX will index total return of stocks of mid- to small-capitalization U.S. companies.

Kathleen Murphy, the president of Fidelity Investments' personal investing business, said in a statement the ZERO funds are "the most recent example, bringing innovation and value to investors, and we're pleased so many investors have taken advantage of this offering."

Fidelity launched its first two zero expense ratio funds on Aug. 3, the ZERO Total Market Index Fund (FZROX) and Fidelity ZERO International Index Fund (FZILX), which together have already amassed more than $1 billion before Aug. 31. It also eliminated investment minimums and cut fees for other mutual funds last month. Greg O’Gara, a senior research analyst for Aite Group’s wealth management practice called the launch of the first two zero-fee funds and other changes "a shot across the bow at Vanguard.”

Reducing net expenses to zero for the investor is substantial, especially considering the cost of comparable international and extended market funds. Comparable funds offered by Vanguard have investment minimums of $3,000 and net expenses of 23 and 21 basis points, respectively.

Financial advisors generally felt Fidelity’s zero-fee equity funds will make it harder to convince clients and prospects that portfolio management is what they should be paying for; instead, advisors who want to grow their businesses will need to earn their fees through financial planning, emotional support and lifetime budgeting.

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