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Sector ETFs FAQs

About Fidelity Sector ETFs

  • What are the new ETFs Fidelity has launched?

    On October 24th, 2013 Fidelity launched 10 passively-managed sector ETFs :

    • Fidelity MSCI Consumer Discretionary Index ETF (FDIS)
    • Fidelity MSCI Consumer Staples Index ETF (FSTA)
    • Fidelity MSCI Energy Index ETF (FENY)
    • Fidelity MSCI Financials Index ETF (FNCL)
    • Fidelity MSCI Health Care Index ETF (FHLC)
    • Fidelity MSCI Industrials Index ETF (FIDU)
    • Fidelity MSCI Information Technology Index ETF (FTEC)
    • Fidelity MSCI Materials Index ETF (FMAT)
    • Fidelity MSCI Telecommunication Services Index ETF (FCOM)
    • Fidelity MSCI Utilities Index ETF (FUTY)
  • Who is the benchmark provider for the sector ETFs?
    MSCI is the benchmark provider for our 10 passive sector ETFs. The MSCI USA IMI sector indexes are market-capitalization weighted indexes of stocks designed to measure the performance of the investable market of U.S. equity sectors based on the Global Industry Classification Standard (GICS) industry taxonomy co-created by MSCI and S&P. These indexes cover 99% of the investible U.S. sector market providing highly diversified exposure to each of the 10 GICS sectors.
  • What are the benefits and risks of investing in ETFs?

    ETFs offer flexibility because you can trade throughout the day, plus you have the ability to set stop and limit orders, as well as sell a security short. You should also consider some of the risks of trading ETFs. As with stocks, ETF shares have bid-ask spreads that can vary significantly from one ETF to another. Losses can be magnified if no liquid market exists for the ETF's shares when attempting to sell them.

    While mutual funds trade at their net asset value (NAV), ETFs can trade above or below the NAV of the underlying portfolio of securities. This premium or discount to the NAV is an important consideration when purchasing an ETF.

    ETFs also allow you to invest in a slice of the market, since many ETFs track narrow market indexes. Because of this narrow focus, these ETFs may be more volatile than investments which are more broadly diversified.

    ETFs may also be tax-efficient because they do not sell shares to meet redemptions and do not trade frequently, so year-end capital gains distributions may tend to be lower than with a mutual fund.

  • In general, how should I decide whether to buy an ETF or a mutual fund?

    We view the use of mutual funds versus ETFs within a broadly diversified portfolio mainly as a decision of personal preference. Investing in funds versus ETFs does not need to be an "either/or" proposition. In fact, many investors and advisors use both products to meet their financial goals.

    Some of the potential benefits of ETFs include intraday liquidity, the ability to short, employ stop losses, use options, holdings transparency, and target specific prices.

    Mutual funds may be preferable for investors who wish to avoid brokerage commissions, are seeking the long-term benefits of dollar cost averaging, are looking for ability to set up automatic investment/withdrawal plans, and want the ability to do dividend reinvestment.

    Both ETFs and mutual funds can benefit from diversification, professional management, and convenience.

    Unlike mutual funds, ETF shares are bought and sold at market price, which may be higher or lower than their NAV, and are not individually redeemed from the fund.

  • When should I consider buying a Fidelity passive sector ETF or a Fidelity actively managed sector mutual fund?

    As with ETFs in general, passive sector ETFs may appeal to cost-sensitive investors who seek trading flexibility and who may be looking for more tactical and shorter-term investment vehicles.

    For investors seeking to outperform an index, we suggest they look at actively managed funds. Fidelity is a leader in sector investing, with over 30 years of global sector investing experience.

    Unlike mutual funds, ETF shares are bought and sold at market price, which may be higher or lower than their NAV, and are not individually redeemed from the fund.

  • Who is managing the 10 passive sector ETFs?
    As part of a broader strategic ETF relationship announced earlier this year, Fidelity has hired BlackRock® as the sub-adviser for the 10 passive sector ETFs.
  • Why did Fidelity partner with BlackRock® to sub-advise the 10 passive sector ETFs?
    Fidelity hired BlackRock® to leverage its passive investment management expertise and scale. BlackRock is a leader in investment management, risk management, and advisory services for institutional and retail clients worldwide. As of June 30, 2013, BlackRock's assets under management were $3.86 trillion. Its ETF division, iShares®, is a global product leader in exchange-traded funds with over 600 funds globally across equities, fixed income, and commodities, which trade on 20 exchanges worldwide.
  • What are the expense ratios of the new ETFs?

    The new ETFs are the lowest cost U.S. GICS-level passive sector ETFs in the industry with total expense ratios of just 0.12%.1

    1. Strategic Insight Simfund/FI Desktop, data as of 08/31/2013. Based on a comparison of total expense ratios for U.S. sector-level ETFs with similar holdings and investment objectives (using the MSCI and S&P Global Industry Classification System — GICS) within the universe of 298 ETFs Morningstar has classified as the Sector Stock asset class.

    The percentage of fund assets used to pay for operating expenses and management fees, including 12b-1 fees, administrative fees, and all other asset-based costs incurred by the fund, except brokerage costs. Fund expenses are reflected in the fund’s NAV. Sales charges are not included in the expense ratio.

  • Are you limiting access to other sector ETFs on your platform?

    No, these 10 Fidelity Sector ETFs are available online to purchase commission-free, but you still have access to nearly 1,400 other ETPs, including other sector ETFs, that you can buy and sell online for $7.95.

    $7.95 trading commission applies to online purchases of U.S. equities in a Fidelity Brokerage account with a minimum opening balance of $2,500 for Fidelity Brokerage Services LLC retail clients. Sell orders are subject to an activity assessment fee (of between $.01 and $.03 per $1,000 of principal) by Fidelity. Other conditions may apply. See Fidelity.com/commissions for details.

Trading

  • Are Fidelity sector ETFs commission-free?

    Yes, the 10 new passive sector ETFs will be commission-free for purchases through online channels. We feel this is an attractive value to investors, as commissions can sometimes be a significant component of the cost of owning ETFs. 2

    2. Free commission offer applies to online purchases of Fidelity ETFs in a Fidelity brokerage account with a minimum opening balance of $2,500. The sale of ETFs is subject to an activity assessment fee (of between $0.01 to $0.03 per $1,000 of principal) by Fidelity. After 02/01/2014, Fidelity ETFs are subject to a short-term trading fee by Fidelity, if held less than 30 days.

  • Is there a short-term trading fee for Fidelity Sector ETFs?
    Beginning October 24, 2013, through January 31, 2014, investors who buy a Fidelity passive sector ETF online at Fidelity.com, ActiveTraderPro® Tools, Wealth-Lab Pro®, or through Fidelity's mobile trading channels (its apps for iPhone®/iPod® Touch, iPad® and AndroidTM, and Fidelity Mobile®) in a Fidelity brokerage account with a minimum opening account balance of $2,500 will not be charged a contingent sales commission if they sell the ETF within 30 days of purchase. However, after January 31, 2014, while an investor who buys shares online in any of our 10 passive sector ETFs can still do so commission-free, they will be charged a contingent sales commission of $7.95 if they sell the ETF within 30 days of purchase. If they hold shares longer than 30 days they will pay no commissions.

Margin

Questions?

Before investing in any mutual fund or exchange traded fund, you should consider its investment objective, risks, charges and expenses. Contact Fidelity for a prospectus, offering circular or, if available, a summary prospectus containing this information. Read it carefully.
ETFs are subject to market fluctuation and the risks of their underlying investments. ETFs are subject to management fees and other expenses. Unlike mutual funds, ETF shares are bought and sold at market price, which may be higher or lower than their NAV, and are not individually redeemed from the fund.
Because of their narrow focus, sector funds tend to be more volatile than funds that diversify across many sectors and companies.
Exchange traded products (ETPs) are subject to market volatility and the risks of their underlying securities which may include the risks associated with investing in smaller companies, foreign securities, commodities and fixed income investments. Foreign securities are subject to interest rate, currency-exchange rate, economic and political risk all of which are magnified in emerging markets. ETPs that target a small universe of securities, such as a specific region or market sector are generally subject to greater market volatility as well as the specific risks associated with that sector, region or other focus. ETPs which use derivatives, leverage, or complex investment strategies are subject to additional risks. The return of an index ETP is usually different from that of the index it tracks because of fees, expenses and tracking error. An ETP may trade at a premium or discount to its Net Asset Value (NAV) (or indicative value in the case of ETNs). Each ETP has a unique risk profile which is detailed in its prospectus, offering circular or similar material, which should be considered carefully when making investment decisions.
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