When it comes to building long-term wealth in the U.S. stock market, the S&P 500 index (SPX) is one of the most popular choices for investors. Two of the most widely used options that track this index are the Fidelity 500 Index Fund (FXAIX) and the Vanguard S&P 500 ETF (VOO). At first glance, choosing between FXAIX, a mutual fund, and VOO, an ETF, can feel confusing. Both provide broad exposure to the U.S. stock market, but they differ in how they are bought, traded, and managed.
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Let’s break down these funds in detail.
FXAIX or VOO: The Differences
The Vanguard S&P 500 ETF (VOO) is a popular choice for investors who want focused exposure to large U.S. companies. It tracks the S&P 500, which is widely seen as a key benchmark for the U.S. stock market and overall economy. Similarly, FXAIX is a mutual fund that typically invests at least 80% of its assets in stocks included in the S&P 500 Index.
There are also key structural differences. As a mutual fund, FXAIX is priced once per day and is best suited for long-term, automatic investing within Fidelity accounts. VOO, on the other hand, is an ETF from Vanguard that trades like a stock throughout the day, giving investors more flexibility to buy and sell anytime during market hours.
Overall, FXAIX may appeal to investors who prefer simplicity and automated investing, while VOO is often chosen by those who want liquidity and portability across different brokerage platforms.
VOO and FXAIX: The Similarities
Both funds are well-known for their very low fees. VOO has an expense ratio of 0.03%, while FXAIX is slightly lower at 0.01%.
When it comes to holdings, both funds are quite similar at the top, with strong exposure to large-cap technology stocks. Their top three positions include Nvidia (NVDA), Apple (AAPL), and Microsoft (MSFT). VOO allocates about 36.3% of its portfolio to its top 10 holdings, while FXAIX is slightly higher at nearly 40%.
In total, FXAIX holds around 506 stocks with assets of roughly $740.36 billion, whereas VOO contains about 507 stocks with total assets of approximately $907.70 billion.
Finally, both funds offer dividend income. FXAIX has a dividend yield of about 1.1% and pays around $0.668 in quarterly dividends, while VOO has a very similar yield of about 1.09%, also distributed quarterly.
Conclusion
For investors, FXAIX is a good option if you prefer a mutual fund with automatic investing and end-of-day pricing. VOO, on the other hand, may be better suited for those who want ETF flexibility and intraday trading.