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Jonathan Clements: Low Fidelity: Five Key Questions
FYI: WE HAVE FINALLY hit rock-bottom. Last week, Fidelity Investments announced that it was introducing two index funds with zero annual expenses, while also slashing expenses on its other index funds and dropping the required minimum investment on all funds, both actively managed and indexed. All of this raises five key questions. Regards, Ted http://www.humbledollar.com/2018/08/low-fidelity/
Mr. Clements should have moved back another decade into the late 1970's when Fidelity was hammering upon the 5-8% loads charged by Merrill Lynch and similar organizations for active managed mutual funds. Yes, Fido had some load funds, too; but at a lower "fee". The Fido eventually disappeared, too. I'll call this the "K-Mart" effect. Volume, volume, volume........force the competitors to match or get out of the way, using the low margin to gain market share and still make a profit on large volume. I had a good view of this, seeing the exposure of K-Mart (Michigan corp.) in Michigan in the early days. It is not difficult to imagine one's hard won money being invested in a fund in 1980 with a front load of (lets be generous) of 7%; versus today, where the same type of investment may be had as an index or etf with an expense ratio of .04%. Nuff said......
Comments
Yes, Fido had some load funds, too; but at a lower "fee". The Fido eventually disappeared, too.
I'll call this the "K-Mart" effect. Volume, volume, volume........force the competitors to match or get out of the way, using the low margin to gain market share and still make a profit on large volume. I had a good view of this, seeing the exposure of K-Mart (Michigan corp.) in Michigan in the early days.
It is not difficult to imagine one's hard won money being invested in a fund in 1980 with a front load of (lets be generous) of 7%; versus today, where the same type of investment may be had as an index or etf with an expense ratio of .04%.
Nuff said......