Fidelity – Up To Their Usual Tricks Again!

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vanguard mutual funds individual stocks vs mutual funds index funds fidelity



As the title of this post suggests, Fidelity has once again failed to impress me and further failed to pull my business away from Vanguard.

Background

As most of you all know, I am a loyal and proud Vanguard index fund investing fan. You can view my current holdings in my investment strategy and periodic portfolio updates.

Back in August of 2010, I completed an in-depth, head-to-head analysis comparing Vanguard against Fidelity. From the analysis, we found that not only was Vanguard’s website easier to use/navigate, but their index fund expense ratios were lower than Fidelity’s corresponding funds 70% of the time.



New Occurrence 


Yesterday, I received a “promotional” offer from Fidelity in the mail, although I would hardly call it promotional.


The offer would give me a $100 Apple Gift Card if I opened up a new Fidelity account, with the following SMALL restrictions…

  • Minimum balance must be $50,000.
  • The account must be a non-mutual fund (see update below, 20-Dec-2011) brokerage account.
  • The account CANNOT be a retirement account.
  • Account must be open for at least 9 months.

All I can say about this offer is WOW!

  • First of all, Fidelity is encouraging me to participate in active stock picking, a form of investing that fails to beat the market when 70% of professionals partake in the activity.
    • Update on 20-Dec-2011 –   I wrote this post a while ago, so I either didn’t notice it then or they have since changed their policy about what they include in brokerage accounts. However, right now on Fidelity’s website, it says that you can purchase no-fee Fidelity mutual funds and ETFs with a brokerage account. This is definitely positive news!
  • Secondly, why did they make the minimum balance so high? If I am not a current Fidelity user, do they really think that offering me $100 will make me transfer $50,000 of my savings over to them? NO! 
  • Third, why can it not be a retirement account? Don’t they want to encourage people to save for retirement and get tax-deferred compounding of interest?
  • And finally, Fidelity has spent $0.44 for the postage, along with however much the graphics/mailer costs to print, on a promotion that did not work. This just proliferates their need to charge higher expense ratios/fees than Vanguard.



How about you all? Do you use Vanguard or Fidelity? Which do you prefer?

Share your experiences by commenting below!


***Photo courtesy of http://northeastsigns.com/id1.html

Comments

  1. You can buy whatever you like in a brokerage account. There are mutual fund ONLY accounts, and brokerage accounts that allow you to purchase anything including index funds. I don't believe they are promoting active stock trading.

    • Thanks for reading Scotty! Looks like you're 100% correct. I wrote this post a while ago, so I either didn't notice it then or they have since changed their policy about what they include in brokerage accounts. However, right now on Fidelity's website, it says that you can purchase no-fee Fidelity mutual funds and ETFs with a brokerage account.
      My recent post Easy Like Sunday Morning Weekly Recap and Roundup – # 5 – December 17th, 2011

  2. still do not understand why a retirement account does not qualify?

  3. You cant make money(gift card in this card) on a tax deferred account that is not part of the account. Suppose you had a million dollars in a IRA(just using large round numbers to prove my point). If they said transfer that money here for 5 years and we will pay no interest but give you a Mercedes you could avoid taxes on the 50000 dollars and still have your IRA

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