Discount Brokers

Discount Brokers

Schwab or Fidelity – that is the question when you’re looking for a discount broker

Discount brokerage firms Charles Schwab and Fidelity Investments have battled for years to lure investors to their no-fee mutual funds. The winners are the investors, who stand to save on fees and tap into a bounty of services. Both fund programs, Schwabs’s Onesource and Fidelity’s FundsNetWork, have several conveniences in common, such as 24-hour, toll-free phone service. And both allow investors to manage a portfolio of funds from different families, get one statement, and switch among funds and cash-management accounts. In both programs, to switch funds, you simply fill out a transfer form and brokerages consolidate the funds you own.

Which one’s the better deal? Fidelity has the edge when it comes to sheer numbers of funds. OneSource offers 254 funds at no transaction fee, although nearly 500 more funds are available for a sales charge. Fidelity’s FundsNetwork is huge with 327 no-fee funds, plus 1,600 funds for fees. Another plus for Fidelity: The Company won’t allow Schwab to offer Fidelity funds for no transaction fee, so OneSource doesn’t include Fidelity funds in its lineup of no-fee funds. However, FundsNetwork offers 86 of Fidelity’s 202 funds without a transaction fee. To buy one of its low-loads, you still pay a 3 percent or so sales charge.

Beware of too much hopping around from one fund to another in both programs. Schwab allows an unlimited number of free switches among funds held for more than three months within a calendar year. But, switches made before three months are subject to a $39 fee. Fidelity’s policy is more onerous, though the company says it is reviewing it. Investors get five free redemptions in a 12-month period for a fund held in their account fewer than six months. Then fees kick in, which are determined by the amount of the transaction and can run about $50 for a $5,000 investment.

If it’s face-to-face contact you’re looking for, Schwab is the clear winner: Schwab has 202 branches, compared to Fidelity’s 77.

Discount Brokers, Mano a Mano

New-York, Manhattan. Photo: Elena

Best of the Closed-Up Funds

Country-fund fever started spreading in late 1989, with lots of investors paying premium prices for the funds. Here are the 10 performing closed-end stock funds for 1994. Most are selling at sizable discounts, a reflection of low investor demand. Closed-end funds had a tough 1994, with only 5% ending the year on a positive note: Brazil Fund, Brazilian Equity, Chile Fund, Japan Equity, Korea Fund, ROC Taiwan, Taiwan Fund, Korean Invest, India Growth, Gemini II Fund.

Tracking International Funds: The best and worst of the conventional international stock mutual funds over the five years ending in December 1994 and their five-year annualized return.

Ten best: GAM International, Merrill Lynch Dev CapMarkets A, Smith Barney International Equity A, Harbor International, Warburg Pincus International, Euro Pacific Growth, Morgan Stanley Instl International Equity, Templeton Foreign, Managers International Equity, Ivy International A.

Ten worst: Ivy Canada A, Quantitative International Equity, Dreyfus/Laurel International Investments, Invesco International Growth, Flag Investment International, WPG International, Alliance International A, Keystone International, Rodney Square International Equity, G.T. Global International Growth A.

Home-Grown Funds with the most foreign interests: The five domestic funds that had the highest percentageof overseas holdings at the end of 1994: Aetna Growth Sel, Excel Value, Fidelity Capital Appreciation, Capital Income Builder, Prudential MultiSector A.