This might be a really stupid question with a really obvious answer but I'm a noob so here goes nothing:
In June 2016, Fidelity undercut Vanguard's index fund rates by about a hair. Here's Fidelity's page listing their expense ratios (they're very proud of beating Vanguard) and a representative news article talking about the phenomenon.
But if I understand correctly, the reason why everyone loves Vanguard is their low expense ratios, which are kept low because they're run at-cost because of some sort of insurance-type-corporation-structuring-investors-are-shareholders type setup that I really don't understand. In contrast, Fidelity is a for-profit company that is held privately. So if Vanguard's index funds are run as low as you can possibly go, then what how can Fidelity possible make any sort of money by undercutting Vanguard? I'm sure there's more to it than that and some sort of long-term strategery going on. Honestly, I'd love to know how this works. Again, I'm a noob so please use small words.
Submitted March 30, 2017 at 01:13PM by mlktwx http://ift.tt/2nkgrXE
