By Jamie Johnson, WCI Contributor
FSKAX and FZROX are two popular funds offered by Fidelity. Both are low-cost mutual funds that invest in large-cap stocks. Both, by virtue of being index funds, are likely a good (and cheap!) place to invest your money. But there are some differences. If you’re having trouble choosing between FSKAX vs. FZROX, let's highlight some of the benefits of both funds.
What Is FSKAX?
The Fidelity Total Market Index Fund (FSKAX) is a low-cost mutual fund that holds nearly 4,000 stocks. It’s one of the largest funds in the world and is a good option for investors looking for broad market exposure.
FSKAX tracks the Dow Jones US Total Stock Market Index, and it currently has nearly $64 billion in net assets, as of January 2023. The fund has returned 6.9% over the last three years and 12.04% over the last decade.
Here is a list of the funds’ top 10 performing stocks:
- Apple, Inc. (at 5.11% of the fund, this stock is the largest holding in FSKAX)
- Microsoft Corp.
- Amazon.com Inc.
- Berkshire Hathaway Inc. Class B
- Alphabet Inc. Class A
- UnitedHealth Group Inc.
- Alphabet Inc. Class C
- Johnson & Johnson
- Exxon Mobil
- JP Morgan Chase
The fund invests in a variety of markets, but here are its primary sectors:
- Technology — 24.49%
- Healthcare — 15.47%
- Financial Services — 12.30%
- Consumer Discretionary — 9.98%
What Is FZROX?
FZROX stands for the Fidelity ZERO Total Market Index Fund, and it’s one of four zero-fee funds offered by Fidelity. Created in 2018, FZROX, which holds about 2,800 stocks, is a large blend fund that invests its assets in common stocks included in the US Total Investable Market Index.
As of January 2023, the fund has returned 7.06% over the last three years, which is all the data we have to look at. FZROX is appealing to many investors since there are no fees or expense ratios attached to the fund, and there’s no minimum investment to get started. However, the fund only pays a dividend once a year in December. That could be a potential downside if you rely on dividend income for your expenses.
Here is a list of the funds’ top 10 performing stocks:
- Apple Inc. (at 5.18% of the fund, this stock is the largest holding in FZROX)
- Microsoft Corp.
- Amazon.com Inc.
- Berkshire Hathaway Inc. Class B
- Alphabet Inc. Class A
- UnitedHealth Group Inc.
- Alphabet Inc. Class C
- Johnson & Johnson
- Exxon Mobil
- JP Morgan Chase
Like FSKAX, the fund invests in a variety of markets, but here are its primary sectors:
- Technology — 24.48%
- Healthcare — 15.44%
- Financial Services — 12.26%
- Consumer Discretionary — 10.06%
More information here:
FSKAX vs. VTSAX: What Is the Best Total Stock Market Index Fund?
FSKAX vs. FZROX: Similarities and Differences
Though FSKAX and FZROX are different funds, there are some similarities between the two. Both are low-cost funds issued by Fidelity with no minimum investment required to get started. The two funds also invest in similar stocks in similar markets.
Though FSKAX has a higher expense ratio, the difference is pretty small. Here is a chart highlighting the similarities and differences between the two funds.
One of the primary differences between the two funds is the index they track—FSKAX tracks the Dow Jones, and FZROX tracks the US Total Investable Market Index. The size of the funds and the number of stocks held is another significant difference.
As of January 2023, FSKAX has $63.9 billion in net assets and about 4,000 different holdings, while FZROX has $12.3 billion in net assets and about 2,800 stocks. That means FSKAX is a more diversified fund, and you can expect more volatility with FZROX.
And since FSKAX has been around since 2011, more data about its performance exists. The fund has performed well over the last 10 years and returned 11.29% (naturally, that number would look much higher if the bear market of 2022 hadn't occurred). However, when you compare both funds over the last three years, the returns are very similar. But FZROX did have slightly better returns overall.
More information here:
Tax-Loss Harvesting with Fidelity: A Step-by-Step Guide
How to Do a Backdoor Roth IRA at Fidelity
FSKAX vs. FZROX: Which Should I Choose?
Both FSKAX and FZROX are good investment options, and they can both help you reach your financial goals. Both funds invest in large-cap stocks and utilize similar investment strategies. That means you can expect similar performance from both funds.
FSKAX does have a slightly higher expense ratio, so FZROX is a better choice if you’re trying to avoid fees. But if you’re looking for a more diversified portfolio, FSKAX is the better option. Ultimately, the fund that is the best fit will depend on your lifestyle and long-term objectives. Really, though, you're probably not going to go wrong either way. If investing in a taxable account at Fidelity, these would make excellent tax-loss harvesting partners. Perhaps start with FZROX given its higher returns, despite the fact that the fund is a little smaller and has fewer holdings.
FAQs
Is FZROX a Good Fund?
FZROX is a mutual fund that was created by Fidelity in 2018. Morningstar gave this fund three (out of five) stars in comparison to the 1,237 funds within its category.
Although FZROX is a newer fund, it's managed by Fidelity, which has a long track record of excellence. And the fund doesn’t come with any fees or a minimum investment, so it’s a good fund for the average investor or for somebody who's just getting started in the stock market.
Is FSKAX a Good Long-Term Investment?
Yes, FSKAX is widely considered one of the best US large blend funds. Total stock market index funds are always a good investment strategy, and FSKAX has delivered solid returns over the last 10 years.
Does FZROX Pay Dividends?
Yes, FZROX pays dividends annually, and the fund hasn’t missed a year yet. The dividend you receive will depend on the value of your holding and the performance of the stocks in the fund.
Do you have experience with FZROX? If you're a Fidelity customer, which fund would you choose? And why? Comment below!
A solid summary, Jamie. I’ll add that FZROX can only be held at Fidelity and cannot be transferred in-kind to any other brokerage. FKSAX, on the other hand, is more portable.
If you invest in FZROX and later decide to leave Fidelity for any reason, you could be forced to realize some serious capital gains to do so.
Cheers!
-PoF
We are pretty much all in on Fidelity (both 401ks, checking, roths, etc) so, both of these are in our portfolio. We use them as partners when we are Tax Loss Harvesting.
Sounds like a good plan.
Neither; I’ll take the ETF version.
Curiously, Fidelity offers no total market passive ETF. They defer to ITOT. Fidelity offers only sector and factor passive ETFs.
Fidelity hasn’t gotten into the ETF game really, just dabbled a bit. Vanguard was late, but better late than never.
Excellent article Jaime and great summary. Question came up to me just now of which one is actually more tax efficient? Being high income that could sway the decision to use one or the other as the tax consequences and turnover might outweigh the no expense ratio of FZROX.
But I guess if you really wanna avoid the problem you should just use ETFs 😀
I would definitely hold an ETF (ITOT or VTI) over either of these in taxable.
I feel like the main thing missing here is the correlation between the two. I’m too lazy to look it up right now, but have so in the past and know it’s like 0.99.
Nice to see a post on Fidelity funds. I was all-in on Vanguard up until about a year ago when Vanguard lost ~$80K in my brokerage account after I made an end of year contribution to my Vanguard Charitable DAF. The Vanguard customer service was a nightmare and only after involving an attorney was our money returned.
Needless to say, since switching to Fidelity the customer service has been phenomenal in comparison. I miss the simplicity of Vanguard, but have been happy so far. I would certainly like to see some more posts that reference Fidelity funds.
How on earth did they manage to lose $80K or your money?
They’ve been surprisingly popular so far so you just might.
Solid article, Jamie. I’m a fidelity investor but opted for neither based on the dividend schedule. Basically, I want quarterly dividends for better compounding. Plus, it seems that the dividends for both error ever so slightly on the lower side vs the total market etf vti? Does fidelity make money off of my interest while holding the dividend payments for an entire year before reinvesting them? I can’t find a good answer to that question so I’ve decided to just opt for vti. That way I know I’m getting my dividend money because I can actually see it. Thanks again for the fund review!
If you want quarterly dividends, that’s fine. But it doesn’t affect compounding. Personally, I’d prefer no dividends or if I must have them, annual dividends. It will compound the same, there are fewer inadvertent wash sales/loss of qualified dividend status while tax loss harvesting, and if the investment has no dividends, no tax drag on growth for long term buy and hold investors from being forced to take a dividend and pay taxes on it.
But I also, like you, slightly prefer VTI/VTSAX.
As far as knowing whether Fidelity’s dividend approach makes a difference, just look at the returns. They’re pretty much the same so it can’t be making much difference, at least pre-tax.