For instance, Fidelity’s fee cuts mean its funds now match or only slightly undercut the fees at Vanguard Group funds, according to a comparison by IndexUniverse, an investment research firm. Fidelity cut the expense ratio on the institutional share class of its Spartan Total Market Index Fund to 0.05% from 0.06%. That now matches Vanguard’s comparable Total Stock Market Index Fund, reports Grind.
Another result of frequent trades or buying and selling are the capital gains. Capital gains taxes are a huge factor and have come into focus, especially as we near the fiscal cliff deadline. Federal tax rates on a short-term investment, under one year, is 35%. Long-term rates are at 15% for ordinary income, but this number could be raised after the first of the new year.
Some of the new fee cuts were intended for 401(k) plans, not just for keeping up with the competition. The moves are aimed at “providing workplace retirement plan sponsors and individual investors access to a wide-array of high-quality index funds at some of the most competitive pricing in the industry,” said JS Wynant, an executive vice president at Fidelity.
Tisha Guerrero contributed to this article.