Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

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jmanter
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by jmanter »

rgs92 wrote: Sun Aug 01, 2021 8:21 pm If an international exposure is desired, Fidelity's zero-expense total international index fund FZILX is a relative bargain compared to Vanguard's VTIAX which has an ER of .11%. (Also note that VXUS, the corresponding Vanguard ETF, has an ER of .08%).
Note that, although these funds have performed about the same since FZILX's inception, they are slightly different. FZILX excludes small caps (I still hold a significant amount in my tax advantaged accounts).
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by jeffyscott »

jmanter wrote: Mon Aug 02, 2021 8:00 am
indexfundfan wrote: Sun Aug 01, 2021 10:17 am With a 0.015% ER FSKAX, I see no reason to get into the very slightly cheaper non-portable FZROX in a taxable account. In an IRA, maybe.

But the better option for me would be to put the money into an ETF, easily transferrable between different brokerages. Fidelity also lets you invest in fractional shares so you can fully invest the last dollar if that is a concern.
The only issue is that ETF investments can't be automated. I use ETFs in my taxable because of the tax efficiency, but I do wish I could "set it and forget it" instead of investing manually twice a month.
The equal tax efficiency of Vanguard index mutual funds is about the only reason to keep a taxable account at Vanguard, for those of us who prefer mutual funds.
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by nedsaid »

All kidding aside, this has been a very informative thread. Lady Geek showed us how to use the comparison tool for Mutual Funds and ETFs at Fidelity. We also discussed the differences between the three Total Market Index funds. Bottom line, you can't go too far wrong with any of the three.
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by jmanter »

jeffyscott wrote: Mon Aug 02, 2021 8:31 am
jmanter wrote: Mon Aug 02, 2021 8:00 am
indexfundfan wrote: Sun Aug 01, 2021 10:17 am With a 0.015% ER FSKAX, I see no reason to get into the very slightly cheaper non-portable FZROX in a taxable account. In an IRA, maybe.

But the better option for me would be to put the money into an ETF, easily transferrable between different brokerages. Fidelity also lets you invest in fractional shares so you can fully invest the last dollar if that is a concern.
The only issue is that ETF investments can't be automated. I use ETFs in my taxable because of the tax efficiency, but I do wish I could "set it and forget it" instead of investing manually twice a month.
The equal tax efficiency of Vanguard index mutual funds is about the only reason to keep a taxable account at Vanguard, for those of us who prefer mutual funds.
Yes. I've thought about switching, but I love the Fidelity 2% credit card feeding my brokerage and the simplicity of having everything in one place (my employer plan is through Fido).
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by runninginvestor »

LadyGeek wrote: Sun Aug 01, 2021 9:49 am
Comments are welcome. If I missed anything or stated anything incorrectly, please let me know. (I'm making this post to show how I used Fidelity's tool to make a decision.)

Update: Added expense ratios per below.
I don't think it's been mentioned, but TDA's comparison tool is handuy also. It'll compare MFs and similar ETFs, or you can select up to 5 to cmpare. here's an example with VTSAX, FSKAX, FZROX, SWTSX, and ITOT (etf).

I like their fee analyzer bc it appears to take into consideration transaction fees (on their platform) and shows the % of fees paid of the total investment; which is why SWTSX is 0.1% vs 1.41% for VTSAX and 0.28% for ITOT.

But if you click "Print All Tabs" it provides a pretty easily readable comparison of everything. Edit: just another tool with similar features and slightly diff layout. Not implying one is better than another.
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by LadyGeek »

^^^ The link is missing.
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by sycamore »

LadyGeek wrote: Mon Aug 02, 2021 12:49 pm ^^^ The link is missing.
Try https://research.tdameritrade.com/grid/ ... ompare.asp.
In the section labeled "Compare Funds", enter a set of ticker symbols separated by commas.
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by LadyGeek »

^^^ Nice.

Both the Fidelity and TD Ameritrade tools should go in the wiki. I can get to it later, unless another wiki editor wants to take a stab at it.

I'm thinking to put them in Tools and calculators (Portfolio tools) but there might be a better location.
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by Northern Flicker »

jeffyscott wrote: Mon Aug 02, 2021 8:31 am
jmanter wrote: Mon Aug 02, 2021 8:00 am
indexfundfan wrote: Sun Aug 01, 2021 10:17 am With a 0.015% ER FSKAX, I see no reason to get into the very slightly cheaper non-portable FZROX in a taxable account. In an IRA, maybe.

But the better option for me would be to put the money into an ETF, easily transferrable between different brokerages. Fidelity also lets you invest in fractional shares so you can fully invest the last dollar if that is a concern.
The only issue is that ETF investments can't be automated. I use ETFs in my taxable because of the tax efficiency, but I do wish I could "set it and forget it" instead of investing manually twice a month.
The equal tax efficiency of Vanguard index mutual funds is about the only reason to keep a taxable account at Vanguard, for those of us who prefer mutual funds.
Also being able to "buy" ETFs by depositing to the mutual fund and doing a conversion has the benefit of saving the cost of a bid-ask spread and the cost of any premium to NAV the market is pricing into an ETF.
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by Northern Flicker »

Generally, index funds are evaluated and compared by how well they track their index, not by relative performance. Performance would be evaluated for the index itself. Tax management and tax drag is both a fund implementation and index issue (a poorly constructed index can cause churn and taxable events). A secondary tracking issue is securities lending risk. Index funds use securities lending to cover costs so that they do not contribute to tracking error. A fund that achieves reliable tracking but takes more securities lending risk than another fund would be less desirable.

So, if I were designing an experiment to conoare index funds empirically, I would consider the salient performance measures to be:

1. Index total return
2. Fund tracking error
3. Tax drag
4. Round-trip transaction cost to purchase/sell shares
5. Securities lending risk
Last edited by Northern Flicker on Mon Aug 02, 2021 7:45 pm, edited 2 times in total.
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by runninginvestor »

LadyGeek wrote: Mon Aug 02, 2021 12:49 pm ^^^ The link is missing.
Indeed, apparetly I'm the person that sends emails w/out attachments. :oops:
Compare with TDA

I forgot to note that they'll also do an 'auto compare' (radio button above the ticker input. It only lists a couple (drawback) but is nice if someone wanted to see comparative ETFs for their mutual funds.
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by LadyGeek »

nedsaid wrote: Sun Aug 01, 2021 11:01 pm The big adventure. Lady Geek learns to trade at Fidelity Brokerage. How will this story turn out? Sort of like watching the weekly matinee at the theatre where our heroine is tied up on the railroad tracks and the train rounds the bend. . .the credits come up and the movie ends. Got to come back next week folks to see the next segment of The Perils of Lady Geek Placing a Trade at Fidelity Brokerage. The suspense is just killing me.

For those of you younger than me, this is sort of like Oak Island. The metal detector gets a signal. Could it be? OMG! It might be! The lost treasure of the Knight's Templar!! OMG!! After the break, they find it was a roofing nail. . . .from the 1300s.

Could it be? OMG? It might be! Can Lady Geek execute her first brokerage trade? Find out after the break.

Yes, folks. This is what passes for excitement on the Bogleheads! After the trade is successfully executed, expect a barnstorming book tour. I want to be the first with an autographed copy. Who knew investing could be so exciting! :wink:
It's happening! :) My account balance "Cash Available to Trade" appeared with a new entry:

Cash credit/debit --> Committed to open orders (view orders) --> Trade filled at $xx.xx, 08/02/2021 04:00:24 PM

The cash is winging it's way into my account. With cold hard virtual cash, should I:

- Stick to my plan and buy VTI
- Place a deposit for a ticket on Virgin Galactic. I have no idea if they will accept a small deposit, but it's worth a try.

The 2nd choice is very, very tempting. Stay tuned.
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by LadyGeek »

Three minutes after my post, my account balance changed and the money showed up as "Cash available to trade". Ticket sales weren't an option, so Virgin Galactic will have to wait.
lazynovice wrote: Sun Aug 01, 2021 6:30 pm When it is time to buy your ETF shares, if you use the app, you will be able to place the order in dollars on the main ticket. On the website, to use fractional shares, go to the “simplified” ticket. That allows you to enter the order in dollars. It is relatively new functionality on the website but has been in the app for a while.

When buying VTI, you will see the bid/ask spread is usually a penny. I place a market order. You whole shares will price at one price and you fractional shares will price at another. It was about half a cent difference but a few weeks ago, a few users here compared notes and the Vanguard ETFs were pricing the same amount for both whole and fractional shares.
Thanks! I followed your instructions. Trade --> Go to expanded fractional shares ticket.

The default is the simplified ticket. Otherwise, click on View Expanded Ticket to see more info. The bid / ask spread looked like this:

Bid ARCX
226.60 x 1

Ask ARCX
226.90 x 5

That's more than a penny difference. What do ARCX and the "x 1", "x 5" multipliers mean?

I selected Buy in Dollars (all available) and Market order. When I hit Preview Order, I get this error message:
(340036) Market and Limit buy and sell orders of stocks and ETFs in dollars are only allowed during normal market hours (9:30am ET thru 4:00pm ET).
I'm forced to select an Order, so I can't get past this. Fidelity has extended trading hours, but you need to sign up for that and it's past closing time anyway.

Does this mean I have to wait until the market opens at 9:30 AM? I can certainly do that.

At Vanguard, I'm used to submitting a trade and it executes at the end of the next day. The adventure continues.
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by Ferdinand2014 »

LadyGeek wrote: Mon Aug 02, 2021 7:58 pm Three minutes after my post, my account balance changed and the money showed up as "Cash available to trade". Ticket sales weren't an option, so Virgin Galactic will have to wait.
lazynovice wrote: Sun Aug 01, 2021 6:30 pm When it is time to buy your ETF shares, if you use the app, you will be able to place the order in dollars on the main ticket. On the website, to use fractional shares, go to the “simplified” ticket. That allows you to enter the order in dollars. It is relatively new functionality on the website but has been in the app for a while.

When buying VTI, you will see the bid/ask spread is usually a penny. I place a market order. You whole shares will price at one price and you fractional shares will price at another. It was about half a cent difference but a few weeks ago, a few users here compared notes and the Vanguard ETFs were pricing the same amount for both whole and fractional shares.
Thanks! I followed your instructions. Trade --> Go to expanded fractional shares ticket.

The default is the simplified ticket. Otherwise, click on View Expanded Ticket to see more info. The bid / ask spread looked like this:

Bid ARCX
226.60 x 1

Ask ARCX
226.90 x 5

That's more than a penny difference. What do ARCX and the "x 1", "x 5" multipliers mean?

I selected Buy in Dollars (all available) and Market order. When I hit Preview Order, I get this error message:
(340036) Market and Limit buy and sell orders of stocks and ETFs in dollars are only allowed during normal market hours (9:30am ET thru 4:00pm ET).
I'm forced to select an Order, so I can't get past this. Fidelity has extended trading hours, but you need to sign up for that and it's past closing time anyway.

Does this mean I have to wait until the market opens at 9:30 AM? I can certainly do that.

At Vanguard, I'm used to submitting a trade and it executes at the end of the next day. The adventure continues.
Fractional shares/exact dollar amounts only occur during market hours. You can put in an order after hours for exact share amounts and it will execute at market open. The bid ask spread is high because its after hours. The spread will be a penny or so during market hours.
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by indexfundfan »

LadyGeek wrote: Mon Aug 02, 2021 7:58 pm The default is the simplified ticket. Otherwise, click on View Expanded Ticket to see more info. The bid / ask spread looked like this:

Bid ARCX
226.60 x 1

Ask ARCX
226.90 x 5

That's more than a penny difference. What do ARCX and the "x 1", "x 5" multipliers mean?

I selected Buy in Dollars (all available) and Market order. When I hit Preview Order, I get this error message:
(340036) Market and Limit buy and sell orders of stocks and ETFs in dollars are only allowed during normal market hours (9:30am ET thru 4:00pm ET).
I'm forced to select an Order, so I can't get past this. Fidelity has extended trading hours, but you need to sign up for that and it's past closing time anyway.

Does this mean I have to wait until the market opens at 9:30 AM? I can certainly do that.

At Vanguard, I'm used to submitting a trade and it executes at the end of the next day. The adventure continues.
Large spreads are common when the market is closed. For VTI, you should see a bid-ask spread of one penny during trading hours.

226.60 x 1 means someone is offering to pay $226.60 for one lot of VTI (one lot = 100 shares) on the ARCX exchange.
226.90 x 5 means someone is offering to sell 5 lots (500 shares) of VTI for $226.90.

Wait for the market to open tomorrow before submitting your order.

You can submit a market order in which you will pay the current asking price or with a limit order, you can indicate the maximum price you will pay for each share of VTI. If you want to be sure the trade will execute, use a market trade or set the limit price to be a penny or two higher than the asking price. Have fun!
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by lazynovice »

LadyGeek wrote: Mon Aug 02, 2021 7:58 pm Three minutes after the post, my account balance changed and the money showed up as "Cash available to trade". Ticket sales weren't an option, so Virgin Galactic will have to wait.
lazynovice wrote: Sun Aug 01, 2021 6:30 pm When it is time to buy your ETF shares, if you use the app, you will be able to place the order in dollars on the main ticket. On the website, to use fractional shares, go to the “simplified” ticket. That allows you to enter the order in dollars. It is relatively new functionality on the website but has been in the app for a while.

When buying VTI, you will see the bid/ask spread is usually a penny. I place a market order. You whole shares will price at one price and you fractional shares will price at another. It was about half a cent difference but a few weeks ago, a few users here compared notes and the Vanguard ETFs were pricing the same amount for both whole and fractional shares.
Thanks! I followed your instructions. Trade --> Go to expanded fractional shares ticket.

The default is the simplified ticket. Otherwise, click on View Expanded Ticket to see more info. The bid / ask spread looked like this:

Bid ARCX
226.60 x 1

Ask ARCX
226.90 x 5

That's more than a penny difference. What do ARCX and the "x 1", "x 5" multipliers mean?

I selected Buy in Dollars (all available) and Market order. When I hit Preview Order, I get this error message:
(340036) Market and Limit buy and sell orders of stocks and ETFs in dollars are only allowed during normal market hours (9:30am ET thru 4:00pm ET).
I'm forced to select an Order, so I can't get past this. Fidelity has extended trading hours, but you need to sign up for that and it's past closing time anyway.

Does this mean I have to wait until the market opens at 9:30 AM? I can certainly do that.

At Vanguard, I'm used to submitting a trade and it executes at the end of the next day. The adventure continues.
All correct. Unless you sign up for after hours trading, you have to buy ETFs while the market is open. After hours trading is much lighter and bid/ask spreads are higher. I’d never do it.

Many posters suggest not buying right at the open or right at the close. Since I trust folks here, I never have. I just give it until 9:45 or 9:50 EST and place the order. I will be shocked if the spread is more than a penny on VTI at that time. But I have been buying ITOT since March so could VTI bid/ask moved up? Maybe but .05 seems high. Since it is a big lump sum, you could do a limit order but I have not had a need to do that.
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by LadyGeek »

Ferdinand2014, indexfundfan, and lazynovice - Thank you. Your explanations are clear and provide good insight into what's going on. I have full confidence to proceed with the buy.
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by lazynovice »

LadyGeek wrote: Mon Aug 02, 2021 8:31 pm Ferdinand2014, indexfundfan, and lazynovice - Thank you. Your explanations are clear and provide good insight into what's going on. I have full confidence to proceed with the buy.
When you enter the trade, you may see two warnings. 1) it will say you are trading on unsettled funds and that if you sell the new purchase before the funds from the previous sake settles, you will be subject to a good faith violation. Since you are not planning to do that, it is fine. 2) it will say that you are subject to the terms in the fractional share agreement. It makes great bedtime reading. It addresses pricing (see my post above) and other administrative things like voting rights etc.

Just didn’t want you to be surprised by it.
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by LadyGeek »

Thanks! I got a trade confirmation email early this morning.

Fidelity's Trade Confirmations page allows you to enter notes for each confirmation. I entered a happy emoji, but it didn't save. :)

The cash as credit/debit moved to (core) position and was available to withdraw. That removed a possible first warning for unsettled funds. I now have a new position with SPAXX - Fidelity ® Government Money Market Fund.

I did indeed get that second warning:
(038110) Placing this order is your acknowledgement that you have received, read and agree to the amended Fidelity Account Customer Agreement which includes a new section on Fractional Share Trading. Click here for a link to the amended Fidelity Account Customer Agreement.
I saved the agreement and will read it later.

I checked the bid/ask when the market opened and a large bid/ask spread was still there. I waited a few minutes and the spread did indeed drop to $0.01.

Bid XNMS
226.30 x 1

Ask EPRL
226.31 x 2

Less than a minute later, I placed the order and saw an updated spread of $0.02:

Bid MEMX
226.21 x 4

Ask MEMX
226.23 x 2

Success!! The order was filled 09:45:26 AM ET at $226.23 (the Ask price). This is the first-time I've traded in a live market. I am now a day trader. :)

I see the whole and fractional share transactions. The result is that I now have $0.07 in SPAXX. So far, my cash is showing pending activity to complete the purchases (Cash Debit from Unsettled Activity). I assume it will show complete after everything is reconciled later tonight.

My new VTI position has a button called "Set Exit Plan", so I clicked on it. It's a trading assistant called Trade ArmorTM. It's interesting to see the trading tools available and how the data is presented to make this easy - if you know what you're doing. This doesn't change anything for me (hold long-term), but it's good to know what you can do as an individual investor.

I now have a closed position (selling of the muni bond fund) and have realized gains. It's easy to see the long and short term cap gains for the fund. I'll have to think about this more, as this is an inheritance acquired last week. The cost basis is reset, but I'm not sure how the cap gains apply.
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by indexfundfan »

Nice!

Just a note: mutual fund trades typically settle next day (T+1) while stock/ETF trades settle on day T+2.

So, the cash from the sale of the muni fund yesterday is fully settled today, and you are not trading on unsettled funds.

The ETF trade made today will settle on Thursday. So you will see a pending debit until Thursday night. In the meantime, your cash will go into SPAXX and earn a tiny bit of interest today and tomorrow.
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by LadyGeek »

That helps a lot, thanks! I'm only used to trading mutual funds at Vanguard. I would place the order and it would execute at the end of the next day.

Your explanation is helpful. I interpret your "T+2" explanation to mean Trade day today (Monday Tuesday) + market close after 2 more days. This is Wednesday after 4 PM Eastern - in time for the market open on Thursday.

So, I need to pay more attention to settlement dates. This also means I'm out of the market and sitting on cash for 3 days. In the long term, a few days out of market won't matter. However, it has an emotional impact.

Since I now have a "live" transaction in process, I'll dig into the website to get more familiar with everything. Looking at the closed position, for example, showed me a lot of information. I could also update the cost basis but... there was a strong caution about not mucking around with that due to IRS regulations.

================
I should also mention that Fidelity's website is well-designed. When I was looking at my Balances, one of my first questions was "What do these definitions mean?" Sure enough, there were helpful links right where I would expect them to be. Other definitions appeared as hyperlinks.

When I clicked on "Set Exit Plan", I was dropped into a tutorial introduction - including a video overview with helpful links and other videos how to use the tool.

Update: Corrected example, see below.
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by indexfundfan »

Yes, if the trade is placed on Monday during trading hours, it will settle on Wednesday. If you are paying for the trade separately, your money must reach Fidelity on Wednesday during business hours.

BTW, today is Tuesday, so your trade will settle on Thursday :-)
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by nedsaid »

Lady Geek, ETFs are not hard to trade just a couple things you should keep in mind. You want to check the bid/ask spread before you actually pull the trigger and make the trade. Usually the spreads are very small, most often a penny or a few pennies a share. Don't place the trade within the first 1/2 hour of trading and don't trade during the last 1/2 hour, the reason being is that sometimes trading volume is lower during those times and your bid/ask spreads can widen. On certain ETFs, you can see pretty insane bid/ask spreads after hours, in fact this puzzled me and I started a thread on it. Learned some things I didn't know, pretty much you don't want to trade them when the markets are closed. You can also place a limit order and the order won't execute above a certain price. Normally market orders are just fine, check the spread first.

ETFs trade at very mild premium/discounts but the market participants that trade and constantly create or redeem ETF shares keep the market price very close to the market prices of the underlying securities.

Vanguard and Fidelity both have good articles about ETFs, how they work, and how to trade them. Some good threads here that explain all of that.

I have owned ETFs since about 2004 or so and I am pretty enthusiastic about them.

You have done something I never have, and that is buying fractional shares of ETFs. I do have the dividends and capital gains reinvested and thus the reinvestment creates the fractional shares.
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by LadyGeek »

^^^ Thanks. All good info. There's also the wiki: Exchange-traded fund, but it doesn't deep-dive into trades.

All of this is a learning experience. As I've said before, there's nothing like doing this with your own money - and during a live market. "The teacher appears when the student is ready."
indexfundfan wrote: Tue Aug 03, 2021 10:37 am Yes, if the trade is placed on Monday during trading hours, it will settle on Wednesday. If you are paying for the trade separately, your money must reach Fidelity on Wednesday during business hours.

BTW, today is Tuesday, so your trade will settle on Thursday :-)
I fixed my post. It finally happened. I'm retired and simply lost track of what day this is. :)
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lazynovice
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by lazynovice »

LadyGeek wrote: Tue Aug 03, 2021 10:30 am
So, I need to pay more attention to settlement dates. This also means I'm out of the market and sitting on cash for 3 days. In the long term, a few days out of market won't matter. However, it has an emotional impact.
I am not sure what you mean by out of the market. You own the shares of VTI as of today at the price you agreed to pay. They should be showing up in your holdings listing in your account. You just don’t have to pay for them until they are delivered to you in 2 days. But you own them.
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by sycamore »

lazynovice wrote: Tue Aug 03, 2021 2:58 pm
LadyGeek wrote: Tue Aug 03, 2021 10:30 am
So, I need to pay more attention to settlement dates. This also means I'm out of the market and sitting on cash for 3 days. In the long term, a few days out of market won't matter. However, it has an emotional impact.
I am not sure what you mean by out of the market. You own the shares of VTI as of today at the price you agreed to pay. They should be showing up in your holdings listing in your account. You just don’t have to pay for them until they are delivered to you in 2 days. But you own them.
Good point. And the trade date is when the clock starts for determining your holding period for short versus long-term gains.
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by LadyGeek »

^^^ I feel like such a newbie here, but that's OK. That was my next question.

Why do I show the fund tracking live in my account when I haven't paid for it yet? Now, I know the answer. :)

My concern now is that the cost basis of the muni fund I just sold appears to be half of the proceeds received from the inheritance distribution. I understand it was a 50/50 split and someone else got the rest. I understand the step-up in basis is from the date of death, but the gain is nowhere near that amount.

I'll do some thinking on this and possibly ask Fidelity about it.
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by lazynovice »

LadyGeek wrote: Tue Aug 03, 2021 3:33 pm ^^^ I feel like such a newbie here, but that's OK. That was my next question.

Why do I show the fund tracking live in my account when I haven't paid for it yet? Now, I know the answer. :)

My concern now is that the cost basis of the muni fund I just sold appears to be half of the proceeds received from the inheritance distribution. I understand it was a 50/50 split and someone else got the rest. I understand the step-up in basis is from the date of death, but the gain is nowhere near that amount.

I'll do some thinking on this and possibly ask Fidelity about it.
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by LadyGeek »

LadyGeek wrote: Mon Aug 02, 2021 1:50 pm Both the Fidelity and TD Ameritrade tools should go in the wiki. I can get to it later, unless another wiki editor wants to take a stab at it.

I'm thinking to put them in Tools and calculators (Portfolio tools) but there might be a better location.
I got to it later. See: Tools and calculators (Portfolio tools)

I reorganized that section, then added Fidelity and TD Ameritrade. I also fixed up the Vanguard section.

Comments / questions / concerns are welcome.

===================
The saga of my first taxable trade has come to a successful conclusion. My $0.07 cash is now in the cash (core) slot and available for withdrawal. :)
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by okwriter »

Speaking of tools, Fidelity GPS (found on the "Analysis" tab) is very handy. It's like Vanguard's portfolio watch, except the calculations are actually correct. And it allows you to add your non-Fidelity accounts as well.
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by fwellimort »

LadyGeek wrote: Thu Aug 05, 2021 3:12 pm The saga of my first taxable trade has come to a successful conclusion. My $0.07 cash is now in the cash (core) slot and available for withdrawal. :)
Congratulations! Generally, I do something like:
If I have $20,000, I order $20,000 on VTI and the remaining $0.07 in FSKAX immediately afterwards.

There's really no difference between ETF and mutual funds except:
1. With ETF, you buy during regular market hours (from 9:45 AM [to avoid morning bid/ask] to 4 PM)
1. With mutual funds, you buy once a day after-market hours

2. ETF money settles in T+2 days (as stocks currently are T+2. I believe markets are expected to be T+1 in the next few years)
2. Mutual fund money settles in T+1 days
^ You can avoid this by having a margin account but margin accounts can look scary (lots of numbers everywhere) and since this shouldn't be an issue for buy and hold, there's no point fretting about. It just means when you sell, you get the money a day later which will most likely be fixed in a few years anyway.

That's.. pretty much it. There's nothing different.
ETFs are just mutual funds that can be traded anytime during market hours. You also have control of setting limit prices and all with ETFs as they are basically like regular stocks.
Also, I just want to point out, 1 cent basis from $228.59 is just 0.004% difference. Mutual funds are doing the same thing once a day. With ETFs, you just happen to see it in 'live action' throughout the day. I know 1~2 cent bid difference seems 'huge' but it's really 0.004~0.008% which is in margin of error.
:sharebeer ETFs really are just... regular mutual funds. Nothing special. Fancy acronym and all but it really is just the same as traditional mutual fund except there's a larger time window for buy/sell. A bit disappointing since ETFs are all the rave but really, they are the same old mutual funds.

It's really nice for instant tax loss harvesting during market downturns (sell immediately and buy another ETF like ITOT/SCHB/SPTM). Just note PDT rule and without margin account, tax loss harvesting should be done once every 2 business days (T+2 day effect).
So if you buy VTI 2 days ago, you can sell and swap with ITOT immediately. But until 2 days after the ITOT purchase, you shouldn't swap ITOT to SCHB. You will get warnings otherwise (up to 3 times before Fidelity prevents this behavior for 3 months). If you don't want that inconvenience, you just need $25k assets on a margin account. Fortunately, since Bogleheaders aren't day traders, I don't think you need to worry about this at all.
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by LadyGeek »

^^^ Good info, thanks.
okwriter wrote: Thu Aug 05, 2021 9:26 pm Speaking of tools, Fidelity GPS (found on the "Analysis" tab) is very handy. It's like Vanguard's portfolio watch, except the calculations are actually correct. And it allows you to add your non-Fidelity accounts as well.
Thanks! I updated the wiki: Tools and calculators (Fidelity)
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by jeffyscott »

fwellimort wrote: Fri Aug 06, 2021 2:02 am There's really no difference between ETF and mutual funds except:
1. With ETF, you buy during regular market hours (from 9:45 AM [to avoid morning bid/ask] to 4 PM)
1. With mutual funds, you buy once a day after-market hours
Funny, I would tend to think of that difference more as:
1. With ETF, you should only put in your order during regular market hours (from 9:45 AM [to avoid morning bid/ask] to 4 PM). And depending on what you are buying, you should check spreads, discounts/premiums, and maybe use a limit order.
1. With mutual funds, you can put in your order anytime, 24 hours a day, 7 days a week and you will get the next closing price.

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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by AlphaLess »

livesoft wrote: Sun Aug 01, 2021 10:15 am I thought the conclusion would be that you would invest the same amount in each of FZROX, FSKAX, and a 3rd fund such as VTI. You would just spend any leftover dollar or penny. Also you would withdraw the money for taxes from each of the funds, for a true after-tax result. Then you would keep track in this thread of the results for the next 10 to 20 years a la a madsinger report.
Interesting :D
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by neverjustadream »

LadyGeek wrote: Sun Aug 01, 2021 3:23 pm Following a similar approach, I added VTI - Vanguard Total Stock Market ETF and iShares Core S&P Total U.S. Stock Market ETF | ITOT to the mix. I'm linking to the Vanguard and iShares websites because the Fidelity pages aren't so helpful when you want to look at ETF after-tax performance.

Here's the updated Fidelity comparison tool: Mutual Fund Results - Mutual Funds Research | Fidelity Investments

FYI - You can sort the tables by clicking on each column heading.

First, I verified the numbers in the Fidelity tool vs. (Vanguard and iShares). Compare the tool's Overview tab performance with total return. Be sure to match down to 2 decimal places. It's important.

Why? Because Vanguard was off by 0.01%. For some strange reason, Vanguard has a drop-down menu in the "After-tax returns - updated quarterly" table. The default is by Market Price. I selected by Net Asset Value (NAV) and the numbers matched. :annoyed

Net Expense Ratios
- ...............Fund..............................
- Fidelity Total Market (FSKAX) ..... 0.015%
- Fidelity ZERO (FZROX) ............... 0.00%
- iShares Core S&P Total (ITOT).... 0.03%
- Vanguard Total Market (VTSAX).. 0.04%
- Vanguard Total Market (VTI)......... 0.03%

After Taxes on Distributions
- ...............Fund.............................. 1 Year ...... 3 Years .. 5 Years
- Fidelity Total Market (FSKAX) ..... 43.77% ... 18.14% ... 17.28%
- Fidelity ZERO (FZROX) ............... 43.57% ... N/A ......... N/A (17.41% over life)
- iShares Core S&P Total (ITOT).... 43.73% ... 18.13% ... 17.32%
- Vanguard Total Market (VTSAX).. 43.83% ... 18.24% ... 17.23%
- Vanguard Total Market (VTI)........ 43.82% ... 18.24% ... 17.37%

After taxes on distributions and sale of fund shares
- ...............Fund.............................. 1 Year ...... 3 Years .. 5 Years
- Fidelity Total Market (FSKAX) ..... 26.42% ... 14.61% ... 14.33%
- Fidelity ZERO (FZROX) ............... 26.28% ... N/A ......... N/A (13.90% over life)
- iShares Core S&P Total (ITOT).... 26.42% ... 14.60% ... 14.33%
- Vanguard Total Market (VTSAX).. 26.50% ... 14.68% ... 14.24%
- Vanguard Total Market (VTI)........ 26.50% ... 14.68% ... 14.38%

The results are in. There are no bad choices, but the edge goes to VTI.
I'm a bit confused on `After Taxes on Distributions` vs `After taxes on distributions and sale of fund shares`. eg with FZROX, the returns over life are 17.41% and 13.90%. FZROX goes from the highest return to the lowest. How would this be explained (I'm guessing sale of fund shares means when you sell your own shares and distributions is referring to dividends/capital gains distributions)?

Additionally, FSKAX after 5 years is 17.28% and 14.33%. ITOT after 5 years is 17.32% and 14.33%. The two funds start at different `After Taxes on Distributions` percentages but end up at the same percentage when including sale of fund shares?
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by jeffyscott »

^ Yes, distributions of capital gains and dividends.

Return over life cannot be compared between funds, since each has a different start date. In this case, it's over the less than 5 year life of the zero fund being compared to 5 years for the others.

It makes sense that returns are about the same after sale of shares. While they are held, the mutual fund would distribute some capital gains, while the ETF would not. But then those distributions would reduce the gains that are realized at the time of sale. The ETF is able to defer all gains until the shares are sold.
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by Taylor Larimore »

Bogleheads:

This topic is very comprehensive comparing FZROX and FI'll. May I add one thing:

Simplicity is very important. It is desirable to hold all of one's investments with a single company if possible.

Best wishes.
Taylor
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by neverjustadream »

jeffyscott wrote: Sun Apr 16, 2023 4:23 pm ^ Yes, distributions of capital gains and dividends.

Return over life cannot be compared between funds, since each has a different start date. In this case, it's over the less than 5 year life of the zero fund being compared to 5 years for the others.

It makes sense that returns are about the same after sale of shares. While they are held, the mutual fund would distribute some capital gains, while the ETF would not. But then those distributions would reduce the gains that are realized at the time of sale. The ETF is able to defer all gains until the shares are sold.
Makes sense. Thanks :D
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by biscuit5 »

thread is a few years old...though if making the decision now, would folks choose either of the two? or maybe just go to FXAIX instead.
I threw VTSAX in the comparison just because we're all familiar with it. Also, am aware some funds haven't been around as long affecting the life of fund returns etc

I have a niece looking to open a Roth next year probably at Fidelity, so, this came to mind.
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Image
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Though at this point would one just go VTI or VOO at Fidelity and call it a day as I think (?) one can now buy fractional shares.

(I have not reread this entire thread in high detail)
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Re: Fidelity Total Market in taxable - FZROX (ZERO) vs. FSKAX (Total Market) SmackDown

Post by nedsaid »

For a taxable account, I would lean towards buying a Total Stock Market ETF rather than a Total Stock Market Mutual Fund. In general, ETFs pay less in capital gains distributions than a mutual fund. ETFs have primarily been based on indexes but now more ETFs are actively managed and it will be interesting to see how this plays out.

In a Mutual Fund, you can be hit with unwanted capital gains distributions if you have a significant amount of shareholders who all the sudden want to cash out, particularly in a turbulent market. The fund managers have to sell securities in order to raise cash for redemptions, whatever realized capital gains that are created within the portfolio then have to be distributed to the remaining shareholders. It can be a frustrating experience when your fund is down for the year and yet you still owe taxes from a capital gains distribution. You get hit with a tax bill that you did nothing to cause.

With an ETF, you are not affected by the selling of other shareholders. The portfolio managers simply hand securities to the Authorized Participant who then liquidates the ETF shares. The sell transactions are performed by the Authorized Participant and are ultimately caused by the shareholders that decide to sell. The seller of the ETF bears the tax consequences and not the remaining ETF shareholders. You get better tax deferral in a taxable account with an ETF compared to a Mutual Fund.

I will say that a Total Stock Market Index Mutual Fund held in a taxable account should be very tax efficient except in the case where you get a stampede out of the fund in a market panic. Vanguard can wash tax consequences generated within their mutual funds through their unique structure of their ETFs being another share class of their mutual funds. Their patent expired, so other fund companies will do this and should diminish the tax efficiency advantage of ETFs over Mutual Funds.

ETFs have their disadvantage is that you pay a small bid/ask spread upon purchase and there might be a small difference between Net Asset Value and the share price of the ETF. If your ETF investment is held long term, these costs will be extremely minor. With a mutual fund, you purchase at Net Asset Value and there are no bid/ask spreads. So ETFs have transaction costs. In theory at least, you get Net Asset Value when you buy or sell a Mutual Fund there is no discount or premium. In practice, mutual fund accountants may use their best price estimates of illiquid or semi-liquid securities to arrive at Net Asset Value. If you sell an ETF, you may get premium or a discount to the value of the underlying assets whenever you buy or sell.

The transaction costs of ETFs are offset by the fact that ETFs are cheaper to operate than a Mutual Fund. A big reason is that recordkeeping is outsourced to the brokerage firm that holds the ETFs for a client and the Mutual Fund accountants don't have to keep track of who owns what.

As with any other security, you don't want to sell an ETF during a time of extreme market turbulence as both bid/ask spreads and premiums/discounts to NAV can widen. There can be a liquidity mismatch within an ETF structure, particularly with bonds when the ETF is liquid and some underlying securities are much less so. Liquidity tends to dry up in really turbulent markets thus you can see bizarre things happen with bid/ask spreads and premium/discounts to NAV. We saw this during the spring of 2020 during the Covid panic.
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