FNILX vs. FXAIX: Practical Comparison
Which Low-Cost Option for S&P 500 Exposure is Better?
Fidelity’s FNILX and FXAIX both do the same job of tracking large-cap U.S. stocks, but they go about it a little differently. FXAIX sticks to the S&P 500, while FNILX follows Fidelity’s own U.S. Large Cap Index. That difference matters.
Let’s break down what that means for your portfolio, and which one performs better.
FNILX vs. FXAIX: The Difference
Wile FXAIX tracks S&P 500 Index, FNILX tracks Fidelity U.S. Large Cap Index. Understanding the difference is where every investor should start:
S&P 500 Index:
- How It’s Made: A group of people (a committee) decides which 500 big companies to include, based on things like company size, how easy it is to buy and sell their stock, and whether the companies represent different industries.
- How It’s Weighted: Each company’s importance in the index is based on its stock market value, adjusted for how many shares are available for the public to trade.
Fidelity U.S. Large Cap Index:
- How It’s Made: This one automatically picks the 500 biggest U.S. companies by size, without a group making decisions.
- How It’s Weighted: Just like the S&P 500, it ranks companies by their stock market value, adjusted for the shares available to the public.
Main Differences:
- Who Decides: The S&P 500 is handpicked by a committee, while the Fidelity index just uses a simple rule to include the biggest 500 companies.
- Flexibility vs. Simplicity: The S&P 500 can make exceptions or adjustments (like skipping a company for specific reasons), but Fidelity sticks strictly to the top 500 by size.
Both indexes track similar companies, but Fidelity’s approach is like using an automated list, while the S&P 500 has a human touch.
So, which one performs better?
There is not much history to compare, but we can already see the difference:
Now, the explanation:
Both FXAIX (S&P 500 Index fund) and FNILX (Fidelity U.S. Large Cap Index fund) have delivered very similar results over time. After all, they’re tracking groups of large U.S. companies with a lot of overlap.
But there are two things to consider: fees and historical returns.
Fees:
FNILX shines here because it has no fees at all. That’s right—Fidelity offers this index fund with a 0% expense ratio, meaning you get to keep every penny your investments earn. FXAIX also has low fees (just 0.015%), but even a small difference in fees can add up over decades if you’re investing a lot of money.
Historical Performance:
The S&P 500 Index (tracked by FXAIX) has a slightly longer history, making it a more established benchmark. However, FNILX’s performance has closely matched FXAIX since its inception, with minor variations due to how the indexes are built. For example, FNILX might include companies the S&P 500 skips over, but this hasn’t created any big performance gap so far.
Bottom Line:
- If fees are your top priority, FNILX is the winner with 0% expenses.
- If you prefer sticking to the more famous and widely followed index, FXAIX is a solid choice.
Both are excellent for building long-term wealth. Your choice may come down to how much you value brand recognition versus cutting every last fee from your portfolio.
3-Fund Portfolio in Two Ways
Since Fidelity offers two alternative approaches to tracking the market along with different ETFs, you can build the classic 3-Fund portfolio in two ways. Here is how it would look:
| Asset | Fund | % |
|---|---|---|
| U.S. Stocks | Fidelity 500 Index Fund (FXAIX) | 40% |
| International Stocks | Fidelity Total International Index Fund (FTIHX) | 30% |
| Bonds | Fidelity U.S. Bond Index Fund (FXNAX) | 30% |
| Asset | Fund | % |
|---|---|---|
| U.S. Stocks | Fidelity ZERO Large Cap Index Fund (FNILX) | 40% |
| International Stocks | Fidelity ZERO International Index Fund (FZILX) | 30% |
| Bonds | Fidelity U.S. Bond Index Fund (FXNAX) | 30% |
We performed backtests with our Portfolio Tester over the last 6 years, using available asset history and the S&P 500 as a benchmark. As you can see, while both approaches offer low-cost diversification, the “ZERO” funds have a slight edge. However, keep in mind that Fidelity ZERO funds are exclusive to Fidelity accounts and cannot be transferred to other brokerages.
Conclusion: Two Paths, Same Goal
Both Fidelity’s Enhanced Index Funds and ZERO Funds offer solid options for building a low-cost, diversified portfolio. Whether you value a broader transferability or zero fees, either choice aligns well with a simple, efficient investment strategy.
At the end of the day, what matters most is getting started and sticking to a plan that fits your goals. Both approaches get you where you want to go.
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. The dividend yield is approximately 1.24% annually, making it a reliable option for investors seeking regular income alongside long-term growth.
Q: Does FNILX pay dividends?
Yes, FNILX pays dividends semi-annually. The dividend yield is slightly lower at around 1.10% annually. While it’s not as frequent as FXAIX, it still provides a steady stream of income for investors.
Q: Does FXAIX reinvest dividends?
Yes, FXAIX offers an optional Dividend Reinvestment Plan (DRIP). This allows investors to automatically reinvest their dividends into additional shares of the fund, facilitating compound growth over time.
Q: Does FNILX reinvest dividends?
Yes, FNILX also provides an optional Dividend Reinvestment Plan (DRIP).
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: 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. Use our Portfolio Tester to compare historical performance with 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.