BOSTON (AP) — Fidelity Investments is trimming fees at its largest index mutual funds and making some of its lowest-cost options accessible to a larger number of fund shareholders, including those with as little as $2,500 to invest.
The moves announced Tuesday follow recent investment fee cuts involving mutual funds or exchange-traded funds at rivals such as Vanguard, BlackRock and Charles Schwab.
Fidelity's moves affect mutual funds holding about $100 billion in assets, out of about $1.6 billion that the Boston-based company manages overall.
These involve index funds, low-cost options that seek to match performance of a basket of stocks or bonds. Fees are unchanged at Fidelity's hundreds of actively managed funds, which seek to beat the market. Investment management fees are typically lower at index funds because investors aren't paying managers to pick investments.
Fidelity is lowering the amount of money a fund shareholder must invest to quality for lower-cost shares at 22 funds, including 14 in its Spartan family of stock and bond index funds.
Starting Jan. 1, the investment minimum for qualifying to invest in Investor Class shares will be reduced to $2,500 from the previous $10,000. Individual investors in a lower-cost share class called Fidelity Advantage will need to meet a $10,000 threshhold, down from the previous minimum of $100,000.
Qualifying for a lower-cost share class can mean small reductions in the expenses charged, and long-term investors can earn significant savings.
For example, starting next month, investors will pay an expense ratio of 0.05 percent — or a fee of $5 a year for every $10,000 invested — in the Advantage shares of Fidelity's largest index fund, the $49 billion Spartan 500 Index Fund. That's down from the previous 0.06 percent, a level that already made Spartan 500 Index one of the industry's lowest-cost stock funds.
Those who can't meet the $10,000 minimum for that fund's Advantage shares pay 0.095 percent for Investor class shares, a fee level that Fidelity isn't changing. That's nearly twice as high as the new fee level for Advantage shares.
Overall, Fidelity is cutting expense ratios — the amount needed to cover a fund's operations costs — at eight Spartan index funds, in varying amounts. While the reduction is modest for the Spartan 500 Index Advantage shares, the cuts are larger at some other funds. For example, expenses for Investor shares of the Spartan Small Cap Index Fund will fall to 0.30 percent from 0.38 percent, while that fund's Advantage shares will charge 0.16 percent, down from 0.24 percent.
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