A milestone is reached with the first zero-cost tracker funds

This is the subtitle which appeared in the Finance and economics section of the  August 4, 2018 print edition of The Economist under the headline “How low can you go?”

In our August 6, 2018 blog we stated that passively investing in the US economy is the best choice for most people, for good, long-term results. In other words, we recommend that investors do nothing else but keep buying an exchange-traded fund (ETF) which tracks the S&P 500 and do so within the framework of their personal asset allocation regime. These ETFs are called tracker funds. Examples are the S&P 500 ETF (symbol SPY), Vanguard S&P 500 (symbol VOO) and the iShares S&P 500 (symbol IVV).

There are other tracker funds but we recommend these because of their very low management expense ratios (MERs) i.e., cost to investors and because we can write (sell) weekly options on them for immediate, guaranteed income.  All mutual funds and ETFs charge their shareholders an MER to cover the costs of management, administration and all other operating expenses. MERs have been dropping over the years and the industry has been able to make up for that through increased volumes.

Unbelievably, it recently got better. Fidelity, the fourth largest in the industry with about 2 1/2 to trillion dollars under management, just announced tracker funds with an MER of zero dollars! There has never been a better time to be a consumer with vendors of goods and services falling over themselves for access to our wallets, but zero dollars? Our grandmother told us that you get nothing but nothing for nothing so how do they do it?

Many vendors of goods and services offer loss leaders to gain clients and customers. That is, they hope to upsell them to a profitable aspect of their business. Advisory services would be an example in the financial industry.

The financial industry has a very solid track record of looking after its interests exceptionally well. There is no need for Monday Morning Millionaire Program members to be worried here. We do need to be concerned anytime we are being upsold to something we do not understand. Monday Morning Millionaire Program members have access to experts for guidance when confronted by the complicated.

Dr. Milan Somborac

The Monday Morning Millionaire Program supports do-it-yourself (DIY) investors which I have been for over 50 years. About my team and me