Zero-fee index funds: Is there a catch? 🆓

The Fidelity ZERO Large Cap Index Fund (FNILX) is more or less an S&P 500 index fund, although it doesn’t track exactly the same index as similar funds and is a tiny bit more tech-heavy. Its one-year return is currently 17.82%.

The Fidelity ZERO Extended Market Index Fund (FZIPX) tracks a custom index of small-cap and mid-cap U.S. stocks. It is most heavily weighted toward the industrial and financial sectors, although it also includes substantial tech and health care allocations. It’s returned 12.53% in the last year.

The Fidelity ZERO Total Market Index Fund (FZROX) consists of a broad custom index of U.S. stocks, including small-cap, mid-cap and large-cap stocks. It’s slightly less tech-heavy than FNILX, but substantially more so than FZIPX. Its one-year return is 17.24%.

The Fidelity Zero International Index Fund (FZILX) is an index fund that invests in large-cap stocks outside of the U.S., largely financial, industrial and tech stocks from Europe and emerging markets. And, as we noted could be the case when we wrote about allocating internationally earlier last year, FZILX is outperforming Fidelity’s other free funds by a large margin. Current one-year return stands at 33.54%.

The E*TRADE No Fee Large Cap Index Fund (ETLGX) tracks the 500 largest companies in the U.S., largely tech and financial services stocks. It’s a teeny bit more tech-heavy than the S&P 500 index. Its one-year return is 29.5%.

The E*TRADE No Fee Total Market Index Fund (ETTOX) invests in several thousand of the largest U.S. companies, and is slightly less tech-heavy than ETLGX. It’s up 29.8% in the last year.

The E*TRADE No Fee International Index Fund (ETSIX) contains large-cap stocks from outside the U.S. (mostly Europe and Asia), with heavy weightings toward the financial and industrial sectors. Its one-year return is 27.7%.

The E*TRADE No Fee Municipal Bond Index Fund (ETMUX) is an index fund of tax-advantaged muni bonds. Its current yield is 4.2%.

The E*TRADE No Fee U.S. Bond Index Fund (ETBOX) contains a diversified portfolio of U.S. corporate and treasury bonds. It pays income monthly, with a current yield of 4.3%.

Only available from Fidelity or E*TRADE: Most mutual funds are available at any broker that offers mutual funds, but Fidelity and E*TRADE’s free funds are exclusive to those respective brokers. If you invest in them and want to move to another broker later, you’ll have to sell them and buy something else.

Off-brand indexes: Most index funds track an established third-party index, like the S&P 500, and pay licensing fees to that index provider (S&P Global in the case of the S&P 500). To keep costs minimal, Fidelity and E*TRADE maintain their own indexes for their zero-fee funds, which means that their returns may slightly diverge from those of other, similar index funds that charge expense ratios. In particular, both brokers’ S&P 500-like free funds are a hair more tech-heavy than the S&P 500 index itself, which may be worth keeping in mind in light of concerns about an AI bubble in tech.

They could institute fees in the future: In the past, some other financial institutions have offered initially-free funds but then started to charge expense ratios later. SoFi offers two exchange-traded funds, the SoFi Select 500 ETF (SFY) and the SoFi Next 500 ETF (SFYX) that once had completely-waived expense ratios, but now they do charge expense ratios (albeit very small ones).

More XRP ETFs may launch in the future: A couple of other ETF issuers, such as CoinShares and WisdomTree, have filed paperwork with the SEC for a spot XRP ETF but have not launched them yet.

Fees may change: As new funds come online, they may announce fee waivers like those offered by Franklin Templeton and Grayscale, which may create competitive pressure for other issuers to waive their fees. Conversely, the fee waivers from Franklin Templeton and Grayscale are only effective for a few months, and may not apply anymore if you wait a while to buy those funds.

More access but less control than actual XRP: Spot XRP ETFs allow investors who don’t have an account with a crypto exchange to profit from the price movements of the world’s fourth-largest cryptocurrency, but the tradeoff is that XRP ETFs offer investors less control over their crypto investment than owning XRP tokens themselves. You can’t send your XRP elsewhere or lend it for a return if you own it indirectly through an ETF — for those features, you’ll need to buy the cryptocurrency itself.

Friday, Jan. 9: Bureau of Labor Statistics (BLS) monthly employment report. A report showing hiring levels and various measures of the unemployment rate.

Friday, Jan. 9: Preliminary Michigan consumer survey data for January. The University of Michigan will release its preliminary data for this month’s survey on Jan. 9, and its final data on Jan. 25. The survey has become a closely watched indicator of ordinary Americans’ perceptions of the economy.

Tuesday, Jan. 13: BLS consumer price index (CPI) report. A key inflation gauge. The employment and CPI reports could give investors hints about what the Federal Reserve will do with interest rates in future meetings; unexpectedly high unemployment or low inflation could indicate that rate cuts are on the way.

Thursday, Jan. 28: Federal Reserve interest rate decision. The Fed will conclude its meeting and announce the new level of the federal funds rate. It is expected to keep the rate unchanged, but it could announce a 0.25 percentage point cut.

Thursday, Jan. 29: Bureau of Economic Analysis first estimate of U.S. gross domestic product (GDP) in Q4 2025. A measurement of whether the economy grew or contracted over the quarter.