FNBGX vs. individual bonds at Fidelity

[foglifter]

Thank you all, this was a great discussion. Very helpful!

[vnatale]

I like buying LLTs directly, but I also own the ETF “TLT” (ER = 0.15%) in a smaller tax deferred account.

FNBX (ER = 0.03%) looks dirt cheap in comparison to TLT, now that Fidelity slashed the ER in line with their current advertising program. That said, there is nothing that I know of that prevents Fidelity from raising those ER’s in the future.
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While I opened a Fidelity account last year, I've yet to fund it. My experience has solely been with Vanguard for over 3 decades.

And, my experience with Vanguard is that their expense ratios, almost without exception, are always going down. They seem to base their advertising / marketing campaign at providing the best products as opposed to the traditional advertising / marketing of drawing you in with some initial low prices or high rates and then changing them for the worse once they have you as a customer.

In the specific fund you mention above, FNBX, have they increased that expense ratio from the date of your writing? And, what is Fidelity's expense ratio policy in general? That is, is it anywhere similar to Vanguard or do they have temporary decreases which then later increase?

Vinny

[mathjak107]

I like buying LLTs directly, but I also own the ETF “TLT” (ER = 0.15%) in a smaller tax deferred account.

FNBX (ER = 0.03%) looks dirt cheap in comparison to TLT, now that Fidelity slashed the ER in line with their current advertising program. That said, there is nothing that I know of that prevents Fidelity from raising those ER’s in the future.
.

While I opened a Fidelity account last year, I've yet to fund it. My experience has solely been with Vanguard for over 3 decades.

And, my experience with Vanguard is that their expense ratios, almost without exception, are always going down. They seem to base their advertising / marketing campaign at providing the best products as opposed to the traditional advertising / marketing of drawing you in with some initial low prices or high rates and then changing them for the worse once they have you as a customer.

In the specific fund you mention above, FNBX, have they increased that expense ratio from the date of your writing? And, what is Fidelity's expense ratio policy in general? That is, is it anywhere similar to Vanguard or do they have temporary decreases which then later increase?

Vinny

vanguards marketing seems to promote or push on you what ever they are promoting at that time ..

they got in to trusts so they cancelled all our beneficiaries on joint accounts out of the blue , never told anyone they did this and when confronted told all of us we would be better served by a trust , which they can do for us ...bull shit .....

then the grand pappy of do it yourself investing told us we can all beat the pro's , just buy their index funds , done! .

well not quite the case , they got in to money mgmt so now a new study by them showed how investors can't do as well on their own because of human behavior factors ....

now they are promoting their managed funds .. but wait , i thought you said indexing beats managed funds so don't bother ....

see a trend here ?

i won't even go into my customer service experience with them .. i won't do business with them.

every time i bring this up it seems there is always someone who does not believe me about their beneficiaries being deleted so they look and can't believe this was done and they had no idea ... so i try to get the word out whenever i can .

[sophie]

FWIW my experiences with Fidelity customer service have been mostly positive, and far better than my experiences with other financial institutions (except Chase...they've been really good).

I took a good hard look at FNBGX when I rebalanced in January, and ended up buying it. I admit I got lazy...it's so much easier to buy and sell a mutual fund than individual treasuries. Plus, you can invest small amounts. I bought a single ($1000) zero coupon bond in a retirement account a few years just as an experiment, and it turns out I can't sell it!!!! Fidelity has decided that the minimum buy or sell order is now 5 (i.e. $5000), so in order to get rid of it I'd have to buy another 5 of them then turn around and sell all 6. That limitation did not exist when I bought the bond. So to be on the safe side I'd probably only buy treasury bonds when I have enough to get at least 10 in one batch ($10,000), and I'm definitely leery of buying them at all in taxable. Just in case the rules change again.

[mdwilson1991]

I ended up using this as my LTT purchase. It has a very slight percentage in some shorter duration bonds compared to TLT, but it is a small difference. As others noted it has a silly cheap expense ratio. I find mutual funds to be so much easier to deal with so I went with this over TLT.

[ppnewbie]

I put 75% in FNGBX and 25% in 30 year Bonds. Honestly it’s still a little confusing to me the way it’s priced and auctions, etc and I have not sold any to rebalance. But I think the best way to go is buying the direct treasury - once you figure it out. I am about to convert my entire cash portion to t-bills.

[vnatale]

I own some FNBGX. At .03 it's almost free, and way easier that dealing with individual bonds.

For each $100,000 in bonds that's $300 per year. Each and every year. How much time would one have to spend annual on individual bonds and how you value your time. Remember that story you told about paying premium fees for a car problem and then while waiting for the car problem to resolve you went back to attempting to save even less than those premium fees on some travel arrangements?

At this point I'm leaning toward owning individual bills / bonds for both the cash and long-term bond portions. The savings per hour expended will be a lot more than the highest hourly fee I charge anyone.

Vinny

[vnatale]

I own some FNBGX. At .03 it's almost free, and way easier that dealing with individual bonds.

For each $100,000 in bonds that's $300 per year. Each and every year. How much time would one have to spend annual on individual bonds and how you value your time. Remember that story you told about paying premium fees for a car problem and then while waiting for the car problem to resolve you went back to attempting to save even less than those premium fees on some travel arrangements?

At this point I'm leaning toward owning individual bills / bonds for both the cash and long-term bond portions. The savings per hour expended will be a lot more than the highest hourly fee I charge anyone.

Vinny

As I rethink....was I off one decimal place so that it is only $30 per $100,000 invested -- not the $300 I cited above?

Vinny

[pmward]

From a time standpoint, there is one thing to account for in individual bonds. The coupon. It doesn't auto reinvest like a mutual fund does. I am a fan of holding individual bonds, but I still have a position in FNBGX for fresh dollar cost averaging contributions. Every so often (probably every 2 years or so) FNBGX builds enough in it that is worth rolling into actual bonds. So there is a little extra work involved. But not much. I can hardly blame someone from just going all in on FNBGX. It is a steal at that small ER.

[vnatale]

foglifter:

1. Fidelity's secondary Treasury market is so liquid you can watch the yield changes by 0.01% increments in real time on their pop-out chart for bond yields.Try it some time. It is free.

2. There is a bid/ask spread for buying/selling Treasurys. That's how Fidelity makes money on its automated trades. It varies with each security and is displayed on the selection chart. I think my last one year T bill had a 0.03% spread-- less than the ER for many bond funds.

3. You always have the option to use a limit order for a secondary market purchase. I don't bother because using the "fill-or-kill" option lets me see the trade executed at once and the spreads are routinely so small.

Re-reading my draft of this post makes me sound like I am a salesman or booster for Fidelity-- I am not. They have won my business by providing superior service with their brokerage computerized platform; in-person phone service; and network of walk-in offices. I have used all three. To keep my business in the future, they will have to keep reducing prices and improving services--which are not always perfect. Others are certainly welcome to chime in with their own experiences.

What is the current range - high, low, median - for the expense ratio for many bond funds?

0.03% seems extremely tiny and trying to get a sense of how much lower it is compared to bond funds expense ratios.