Fidelity Forays into Low-Cost Funds

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by: Doug Fabian

Fidelity Investments is a relatively recent entrant to the exchange-traded fund (ETF) provider market. Fidelity, founded in 1946, probably is best known as one of the largest providers of mutual funds and other actively managed funds, featuring actively managed sector funds.

Now, Fidelity has thrown itself into the low-cost end of the ETF pool with an expense ratio of 0.12% for its 10 brand-new passively managed sector ETFs. Additionally, this provider is enticing consumers with no-cost commissions for its own funds and 65 iShares ETFs, as well as $7.95 online commissions for U.S. equities.

Fidelity’s ETFs include coverage of the following areas: consumer discretionary, consumer staples, energy, financials, health care, industrials, information technology, materials, telecommunications and utilities.

One of these funds, Fidelity MSCI Health Care Index ETF (FHLC), has had a profitable start, with a 5.79% return from its October inception date to the end of 2013. For the first three months of 2014, FHLC has notched market-beating returns of 6.33%, as shown below.

Fidelity’s offerings aren’t exotic. They don’t represent a market sector that you, as a retail investor, would not otherwise be able to tap. But they do represent a low-cost method of diversifying your investments by broad-based sector, which is something you may find worthwhile.

If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful Investing newsletter. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an e-mail. You just may see your question answered in a future ETF Talk.

In case you missed them, I encourage you to read my articles from previous weeks about ETF providers Charles Schwab, Guggenheim, PowerShares, WisdomTree, First Trust, ProShares,  Vanguard, iShares and State Street. I also invite you to share your thoughts below.

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