I am a huge fan of low fees when I am investing outside the Thrift Savings Plan, so zero fees would be even better if I could get comparable returns. The fees on some similar products are so low as to be almost meaningless (the Vanguard Total Market fund is only $0.40 per year per $1000 invested, so if you have $10,000 in that you are only paying $4 in fees). I wouldn’t switch existing investments to the Fidelity zero fees funds from something for which I was paying a few dollar a year, but I will definitely take a look at what those two indexes are invested in and would consider them for future funds if I was looking for a very broad domestic or international index fund.
Do you have any thoughts on how Fidelity is able to offer zero fees on this fund? I assume any fund has expenses–like re-balancing to follow an index, keeping the lights on, office space, etc. Would Fidelity be loosing money on these funds, in a sense, but making it up through other funds and services?
It is just a loss-leader for them. They will offer their two broadest, most basic funds for free to get new customers in the door, then sell them other funds and services once they are in the Fidelity ecosystem.