Last week’s headlines: Vanguard Ups the Ante in an ETF Race to Zero and Millennial Online Lender SoFi to Offer Zero-fee ETFs. Fidelity started the rush last August announcing two no-fee index mutual funds; today they offer four.

How much do fees matter and is it worth chasing 0% fee offerings? 

Fees matter a lot. NerdWallet looked at a 25-year-old who’s adding $10,000 a year to his $25,000 retirement account and earning an average return of 7%. In 40 years:

  • paying just 1% in fees would cost $590,000+ in sacrificed returns
  • by choosing a passive index fund with .07% fees (versus 1%) he’ll save $215,000 in fees which compounds over 40 years to $533,000 more in his retirement account.

Note: NerdWallet’s analysis found that from ages 45 to 65, the loss to fees increases from 12% to over 25%! This because fees compound in the same way that returns compound, just not in your favor.

Okay, so fees matter. Is it then worth using one of the handful of 0% fee funds or ETFs? Yes, you’ll save money but it may analogous to driving all over town for the cheapest gas – at the end of the day you haven’t saved money and you’re exhausted. Convenience and time have value.

“It’s a lost leader for Fidelity…” says Motley Fool. It gets people in the door anticipating they’ll transition to other funds and income producing services. If other funds and services are competitively priced, then great, but that’s not my experience.

“It’s like Walmart branding ‘Everyday Low Prices,’” said Wei Ke, a pricing strategist for Simon Kucher & Partners. “Once you know that psychologically, you stop doing the hard work of comparison shopping.”

Your job as an investor is finding the low-cost provider of a broad range of funds, ETFs and services that meet your needs.

This from a recent WSJ article, “Not one of Fidelity’s four zero-fee funds is among the firm’s top 10 most popular this year. The most successful of the bunch, the Fidelity ZERO Total Market Index Fund, took in $290 million in January, a fraction of the $5.2 billion that went into the most popular that month, Fidelity’s 500 Index Fund, which costs 20 cents a year for every $1,000 invested.”

Ben Johnson, director of fund research for Morningstar, put it this way: “Free is not free. There’s costs involved, but the cost might not be immediately apparent to most investors.”