December 11, 2012
The massive asset management firm Fidelity Investments has announced sweeping changes to its fee structure and investment minimums in many of its index fund offerings, the company said on Tuesday.
Apart from decreasing investment minimums by as much as 90% for some of its products, reduced fees were announced for eight of Fidelity's index mutual funds, with the decline in fees ranging from 0.01% to 0.08% per year. A total of 22 funds saw their investment minimums decrease. All changes will take effect Jan 1.
Fidelity, which boasts $1.6 trillion in assets under management, is competing for investment with companies such as Vanguard, which pioneered the index fund and has been known as a low-cost indexed funds provider for many years. A good example of Vanguard's low-cost strategy would be Vanguard 500 Index Fund Admiral Shares (NASDAQMUTFUND: VFIAX ) , which tries to replicate the returns of the S&P 500 (SNPINDEX: ^GSPC ) . That fund charges just a 0.05% expense ratio and requires a minimum investment of $10,000.
Fidelity's Spartan 500 Index Fund (NASDAQMUTFUND: FUSEX ) , on the other hand, also uses the S&P 500 as a benchmark but charges 0.095% to the smallest investors. The new $2,500 minimum (formerly $10,000) may help to attract a higher volume of customers to the fund.