Fidelity ZERO Fee Funds: Here Are the Pros and Cons

Someone asks:

Does anyone know what is the advantage of investing in Fidelity’s Zero Index Funds over their regular counterparts? Besides having zero commission fees.

Is it still advantageous to invest in the non Zero Index funds? Or are they both the same since they follow similar indexes?

List of Fidelity ZERO Fee Index Funds

There are currently 4 different zero expense ratio index mutual funds from Fidelity.

• FNILX (Fidelity ZERO Large Cap Index Fund)
• FZROX (Fidelity ZERO Total Market Index Fund)
• FZIPX (Fidelity ZERO Extended Market Index Fund)
• FZILX (Fidelity ZERO International Index Fund)

Fidelity ZERO Funds: How Do They Compare?

Matt B:

I don’t see any difference between the regular Fidelity index fund and the zero expense ratio index fund. The only thing I can think of is Fidelity created these funds to lure new customers.

Harrison W:

I could be wrong, but I think the downside is simply this:

1. They are new and have less of a track record against their benchmark.
2. The long-standing index funds already have such low fees that even a minuscule difference in performance could wipe out the cost savings.

Those are the only downsides I can see. Otherwise zero fees sounds pretty awesome.

Jason B:

I just switched out of Fidelity’s ZERO funds. I exchanged FZROX for FSKAX and FZILX for FTIHX.

The reason I did this was because they didn’t truly fit my allocation. FZROX isn’t a “true” total market fund. It’s missing ~1000 companies. FZILX is missing international small cap companies.

This is inside of a Roth IRA, so there’s no tax consequences.

John D:

I’d only hold the zero funds in a tax-advantaged account and I planned on supplementing it with some sort of a small cap fund. The Zero Extended Market fund is not great for this so you’d end up losing on costs by having to go out and buy a small cap index fund or ETF anyway. In short, there was nothing wrong with Fidelity’s traditional index funds and the zero funds are basically a marketing gimmick.

April A:

That is exactly what I thought when I decided to invest in FXAIX and not FNILX ($0 fee). The expense fee of FXAIX is extremely low and FNILX didn’t have enough history.

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