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For people wondering how this can be of any benefit to Fidelity, here's a couple options: 1) They lend the stock to shorters and make money off the interest.
by reverend_gonzo 8y ago
For people wondering how this can be of any benefit to Fidelity, here's a couple options:
1) They lend the stock to shorters and make money off the interest.
2) They get people into their ecosystem. As most people don't keep a dozen different accounts, they can get people to start using their checking and savings accounts (where Fidelity makes money from lending a fraction of the balance). People might also be more likely to use their loan products, credit cards, or other services, which are obviously benefical to Fidelity.
There's likely other benefits to them as well, especially given that index funds don't require any real human oversight.
Edit: Given other info posted, it's really just #2. This is a loss leader to get customers.
- smileysteve 8y agoI read #2 in their press release; But; it seems like a poor marketing decision; You're attracting people who want no fees and subscribe the the Random Walk Model - then you prove the Random Walk Model. I don't see how this encourages people to go into more different funds. Maybe for asset allocation for near term cash volatility.
- Fomite 8y agoAs a counter-example, I chose Schwab for their low fees, because the bulk of my investments are in index funds. But that doesn't mean they all are. Schwab is also both my bank and my active investment broker of choice. The reason for that is because it's nice to have all my stuff in one place, viewable from a single screen.