Fund Expenses Dip

Wall Street Journal

In a move to compete with Vanguard'sgiant S&P 500 Index fund,Fidelity has slashed the expense ratios onits index mutual funds. Five of Fidelity'sindex funds will now carry an expenseratio of just 0.1%, down from a range of0.19% to 0.47%, and below Vanguard'sskinflint 0.18% on its S&P 500 fund. Bycomparison, the average US stockcharges 1.5%. Although it looks like abargain, Jonathan Clements, a respectedcolumnist, urges fundbuyers to beware. Much the same thinghappened 14 years ago, he notes, whenFidelity and Dreyfuss cut expenses onindex funds. Within 4 years, however,both funds had doubled their expenseratios, and some investors who wantedto jump ship found themselves facing asizable capital gains tax bill.