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Fidelity's "Zero" funds are great, but only for specific scenarios IMO. They can't be held outside Fidelity accounts, so what happens if you get caught up in so
by whitepoplar 2y ago
Fidelity's "Zero" funds are great, but only for specific scenarios IMO. They can't be held outside Fidelity accounts, so what happens if you get caught up in some KYC nonsense and Fidelity closes your account? Are you forced to liquidate and incur capital gains? There are also some embedded tax efficiencies inherent to ETFs, like 351 exchanges, which aren't popular now, but may become popular in the future. TBH, this mainly applies to taxable accounts. For nontaxable accounts, Zero funds don't have much downside.
- robszumski 2y agoThe zero fund I am familiar with (FZILX) has a once-a-year dividend schedule which I'm sure nets them a lot of money, vs paying out more frequently. If you want to unload, you can only do it once a year without throwing away your earned dividend.
- baking 2y agoThat's not how dividends work.
- robszumski 2y agoYou have to hold the fund on the ex-dividend date... Pays out once in Dec. If you buy in Feb and sell in Oct, you're not getting your dividend although you earned most of it... If you had VTI, you'd get 3 of them.
- baking 2y agoDividends are built into the NAV price. It just becomes taxable income when it is paid out.
- robszumski 2y agoAh right
- TeaBrain 2y agoI'd also thought your idea sounded like it made sense, sort of like how a trader can attempt dividend stripping, but looks like the user baking cleared that up.
- TeaBrain 2y agoThey raise a good point, which I've never considered before. This could be considered a form of dividend arbitrage based on the difference in scheduling between the component dividends vs the fund dividends, based on the knowledge that a non-zero amount of fund holders will exit the fund before the once a year dividend date, but not before the fund earned dividends based on the fund components.
- TeaBrain 2y agoNevermind, it looks like baking cleared up my misconception in another reply.
- icelancer 2y ago> They can't be held outside Fidelity accounts, so what happens if you get caught up in some KYC nonsense and Fidelity closes your account? This literally happened to me. I'm banned from Fidelity for some unknown (AML presumably) reason but have no other issues with any brokerage, bank, or exchange. Fortunately I just held a bunch of ETFs, so it was straightforward. But it does happen.