Broker Update: Fidelity’s Transaction Fee Varies Per Fund

February 12, 2015

FidelityFidelity has lowered the transaction fee it charges for some mutual funds on its brokerage platform from $75 to $49.95. But investors will have to do a little research to determine which funds are charged $49.95 and which funds continue to be charged $75.

Most funds at Fidelity are available as ‘no transaction fee’ or NTF funds. But transaction fee funds at Fidelity now cost investors either $49.95 or $75, depending on the fund family.

Previously Fidelity charged a flat $75 transaction fee for all ‘fee’ funds, and a flat fee remains the norm at most brokers. (Click here to see our table of broker transaction fees.) Schwab, for example, charges $76, and Scottrade charges $17.

Which funds cost $49.95 and which cost $75?

Fidelity investors now have to check online to find out how much it will cost to buy a given fund. In its Fee Schedule (PDF), Fidelity instructs investors to look at a fund’s ‘Fees and Distributions’ tab.

So we did just that: we looked up funds from the major fund families in NoLoad FundX. We found that most funds, including those from large fund families like Janus, Oakmark, PIMCO and Wells Fargo, were available for no transaction fee at all. Many other funds, like those from FPA, Mairs & Powers, Schwab and T. Rowe Price, had transaction fees of just $49.95. But funds from Dodge & Cox and Vanguard cost $75.

Should you pay a transaction fee?

As we wrote here, we suggest paying no more than 1% of your investment in trading fees, and preferably much less. If you invest $5,000 in a fund with a $49.95 transaction fee, you will pay 1% before the fund makes a dime for you.

Consider using transaction fee funds only when taking larger positions. If you’re considering a fund that costs $75 just to place the trade, a purchase of $30,000 would cost you a quarter of one percent (0.25%). That’s certainly more palatable that a 1% hit.  If you’re taking small positions, you should definitely consider using NTF (no transaction fee) funds or exchange traded funds.

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