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FZROX vs FXAIX: Which Fidelity Fund Is Better?

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In this article, we will explore the difference between FZROX vs FXAIX.

Choosing between Fidelity ZERO Total Market Index Fund (FZROX) and Fidelity’s 500 Index Fund (FXAIX) can be difficult.

Fidelity ZERO Total Market Index Fund, FZROX, is a popular fund because of its zero percent expense ratio.  The fund also holds over 2,600 stocks.

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

This comparison will make it easy to decide which one is right for you.FZROX vs FXAIX Graphic

 

FZROX vs FXAIX

The primary difference between FZROX and FXAIX is the index they track.  FZROX tracks the U.S. Total Investable Market Index, while FXAIX tracks 80% of the S&P 500 Index.

Both funds are Fidelity funds.

Fidelity made major headlines when they announced FZROX would not have any fees or expense ratio attached to the fund.

Another significant difference is the number of holdings in each fund.

FZROX holds 2,631 stocks

FXAIX holds 508 stocks

This means FZROX holds 5 times as many stocks as FXAIX.

 

FZROX

  • Tracks U.S. Total Investable Market Index
  • No Minimum Investment
  • Expense Ratio: 0%
  • Number Of Stocks: 2631

FXAIX

  • Tracks 80% Of The S&P 500 Index
  • No Minimum Investment
  • Fund Inception: 1988
  • Expense Ratio: 0.015%
  • Number Of Stocks: 508
  • Similar ETF (VOO)

 

FZROX vs FXAIX Performance

FZROX and FXAIX have had almost identical performance returns over the last 3 years.  FXAIX has had slightly better returns but only by 0.71% annually.

FZROX vs FXAIX Performance

We can only compare FZROX and FXAIX’s performance over the last 3 years since FZROX is still a new fund.  In addition, FZROX’s inception date was in 2018.

FXAIX has had strong performance returns over the last 10 years, with over 15% annual returns.  This is in line with the performance of the S&P 500.

Here is how FZROX and FXAIX performance compares on a chart:

FZROX vs FXAIX Performance Comparison

Again, the performance overlaps closely for both funds.

 

FZROX and FXAIX Similarities

Although FZROX and FXAIX are not the same funds, they have similarities.  They are both very low-cost index funds.

Their expense ratio is almost identical (0% vs 0.015%).  The difference can be considered negligible at that low of an expense ratio.

Example:

Investing $10,000 into FZROX and letting it grow for 30 years at a 7% return would result in $76,122.55.

Investing $10,000 into FXAIX and letting it grow for 30 years at a 7% return would result in $75,273.45.

A difference of $849.10.

 

Similarities between FZROX and FXAIX:

  • Low-Cost Index Funds
  • Moderate – Aggressive Funds (Risk Level 4)
  • Invests Mainly In Large U.S Companies

 

FZROX Overview

  • Fund Inception: 2018
  • Expense Ratio: 0%
  • Number Of Stocks: 2,631
  • Top 10 Holdings: 24%
  • Yield 1.25%

Fidelity ZERO Total Market Index Fund (FZROX) is 1 of 4 new Fidelity funds that have a zero expense ratio.  These are the only index funds with a zero expense ratio on the market.

The other 3 Fidelity funds with a zero expense ratio are:

  1. (FNILX) Fidelity ZERO Large Cap Index Fund
  2. (FZIPX) Fidelity ZERO Extended Market Index Fund
  3. (FZILX) Fidelity ZERO International Index Fund

These zero expense ratio funds are likely a result of market pressures to lower investment costs and compete with other big brokerages with low-cost funds like Vanguard.

Another key aspect of FZROX is that it only pays a dividend once a year in December.  This is a big difference compared to most other funds that pay a dividend quarterly.

FZROX only pays a dividend once a year in December

This might be important for someone who is in retirement and depends on dividend income for yearly expenses.

 

FZROX Performance

Fidelity’s FZROX has averaged 19% annually over the last 3 years.  However, the fund doesn’t have a 5 or 10-year performance history since its inception was in 2018.

Here is how $10,000 would have grown with FZROX over the last 3 years:

FZROX Performance

Overall, this is a great return, especially when you consider there is no expense ratio.  Therefore, as an investor, you keep 100% of the performance returns.

 

FZROX Top 10 Holdings

FZROX is largely made up of Microsoft, Apple, Amazon, Alphabet, and Tesla and provides exposure to over 2000 stocks.

FZROX Top 10 Holdings

Fidelity’s FZROX provides more diversification than FXAIX because it has 5 times as many holdings.  This will likely make FZROX less volatile compared to FXAIX.

FZROX has less volatility and more diversification

 

FXAIX Overview

  • Fund Inception: 1988
  • 10-Year Performance 15.42%
  • Expense Ratio: 0.015%
  • Number Of Stocks: 508
  • Top 10 Holdings: 29.29%
  • Yield 1.30%

Fidelity 500 Index Fund (FXAIX) is a popular fund that aims to invest at least 80% of assets in stocks included in the S&P 500 Index.

Tracking the S&P 500 index helps funds diversify by holding 500 large-cap U.S. companies.

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.

 

FXAIX Performance

Fidelity’s FXAIX tracks at least 80% of the S&P 500 Index, and so it will always closely follow the index’s returns.

Here is FXAIX’s performance over the last 10 years:

FXAIX Performance

 

FXAIX Top 10 Holdings

Fidelity’s FXAIX is largely made up of Apple, Microsoft, Amazon, Alphabet, and Tesla and provides exposure to over 500 stocks.

The top 10 holdings for FXAIX and FZROX are the same.

The difference is the percentage of the total portfolio the top 10 holdings make, with FXAIX at 29% and FZROX at 24%.

FXAIX Top 10 Holdings

The top 10 holdings of FXAIX make up 29% of its portfolio.

This makes FXAIX less diversified compared to FZROX.

 

Which Is Better FZROX or FXAIX?

Both FZROX and FXAIX are great funds.  The answer to which fund is better will depend on your investment goals and how important cost and diversification are to you.

To make it easier to decide, I’ll lay out the advantages of both of them:

FZROX Advantages:

  • No Cost
  • More Diversification
  • Less Volatility

FXAIX Advantages:

  • Strong Performance History
  • Very Low Expense Ratio
  • More Liquidity

If having the lowest cost option with more diversification is your primary goal, then FZROX is the best option with its zero cost feature.

If having a solid history of performance returns and more liquidity, then FXAIX is the better option due to its inception date of 1988 and net assets of $379.81 billion.

That said, there is no reason why you can consider both for your investment portfolio if you don’t want to choose only one.

 

My Winner: FZROX

My winner is FZROX because it has more holdings than FXAIX (2,631 vs 508).  This gives you more diversification as an investor.

I always prefer the lowest cost option for investment funds, even if the difference is small.

Again, both funds have a very low expense ratio which means you keep more money in your portfolio.

Lastly, both FZROX and FXAIX are excellent Fidelity funds and make for a great addition to consider.

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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.
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