FZROX vs. FSKAX: Practical Comparison
Which Total Market Fund Fits Your Portfolio Best?
Fidelity’s FZROX and FSKAX both aim to cover the entire U.S. stock market, but they have some important differences. FZROX is Fidelity’s “ZERO” Total Market Index Fund, while FSKAX is their Total Market Index Fund. These funds seem similar, but the details matter.
Let’s break down what makes them unique and how they fit into a classic 60/40 portfolio.
FZROX vs. FSKAX: The Difference
While both funds target the total U.S. stock market, the way they operate isn’t identical. Understanding this difference is critical for investors:
Fidelity ZERO Total Market Index Fund (FZROX):
- Expense Ratio: 0% (ZERO fees).
- Eligibility: Can only be held in Fidelity accounts.
- Holdings: Approximately 2,631 U.S. stocks.
- Focus: Covers the majority of the market, but excludes some smaller companies due to its design.
Fidelity Total Market Index Fund (FSKAX):
- Expense Ratio: 0.02%.
- Eligibility: Transferable to other brokerages.
- Holdings: Approximately 3,875 U.S. stocks.
- Focus: Includes the entire U.S. stock market, with broader diversification than FZROX.
Key Differences:
- Fees: FZROX eliminates all fees, while FSKAX charges a very low 0.02%.
- Portability: FSKAX allows you to transfer your investments to another brokerage, while FZROX is locked to Fidelity.
- Diversification: FSKAX holds more stocks, including smaller companies that FZROX skips.
Which one performs better?
Both funds have delivered similar returns since FZROX launched in 2018. Over time, the performance difference is likely to remain minimal because they both track the same market. However, FSKAX’s broader diversification could provide slightly more stability, especially during volatile market periods.
60/40 Portfolio in Two Ways
You can use either FZROX or FSKAX to build a classic 60/40 portfolio—a blend of stocks and bonds designed for balanced growth and income. Here’s how it looks:
| Asset | Fund | % |
|---|---|---|
| U.S. Stocks | Fidelity ZERO Total Market Index Fund (FZROX) | 60% |
| Bonds | Fidelity U.S. Bond Index Fund (FXNAX) | 40% |
| Asset | Fund | % |
|---|---|---|
| U.S. Stocks | Fidelity Total Market Index Fund (FSKAX) | 60% |
| Bonds | Fidelity U.S. Bond Index Fund (FXNAX) | 40% |
We ran 6-year backtests on these portfolios using available data, and the results were nearly identical. The slight edge goes to FZROX, thanks to its 0% fees. However, the difference is negligible unless you’re investing significant amounts over decades.
Conclusion: Both Get the Job Done
Both FZROX and FSKAX are excellent choices for building a 60/40 portfolio. If you’re sticking with Fidelity, FZROX’s zero fees make it a compelling option. If you want the flexibility to move your investments or prefer a fund with broader diversification, FSKAX is a better fit.
At the end of the day, both funds serve the same goal—helping you build long-term wealth with minimal costs. Choose the one that aligns with your preferences and start investing today.
FAQ
Q: Is FSKAX or FZROX better?
Both are excellent options for total market exposure. FZROX has a 0% expense ratio, making it ideal for Fidelity investors who want to minimize costs. FSKAX offers broader diversification and portability to other brokerages, which may suit investors seeking flexibility.
Q: Does FZROX pay dividends?
Yes, FZROX pays dividends quarterly. The dividend yield varies but typically aligns with the total market average.
Q: Does FSKAX pay dividends?
Yes, FSKAX also pays dividends quarterly. The yield is comparable to FZROX, providing consistent income for investors.
Q: Does FZROX reinvest dividends?
Yes, FZROX offers an optional Dividend Reinvestment Plan (DRIP). This allows dividends to be reinvested automatically into the fund, helping investors compound their growth over time.
Q: Does FSKAX reinvest dividends?
Yes, FSKAX also provides a DRIP option for automatic reinvestment of dividends.
Q: Is FZROX a good investment for long term?
Yes, FZROX is an excellent choice for long-term investors. With its 0% expense ratio and broad market coverage, it’s designed to maximize growth with minimal costs.
Q: Which is better, FSKAX or VTI?
Both are highly similar in performance and diversification. Choose FSKAX if you prefer a mutual fund or are a Fidelity investor. VTI is an ETF, offering better tax efficiency and tradability for Vanguard users.
Q: How high will FZROX go?
The performance of FZROX depends on the growth of the U.S. economy and the total stock market. It’s built for long-term gains, not for predicting specific price levels. Use our Portfolio Tester to explore its historical performance alongside other assets.
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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.