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By Jeremy Glaser | 02-02-2010 01:34 PM

What Fidelity's ETF Move Means for Investors

Fidelity customers will now have commission-free access to 25 iShares ETFs, but investors shouldn't run for the exits of the firm's existing index mutual funds.

Jeremy Glaser: For Morningstar.com, I'm Jeremy Glaser. Fidelity shook up the ETF world today by announcing 25 commission-free iShares ETFs that will be available on their platform. Here to see the impact that this will have on investors is associate director of ETF Research, Paul Justice and Editor of the Fidelity Fund Family Newsletter, Christopher Davis. Thanks for joining me gentlemen.

Christopher Davis: Thanks.

Glaser: Paul, were you surprised to see Fidelity offer these funds for no trading fee.

Paul Justice: No, I wasn't really surprised. We had speculated back in November when Charles Schwab announced that it would be doing commission-free ETFs on its own platform that some of the other providers would have to come out and offer the same. Fidelity did that.

We speculated maybe they would issue their own funds or potentially partner with someone. So picking iShares is actually, I think, a great venture for them. iShares already controls about 50% of the assets under management in the ETF industry in the United States, so they're clearly getting a premier provider, and now you are simply eliminating a $7.95 fee to purchase these 25 core ETFs.

I view these as more like asset allocation ETFs, not the rapidly trading ETFs, so it will attract investors who want to build that core base of a portfolio at low expenses and with some tax advantages that ETFs offer.

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