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FXAIX vs VOO: All You Need To Know

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This article will compare FXAIX vs VOO.  Both the Fidelity 500 Index Fund (FXAIX) and the Vanguard S&P 500 ETF (VOO) remain among the best US Stocks Large Blend funds.  They are among the best portfolios you can invest in and expect great returns.

Fidelity 500 Index Fund, FXAIX, is one of the simplest funds to invest in right now.  And, unlike other index funds, it has a relatively low turnover rate.

Vanguard S&P 500 ETF, VOO, on the other hand, is one of the most popular ETFs that focuses on long-term growth.  The fund invests in technology, healthcare, financials, industrials, and other industries and has a very low expense ratio.

Even though these two are great options for investing your money, it is best to compare the two to make the best decision.  So what is a mutual fund and an ETF, and how do FXAIX vs VOO match against each other?

Read on to find out.

FXAIX vs VOO Graphic

What is a Mutual Fund?

A mutual fund is an investment fund that pools investors’ monies to invest in securities such as stocks and bonds.  So, as an investor, mutual funds invest your money into stocks and other related investments and you share in the profit.

Mutual funds are actively managed, meaning that a professional manages the investment to ensure losses are limited.  Investing in a mutual fund offers some key benefits which include:

  • Economies Of Scale
  • Diversification
  • Liquidity
  • Professional management

 

What is an Exchange Traded Fund (ETF)?

An exchange-traded fund (ETF) tracks an index, commodity, sector, and other assets, however, just like the regular stock they trade on stock exchanges.  In other words, you can view an ETF as a basket of securities that you can trade on an exchange.

By investing in an ETF, you can diversify your portfolios, reducing risk by letting them participate in a variety of securities.  ETFs however, differ from mutual funds based on the time they trade – only after the market closes.

 

FXAIX vs VOO

The main difference between FXAIX and VOO is that FXAIX is a mutual fund while VOO is an ETF.

FXAIX = Mutual Fund

VOO = Exchange Traded Fund (ETF)

With an understanding of a mutual fund and an ETF, we can now compare FXAIX vs VOO.  Since both ETFs and mutual funds are essentially containers for holding a variety of investments, they are not very different variables.

Now, let’s keep comparing FXAIX and VOO.

 

What Is The Biggest Difference Between FXAIX VS VOO?

The most significant difference between FXAIX vs VOO is the brokerage that offers the fund. FXAIX is from Fidelity. VOO is from Vanguard.  They also differ in where they are available.  For example, you can find VOO on a variety of investment applications and websites, while FXAIX provides the platform for issuing them.

401(k)s provide access to both ETFs and Mutual Funds, similar to how FXAIX and VOO are issued by Fidelity and Vanguard, respectively.

You can trade an ETF continuously, whereas orders for mutual fund shares are batched together throughout the day.  Mutual funds can be held until the conclusion of trading when shares are purchased and all orders received.

 

How To Invest In VOO

You can buy VOO on the Vanguard platform commission-free but only as whole shares. Investors looking to buy fractional shares can use platforms like M1 Finance. ***(Get $50 When You Use This Link)***

Normally, fractional shares are not available for ETFs but with M1 Finance you can purchase fractional shares for FREE.

Buying fractional shares allows you to maximize your investment.  This is especially beneficial when it comes to high-priced ETFs like VOO with a cost of ~$431/share.  To avoid paying commission fees, I would suggest purchasing VOO through the Vanguard platform or with M1 Finance.

 

Is VOO The Same As FXAIX?

VOO and FXAIX are not the same, FXAIX is a mutual fund, whereas VOO is an exchange-traded fund.  Although both are containers for storing a large number of investments, they differ in terms of how they work, protocols, and durations.

 

FXAIX VS VOO: Comparing Key Metrics

The Fidelity 500 Index Fund tracks the S&P 500 index, covering roughly 80% of the investable market cap of the U.S. equity market.  The S&P 500 is a choice for many investors because of the opportunity to diversify their portfolio, and as such can hedge volatility.  This makes it a good option for retirement.

FXAIX has $379.81 billion in net assets.  This fund is well-liked by retail and institutional investors alike.  And, with a 10-year return of 16.78%, it virtually matches the benchmark index’s return of 16.79% (S&P 500 TR USD).  FXAIX expense ratio is 0.02%, which is considered low and this fund does not have 12b1, front-end, or back-end sales fees.

VOO is a popular and reliable index fund in the United States.  The Vanguard S&P 500 ETF (VOO) invests in the stocks of some of the largest companies in the United States.  As an ETF, VOO also tracks the S&P 500 index by acquiring all of the equities within the fund.

VOO is notable as one of the simplest investments in securities, making it perfect for beginners who want to invest in broad-market funds.  VOO also offers the benefit of diversification which can also mitigate risk to a large extent.

However, it’s impossible to determine which of these investment vehicles is the finest without evaluating and contrasting their qualities.

Let’s have a look at how they stack up on some key metrics.

 

FXAIX and VOO Holdings

FXAIX and VOO invest in virtually identical investments, and the portfolio’s holdings help to diversify the portfolio.  These ETFs are both large-blended US stock ETFs.  Below are the top ten holdings of FXAIX VS VOO.

FXAIX vs VOO Holdings

 

FXAIX and VOO Cost

If you’re just starting to invest and learning how fees affect your portfolio, fees are one of the biggest killers of portfolio development.  Over 30 years, the difference between a 2% cost and a 0.04% fee might result in your portfolio losing half of its value.

FXAIX has a 0.015% expense ratio, whereas VOO has a 0.03% expense ratio.  Both of these funds have a similar fee in this scenario.  The Vanguard S&P 500 ETF (VOO) is less expensive than 96% of rival funds.

FXAIX has an expense ratio of 0.015%

VOO has an expense ratio of 0.03%

 

FXAIX and VOO Size

When looking for assets to invest in, one factor to consider is size.  A huge fund does not automatically imply that it is a good fund, but it is one factor to consider when determining how to select the best fund.

FXAIX and VOO both manage around the same amount of assets.  VOO manages 770 billion and FXAIX manages 379.81.

 

FXAIX and VOO Performance

Many factors are taken into account while comparing the performance of FXAIX and VOO.  You might want to compare their returns to see how well they do.

The VOO fund invests all of its assets in the stocks that make up the target index in an attempt to duplicate them.  The FXAIX fund, on the other hand, invests at least 80% of its assets in common equities that are part of the Index.

FXAIX vs VOO Performance

I give a slight edge to VOO because it will deliver more consistent returns alongside the S&P 500.

Winner: VOO

 

Financial Independence (FI) Score

Because both of these products are US Stocks Large Blend funds, you’ll probably only need to invest in one of them.  They both have a comparable FI Score, with only a small variation between them.  A higher FI Score does not guarantee future growth, but it does indicate that the fund meets the criteria for a strong fund.

FXAIX Score = 98

VOO Score = 95

The difference between these two’s FI scores isn’t that far apart.  They’re both fantastic investments.

Winner: Both

 

What Should Know About FXAIX vs VOO as an Investor

VOO and FXAIX’s Stock-Like features can be problematic for new traders.  Traders and speculators will benefit from the characteristics offered by VOO trading.  However, FIAX has a significantly greater initial commitment requirement than VOO.

VOO allows investors to put up “good-until-canceled” stop-loss and stop-limit orders.  While for the buy-and-hold investor with little or no experience trading equities, these might be problematic.  FXAIX provides a strong long-term return, is well-diversified, and is a low-risk option to invest in companies.

Despite some of the drawbacks of ETF investing, VOO’s portability between brokerages makes it a preferable alternative for investors.

It is best for those just starting a long-term investment in an S&P 500 index fund.

 

Conclusion

FXAIX and VOO are largely identical.  Both track the same collection of stocks (the S&P 500 Index) and hence, are similar in dividend yield and annual returns.  They also offer incredibly low fees.

However, VOO is an ETF while FXAIX is a mutual fund, you can’t trade a mutual fund all day.  That being said, if you are a beginner investor, VOO may be most suitable for you.

 

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Disclaimer
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This information is my opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.