FITLX vs. FZROX: Fidelity's Index Fund Showdown

When building a lazy portfolio, Fidelity offers two standout options: FITLX (Fidelity Total Market Index Fund) and FZROX (Fidelity ZERO Total Market Index Fund). Both are excellent choices, but which one is better for your strategy? Let’s break it down.

FITLX vs. FZROX: Key Differences

While both funds track the total U.S. stock market, they cater to slightly different needs. FITLX follows a traditional total market index with a small expense ratio, while FZROX is part of Fidelity’s ZERO Fee Index Funds, offering an unbeatable expense ratio of 0%.

Here’s a quick comparison:

Feature	FITLX	FZROX
Expense Ratio	0.015%	0.00%
Index Tracked	Dow Jones U.S. Total Stock Market	Fidelity U.S. Total Investable Market Index
Management Style	Passive	Passive
Minimum Investment	None	None
Tax Efficiency	Slightly higher due to broader index	Slightly less due to in-house index

Expense Ratio

FZROX’s 0% expense ratio is a game-changer, making it the cheapest way to track the U.S. stock market. However, FITLX’s 0.015% is still incredibly low, and for most investors, the cost difference is negligible.

Index Differences

FITLX tracks the Dow Jones U.S. Total Stock Market Index, which is broader than FZROX’s proprietary Fidelity U.S. Total Investable Market Index. While the performance is nearly identical, FITLX covers more small-cap stocks, offering slightly greater diversification.

Tax Considerations

FZROX is exclusive to Fidelity accounts and uses a proprietary index, which can lead to slightly less tax efficiency. FITLX, on the other hand, is structured as a traditional mutual fund, offering broader compatibility and tax advantages.

Which Fund Fits Your Lazy Portfolio?

Both FITLX and FZROX work well in a 3-fund portfolio. Here’s an example allocation using each fund:

Using FITLX

Asset Class	Fund	%
U.S. Stocks	FITLX	40%
International Stocks	FTIHX (Fidelity Total International Index Fund)	30%
Bonds	FXNAX (Fidelity U.S. Bond Index Fund)	30%

Using FZROX

Asset Class	Fund	%
U.S. Stocks	FZROX	40%
International Stocks	FZILX (Fidelity ZERO International Index Fund)	30%
Bonds	FXNAX	30%

Key Differences in These Portfolios

• FITLX Portfolio: Broader U.S. stock coverage and slightly higher tax efficiency.
• FZROX Portfolio: Zero fees but slightly narrower U.S. stock coverage.

Rebalancing and Long-Term Strategy

Both funds make excellent core holdings for lazy portfolios. Annual rebalancing ensures you stay aligned with your target allocation and risk tolerance. If FZROX grows significantly, consider rebalancing gains into bonds (FXNAX) or international stocks (FTIHX or FZILX).

Conclusion

Choosing between FITLX and FZROX boils down to priorities. FZROX offers unbeatable cost efficiency, but FITLX provides broader market exposure and better compatibility for taxable accounts. Either way, both funds are strong building blocks for a FIRE-friendly lazy portfolio.

Start with what fits your strategy and brokerage. Fidelity’s low-cost funds, combined with disciplined rebalancing, make reaching financial independence easier than ever.

FAQ

Q: Is FITLX a good investment?

Yes, FITLX is an excellent investment for those seeking broad exposure to the U.S. stock market with minimal fees. It’s a low-cost, passively managed fund that fits well in a lazy portfolio, particularly for Fidelity investors.

Q: Is FZROX a good index fund?

Absolutely! FZROX is one of the most cost-effective ways to invest in the total U.S. stock market, with its 0% expense ratio making it unbeatable for fee-conscious investors. It’s a great core holding for a diversified portfolio.

Q: How is FZROX compared to VTI?

Both FZROX and VTI (Vanguard Total Stock Market ETF) offer exposure to the U.S. stock market. The key difference lies in the indices they track: FZROX follows Fidelity’s proprietary index, while VTI tracks the CRSP U.S. Total Market Index. Performance is nearly identical, but VTI is more tax-efficient and tradable, while FZROX is exclusive to Fidelity accounts.

Q: Does FZROX follow the S&P 500?

No, FZROX tracks the Fidelity U.S. Total Investable Market Index, which includes a much broader range of stocks than the S&P 500, covering small-, mid-, and large-cap companies.

Q: What is the future of FZROX?

As a part of Fidelity’s ZERO Fee Index Funds, FZROX is expected to remain a popular choice for investors seeking low-cost exposure to the U.S. stock market. Its future depends on Fidelity’s continued commitment to offering innovative and cost-effective investment products.

Q: Who is better, Fidelity or Vanguard?

Both have strengths:

• Fidelity: Best for zero-fee funds, a wide range of actively managed funds, and investor-friendly features like no account minimums.
• Vanguard: Known for ultra-low fees, tax efficiency, and its investor-owned structure. Your choice depends on your priorities and existing brokerage accounts.

Q: Is FZROX tax efficient?

While FZROX is not as tax-efficient as ETFs like VTI, it remains a good choice for tax-advantaged accounts such as IRAs. For taxable accounts, ETFs may be a better option due to their unique tax advantages.

Q: Should I own both VTI and SPY?

Owning both VTI (total market exposure) and SPY (S&P 500 exposure) can lead to overlap, as SPY is a subset of VTI. It’s usually more efficient to choose one, depending on your investment goals.

Q: Is FZROX passively managed?

Yes, FZROX is passively managed, aiming to replicate the performance of the Fidelity U.S. Total Investable Market Index.

Q: Is it a good time to buy FZROX?

Timing the market is challenging, so the best strategy is to dollar-cost average (DCA) into FZROX consistently, regardless of market conditions. It’s an excellent long-term holding for diversified portfolios.

Q: Does FZROX pay dividends?

Yes, FZROX pays dividends, which are automatically reinvested unless specified otherwise. These dividends come from the companies in the fund’s portfolio.

Q: Is FZROX US-only?

Yes, FZROX focuses exclusively on the U.S. stock market, covering small-, mid-, and large-cap companies.

Q: Does FITLX pay dividends?

Yes, like FZROX, FITLX also pays dividends from the stocks in its portfolio, which can be reinvested or withdrawn depending on your preference.

Q: Which Fidelity funds outperform the S&P 500?

Funds like Fidelity Contrafund (FCNTX) and Fidelity Blue Chip Growth Fund (FBGRX) have historically outperformed the S&P 500, though they come with higher expense ratios and risks compared to index funds.

Q: What is Fidelity’s best performing ETF?

Fidelity’s FTEC (Fidelity MSCI Information Technology Index ETF) has been a top performer, offering concentrated exposure to the booming tech sector. Its performance depends heavily on the growth of tech giants like Apple and Microsoft.

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Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investing involves risks, including the possible loss of principal. Always conduct your own research before making investment decisions.