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Thursday, March 11, 2010

Exchange-traded funds get even cheaper

Posted by admin on February 5, 2010

Want to avoid trading costs on exchange traded funds (ETFs)? It's now becoming easier to do so.

This week, Fidelity teamed up with iShares to eliminate trading fees on more than two dozen popular ETFs. The move comes three months after Schwab introduced eight of its own free-trade ETFs.

Traditionally, if you wanted to invest in an ETF, you had to pay a sales charge each time you bought or sold shares. When Schwab rolled out free-trade ETFs in November it put pressure on other big brokerages to do the same.

And Fidelity has responded–in a big way.

Fidelity investors now can choose from among 25 popular iShares ETFs (compared with Schwab's eight). Examples include the iShares S&P 500 Index (IVV), iShares Barclays Aggregate Bond (AGG) and iShares MSCI Emerging Markets Index (EEM).

And collectively, the iShares ETFs offer sweeping coverage of the market, including emerging-market stocks and bonds, blue-chip U.S. stocks, Treasury Inflation Protected Securities (TIPS), and muni bonds.

To buy the iShares ETFs at no cost, you have to have an account with Fidelity and the trades must be done online. Go here to read the fine print.

But the bottom line is this: Until now, the sales charge on ETFs, which tend to carry lower annual fees than mutual funds, has dinged investors who make small but regular contributions to their portfolio.

Now, however, Fidelity and Schwab (and others soon, perhaps) are offering the best of both worlds: super-low annual fees "without paying the price of admission," as one Morningstar article put it.

To me, that sounds like a good reason to get in line for a ticket.

More Money Thursday roundup: IRS hangups & the best ways to cut your travel costs in 2010

Posted by admin on January 7, 2010

Personal finance from around the web:

  • Financial new year's resolutions are the rage for 2010, according to a Fidelity survey. But one blogger argues that it's the "bad guys" — banks, credit card companies and big employers — who need to shape up this year. Here are seven new year's resolutions for them. [Fidelity, The Consumer Reporter]

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401(k) matches are back in fashion

Posted by admin on November 19, 2009

The 401(k) is enjoying a wee bit of a corporate comeback.

Fidelity Investments, which says it's the leading provider of workplace retirement savings plans in the US, disclosed Thursday morning that some of the companies which reduced their financial contributions to 401(k) plans during the financial meltdown have started ponying up money again, or at least plan to.

More specifically, Fidelity says that of the eight percent of companies that reduced or suspended their matches of employee contributions earlier this year, 27% have either reinstated their match already or plan to in 2010. The reinstatement trend is especially strong at plans with 5,000 participants or more: Fidelity says that 44% of those employers are bringing back the company match.

A company match has a ripple effect beyond the dollars it adds to employees' 401(k) balances; its presence or absence also influences whether employees decide to participate in a plan and how much of their own income they defer if they do. At companies where the match was suspended, says Fidelity, 11% of employees decreased their deferral rates — nearly double the rate of employees who pulled back from contributions to plans which didn't change their match. (Fidelity's numbers come from a survey of all participants for which the company keeps records, representing more than 11 million workers at more than 17,000 plans.)

Suggesting some more dim lighting at the end of the meltdown tunnel — for those workers, that is, who still have jobs that still come with retirement plans — Fidelity also said that in the third quarter of 2009, the average account balance rose nearly 13%, to $60,700, from the balance at the end of the prior quarter. Participants' "personal rates of return," which Fidelity calculates from a formula that excludes various account activities, amounted to a median of 0.4% — the first positive number in seven quarters.

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