Fidelity Investments just beat all of the low-fee index fund competition to a move long expected: It will be the first fund company to offer core index funds without any management fee. On Wednesday, Fidelity announced the Fidelity Zero Total Market Index Fund and the Fidelity Zero International Index Fund will be available to investors on Friday. "Investors will pay a 0.00 percent fee, regardless of how much they invest in either fund, while gaining exposure to nearly the entire global stock market," Fidelity said in a release. The major index fund companies and discount brokers have been engaged in what investing experts call an "endless" fee war, with Vanguard Group, Charles Schwab and BlackRock's iShares ETF families constantly setting new bars for the lowest management fees on core ETFs. Lately, some of the biggest Wall Street banks have been encroaching on their turf as well, with Goldman Sachs and J. P. Morgan introducing ETFs with competitive expense ratios. This month, Vanguard is making a big move to relaunch its brokerage platform with trading of almost all ETFs in the industry for free. Many index fund and ETF experts have argued that it would ultimately make sense for fund managers to offer the "building blocks" — the core market exposures — for free and charge fees for less generic investment products as individuals and advisors fill out their portfolios. "Investors are increasingly fee-conscious and shifting toward passive products," said Todd Rosenbluth, the director of ETF and mutual fund research at CFRA. "While ETFs get much of the attention from a competitive perspective, demand for index mutual funds remains strong. Fidelity's move makes it easier and cheaper to invest in well-diversified mutual funds."

Index funds are still growing as fast, if not faster, than ETFs

It is not a surprise that the first zero-fee fund comes in a traditional index fund portfolio rather than ETF. Vanguard Group founder Jack Bogle has noted that the only investment category growing as fast, if not faster than ETFs, is traditional index funds. Rosenbluth said it is less likely that a zero-fee ETF comes soon. "This is self-indexed and is part of a family leveraging its scale," he said of the Fidelity move and the fact that it does not need to pay a licensing fee to a third-party index company, such as S&P, FTSE or MSCI. Fidelity also announced that it is lowering fees on other core mutual funds by an average of 35 percent and will charge no investment minimums to access the lower and no-fee funds. Expense ratios will go as low as 0.015 percent, Fidelity said, and it specifically compared its new pricing to Schwab and Vanguard portfolios and brokerage account policies in its release, claiming it will now offer lower fees than all of Vanguard's comparable funds and 9 out of 10 comparable Schwab funds.

The lowest fee fund war Index Fund/ETF Expense ratio Schwab Total Stock Market Index 0.03 percent Schwab Multi Cap Core ETF 0.03 percent Vanguard Total Stock Market 0.14 percent Vanguard Total Stock Market ETF 0.04 percent iShares Core S&P 500 Equity ETF 0.04 percent Schwab International Index Fund 0.06 percent Vanguard Total International Stock Market Fund 0.17 percent Vanguard Total International Stock ETF 0.11 percent iShares Core MSCI International ETF 0.10 percent Fidelity Total Market Index Fund 0.015 percent Fidelity Total International Index Fund 0.06 percent