What Is Fidelity Advantage Class?
Fidelity Investments is one of the largest mutual fund families. The company manages more than 500 funds with well more than $1 trillion in assets. The Advantage class of funds offers the company's lowest expense ratio on certain funds for investors that meet the eligibility requirements.
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Identification
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Fidelity offers its Spartan class of low-cost index funds. Index funds hold the same investments as a specific index, such as the S&P 500, and are not actively managed. The Spartan class consists of four domestic stock funds, one international stock funds and three Treasury bond funds. Each of the Spartan funds has two share classes: Investor class and Advantage class.
Function
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The major index funds track the same indexes and hold the same securities. They compete on the lowest expense ratios. The Investor class Spartan funds from Fidelity have low expense ratios of 0.10 percent for the domestic stock funds and and 0.20 percent for the international fund and the bond funds. The Advantage class shares have even lower expenses at 0.07 percent for the domestic stock funds, 0.17 percent for the international stock fund and 0.10 percent for the Treasury bond funds.
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Features
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The two share classes, Investor and Advantage, for each Fidelity Spartan index funds hold the same securities with the only difference being the expense ratio. For investors, the main difference is the minimum investment amounts. Investor class Spartan funds can be purchases with a minimum initial investment of $10,000. Advantage class shares have a minimum investment and account balance requirement of $100,000.
Effects
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Lower expense ratios lead to higher final returns to investors. For a smaller amount, the difference in expenses is not large. For a $10,000 account, the .03 percent difference amounts to $3 per year. The 0.10 percent difference in the expense ratios of the two fund classes for the Treasury bond funds is more significant. On a bond fund the lower expense ratio translates directly to a higher yield.
Warning
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Fidelity regularly reviews account balances and upgrades the share class when accounts exceed the $100,000 threshold for Advantage class shares. This conversion will not happen if the shares are held by a third party, such as a stock broker or retirement plan administrator. You can call your broker or administrator and request the conversion if you account balance is high enough for Advantage class shares.
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