Page 55 - Money - November 2018

-RZIWX INDEX FUNDS

8,) 43;)6 3* >)63 Investor Class, which charges
*MHIPMX] LSTIW QEOMRK MXW JYRHW JVII [MPP LIPT XLIQ GSQTIXI [MXL PEVKIV VMZEPW 0.02%, or $2 per $10,000 invested,
has returned 10.53%.
AMOUNT INVESTED ANNUAL FEE PER
FUND NAME
IN FUND $10,000 INVESTED Many investors should now be
able to get a fund equivalent to
Fidelity Zero Total Market Index Fund $1.1 billion $0 Fidelity Total Market Index Fund,
Investor Class, for free. But the
Vanguard Total Stock Market $749 billion $4*
Index Fund benefit of that—equivalent to
boosting the Fidelity fund’s return
Schwab Total Stock Market $8.9 billion $3
Index Fund by 0.02 percentage points a
year—wouldn’t have been enough
Fidelity Zero International $333 million $0
Index Fund to overcome the Schwab fund’s
Vanguard FTSE All-World, $37 billion $11* long-term outperformance.
Ex-U.S. Index Fund When Morningstar back-tested
the long-term performance of
Schwab International Index Fund $4.6 billion $6
Fidelity’s, Schwab’s, and Van-
*Assumes $10,000 or more invested. SOURCE: The fund companies guard’s total market funds, it
found that even during the race to
zero, the impact of fees on the
funds’ returns was generally small.
percentage point a year for the performance of its benchmark.
privilege of investing in a fund to “The risk of investors becom- DON’T FORGET ABOUT UNCLE SAM
paying [almost] nothing, that’s a ing overly obsessed with fees is Investors who already own a
really big deal,” says Morning- that they overlook differences” Vanguard, Schwab, or other index
star’s Johnson. “When you go that could be much more signifi- fund but are thinking of switching
from paying 0.04% to invest in a cant in the long run, says Johnson. to a free Fidelity one have at least
fund to paying nothing, that’s far For instance, over the past one more thing to consider if their
less exciting—that’s $4 a year’s decade, Schwab Total Stock savings are stashed in a taxable
worth of savings on a $10,000 Market Index Fund, which brokerage account, as opposed to
investment.” charges investors 0.03% of assets a tax-advantaged retirement
a year, or $3 per $10,000 invested, option like an IRA or 401(k).
TAKE A LOOK, BUT CONSIDER has returned 10.62% annually, on Selling one fund to buy another
OTHER FACTORS average, according to Morning- typically prompts a capital
While a fund’s cost should always star. By contrast, the Fidelity gain—and with it a potential tax
be a factor in your investment Total Market Index Fund, bill, points out Morningstar’s
decisions, in today’s hypercom- Johnson. “Jumping ship could
petitive market, it shouldn’t potentially be very costly,” he says.
necessarily be the biggest one, Still, even if the new Fidelity
says Oliver Pursche, a Bruderman funds aren’t an immediate game
Brothers investment strategist. changer for your portfolio, they
Among other considerations: may well have a big impact on the
what specific stocks the fund .914-2+ 7,-4 investment world in the future.
holds, to a large part determined '390( Just as consumers have come
by the particular benchmark it to expect free news online and
tracks, and a factor that investors 438)28-%00= &) free Wi-Fi at coffee shops, they
call “tracking error,” which is :)6= '3780= š may now expect to buy broad-
essentially how close the fund market exposure for nothing—or
comes to actually matching the —Morningstar analyst Ben Johnson next to nothing, says Johnson.

MONE Y. C O M NO VEMBER 2 018