Exploring the Fidelity ZERO Funds: Investing Without Fees
Fidelity ZERO funds are mutual funds with no management fees.
Four funds available: FZROX, FZILX, FNILX, FZIPX.
Designed to provide broad market exposure for zero cost.
No account minimums, making them accessible for all investors.
Mutual funds, not ETFs, with once-a-day pricing.
Great for long-term investors focused on minimizing costs.
In the world of investing, every dollar counts. While gains can compound over time, so can fees. That’s why the introduction of the Fidelity ZERO funds was such a game-changer for the investment community. In this post, we dive into what makes these funds unique and why they might be an appealing option for many investors.
What Are the Fidelity ZERO Funds?
The Fidelity ZERO funds are a set of mutual funds designed to provide broad market exposure with a zero expense ratio. That means investors don’t pay any management fees—ever. This is a rare feature in the financial industry, where management fees, even if small, can eat into your returns over time. Fidelity launched these funds to make investing more accessible to everyone, cutting down on costs that could otherwise reduce the power of compounding returns.
Currently, Fidelity offers four ZERO funds:
Fidelity ZERO Total Market Index Fund (FZROX)
This fund offers exposure to the entire U.S. stock market, including small, mid, and large-cap companies. It’s designed to track the performance of a broad range of U.S. equities, making it an excellent choice for investors looking for comprehensive coverage.
Fidelity ZERO International Index Fund (FZILX)
If you’re interested in global diversification, FZILX provides exposure to international markets, excluding the U.S. This fund covers both developed and emerging markets, giving investors a taste of global economic growth.
Fidelity ZERO Large Cap Index Fund (FNILX)
This fund focuses on large-cap U.S. companies, which are typically established firms with solid performance histories. It’s a great option for those who want exposure to some of the largest, most recognizable companies in the U.S.
Fidelity ZERO Extended Market Index Fund (FZIPX)
FZIPX invests in mid- and small-cap stocks, providing coverage of companies that are not included in the large-cap index. This fund is ideal for investors who want to diversify into the smaller, potentially faster-growing segment of the U.S. market.
Why Are These Funds Special?
The standout feature of these funds is, of course, their zero expense ratio. Most mutual funds and ETFs come with annual management fees, which, although often small, can add up over time and eat into your returns. With the Fidelity ZERO funds, you’re able to invest without worrying about these ongoing costs.
Another significant benefit is the accessibility of these funds. There are no account minimums required, meaning investors of all sizes can get started easily. Whether you’re a seasoned investor looking to lower your costs or someone just beginning their journey, these funds make it possible to invest without cost barriers.
Mutual Funds, Not ETFs
It’s important to note that the Fidelity ZERO funds are mutual funds, not ETFs. This means they are priced once a day at the market’s close, rather than being traded on an exchange throughout the day like ETFs. The benefit here is that investors can buy or sell shares directly through Fidelity without any commissions, making it a simple process. However, if you’re someone who likes the flexibility of trading intraday, an ETF might be more suitable for you.
Are There Any Drawbacks?
While the zero expense ratio is enticing, there are a few things to consider. The Fidelity ZERO funds can only be bought through Fidelity, meaning if you’re using a different brokerage, you’d need to open an account with Fidelity to access these funds. Additionally, being mutual funds, they don’t offer the intraday trading that some investors may prefer when investing in ETFs.
Another consideration is that, like all index funds, the Fidelity ZERO funds aim to match the performance of the market, not beat it. If you’re looking for a more actively managed approach, where fund managers try to outperform the market, you’ll need to look elsewhere (likely with a higher expense ratio).
Who Should Consider Fidelity ZERO Funds?
The Fidelity ZERO funds are well-suited for long-term investors who are focused on minimizing costs. If you’re building a diversified portfolio and want core exposure to U.S. and international equities, these funds are a great option to consider. Their zero-cost structure ensures that more of your money stays invested and working for you.
These funds also work well for those just getting started in the investing world. Without account minimums or management fees, they provide an easy entry point into investing in broad markets—whether you’re interested in the entire U.S. market, large-cap stocks, international stocks, or the mid- and small-cap segments.
Final Thoughts
The Fidelity ZERO funds are a bold step forward in making investing affordable for everyone. By eliminating management fees, Fidelity has created a unique offering that directly addresses one of the most significant costs of investing—annual expenses. Whether you’re just starting out or are a seasoned investor, these funds are worth considering as part of a cost-effective, diversified investment strategy.
With the rise of zero-fee funds, it’s clear that the competition among brokerages is heating up, and that’s ultimately a win for all investors. It’s worth exploring how funds like FZROX, FZILX, FNILX, and FZIPX can fit into your portfolio, particularly if you’re looking to invest without added fees eating into your returns.