FXAIX vs. FNILX: Fidelity’s S&P 500 Index Funds Compared
Low-Cost Options for S&P 500 Exposure.
For investors seeking exposure to the S&P 500, Fidelity offers two standout funds: FXAIX (Fidelity 500 Index Fund) and FNILX (Fidelity ZERO Large Cap Index Fund). Both provide low-cost access to large-cap U.S. stocks, but which one is better for your portfolio? Let’s compare them.
FXAIX vs. FNILX: Key Differences
Both FXAIX and FNILX track the S&P 500 or its equivalent, but they differ in expense ratios, index methodology, and tax implications. Here’s a side-by-side comparison:
| Feature | FXAIX | FNILX |
|---|---|---|
| Expense Ratio | 0.015% | 0.00% |
| Index Tracked | S&P 500 | Fidelity U.S. Large Cap Index |
| Management Style | Passive | Passive |
| Minimum Investment | None | None |
| Tax Efficiency | Higher due to established structure | Slightly lower due to proprietary index |
Expense Ratio
FNILX is part of Fidelity’s ZERO Fee Index Funds, meaning no management fees—ever. However, FXAIX’s 0.015% expense ratio is so low that the cost difference is negligible, especially for large portfolios.
Index Differences
- FXAIX: Tracks the official S&P 500, which includes 500 of the largest U.S. companies.
- FNILX: Follows Fidelity’s proprietary U.S. Large Cap Index, designed to closely mimic the S&P 500 with slight differences in methodology.
Tax Considerations
FXAIX, structured as a traditional mutual fund, is more tax-efficient than FNILX in taxable accounts. FNILX’s proprietary index and lack of ETF share class make it slightly less tax-efficient.
Which Fund Fits Your Lazy Portfolio?
Both FXAIX and FNILX are great options for lazy portfolios, providing low-cost exposure to large-cap U.S. stocks. Here’s an example allocation using each fund:
Using FXAIX
| Asset Class | Fund | % |
|---|---|---|
| U.S. Stocks | FXAIX | 40% |
| International Stocks | FTIHX (Fidelity Total International Index Fund) | 30% |
| Bonds | FXNAX (Fidelity U.S. Bond Index Fund) | 30% |
Using FNILX
| Asset Class | Fund | % |
|---|---|---|
| U.S. Stocks | FNILX | 40% |
| International Stocks | FZILX (Fidelity ZERO International Index Fund) | 30% |
| Bonds | FXNAX | 30% |
Key Differences in These Portfolios
- FXAIX Portfolio: Offers precise tracking of the S&P 500 and better tax efficiency for taxable accounts.
- FNILX Portfolio: Zero fees but slightly less tax-efficient due to the proprietary index.
Rebalancing and Long-Term Strategy
As core holdings in lazy portfolios, both FXAIX and FNILX require regular rebalancing to maintain your target allocation. Reinvesting dividends and reallocating gains ensures your portfolio stays aligned with your risk tolerance.
Conclusion
Both FXAIX and FNILX are excellent options for gaining exposure to the S&P 500. FNILX’s zero expense ratio is hard to beat for Fidelity investors, especially in tax-advantaged accounts. On the other hand, FXAIX offers better tax efficiency and precise S&P 500 tracking, making it a great choice for taxable accounts.
Start with the fund that best suits your portfolio needs and account type. Fidelity’s commitment to low fees and excellent index funds makes either option a smart choice for long-term investors.
FAQ
Q: Does FXAIX track S&P 500?
Yes, FXAIX tracks the S&P 500 Index, providing exposure to 500 of the largest U.S. companies.
Q: Is VOO or FXAIX better?
Both VOO and FXAIX are excellent options. VOO is an ETF, offering better tax efficiency and tradability, while FXAIX is a mutual fund with no transaction fees for Fidelity investors.
Q: Does FXAIX pay dividends?
Yes, FXAIX pays dividends quarterly based on the underlying stocks in the fund.
Q: Does FXAIX reinvest dividends?
Yes, you can choose to have FXAIX dividends automatically reinvested into the fund.
Q: Is FNILX a good investment for long term?
Yes, FNILX is a great long-term investment due to its 0% expense ratio and broad large-cap exposure.
Q: Does FNILX pay dividends?
Yes, FNILX pays dividends, which can be reinvested or withdrawn based on your preference.
Q: Which is better, FXAIX or SWPPX?
Both funds are similar in performance and expense ratios. Choose FXAIX if you are a Fidelity investor, or SWPPX if you use Schwab.
Q: How high will FXAIX go?
The performance of FXAIX depends on the growth of the U.S. economy and the S&P 500 companies. It’s designed for long-term growth, not for predicting specific price points.
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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.