By Eric Rosenberg, WCI Contributor

If you’re on the fence about deciding whether to invest with FXAIX or VOO, you’ve come to the right place. FXAIX and VOO are large investment funds from two of the largest investment companies in the United States. Designed to follow the performance of the popular S&P 500 index, Fidelity and Vanguard both offer low-fee variations.

Here’s a closer look at FXAIX vs. VOO to help you determine which makes the most sense for your investment goals.


What Is an S&P 500 Index Fund?

Before looking at which one is best, it’s important to understand the basics of an S&P 500 index fund. As the name suggests, an S&P 500 index fund is an investment fund tracking the performance of the S&P 500.

The S&P 500 is a group of 500 of the largest companies in the US. It includes well-known names such as Apple, Microsoft, Amazon, Alphabet (Google), and Berkshire Hathaway. Rather than buying all 500 stocks for your portfolio, a single purchase of an S&P 500 mutual fund or exchange-traded fund (ETF) gives you exposure to all 500 stocks with a single investment.

S&P 500 index funds are popular among the early retirement community, as the index returned an average of around 10% per year (over a long investment horizon) for the past several decades.

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What Is FXAIX?

FXAIX is the mutual fund ticker symbol for the Fidelity 500 Index Fund. The fund earns a five-star Gold rating from Morningstar and ranks above average compared to most industry peers. With a low 0.015% expense ratio, FXAIX is one of the cheapest ways to hold the 500 stocks in the S&P 500 index.

As a mutual fund, trades occur daily at the market close when net asset values update. Opened in 2011, the fund almost perfectly follows the S&P 500’s performance, lagging by almost exactly the annual expense ratio. Its 10-year average return, as of July 2023, is 12.85%.

The fund’s five managers have an average tenure of 7.5 years managing the fund, with the longest-serving at 14 years. FXAIX is inexpensive, and it performs well—and it comes from one of the most trusted names in low-cost investing. If you’re looking for an S&P 500 fund, FXAIX is a solid option.

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What Is VOO?

VOO is the ticker symbol for the Vanguard S&P 500 ETF. VOO comes from Vanguard, the OG creator of index funds. While Vanguard was an early pioneer in low-fee index investing, it has slowly let competitors like Fidelity surpass its pricing and innovative industry lead (and people still have complaints about Vanguard's customer service and whether it's lost its mission). The fund charges an annual 0.030% management fee.

As an ETF, you can buy and sell with near-instantaneous transaction times during market hours. The fund earns a five-star Gold rating from Morningstar and traces its history to its inception in 2010. Its 10-year average return, as of July 2023, is 12.82%.

An extremely efficient fund, VOO generally outperforms category peers and lags the S&P 500 index almost exactly by the cost of the expense ratio. Vanguard's trading and investment platform isn't as good as what Fidelity offers, and Vanguard charges higher account fees. But when it comes to S&P 500 ETFs, VOO stands out as a best-in-class offering. It is also available in traditional mutual fund form under ticker VFIAX.

More information here:

VFIAX vs. VOO: What Is the Best 500 Index Fund?


FXAIX vs. VOO: Which Should I Choose?

The decision on FXAIX vs. VOO generally comes down to convenience. FXAIX might be slightly cheaper, but at these sorts of “near-free” expense ratios, the price really shouldn't make your decision. If you're already investing at Fidelity and like traditional mutual funds, FXAIX is a fantastic choice. If you're already at Vanguard, however, VOO or VFIAX are going to be cheaper for you. If you really want an ETF, VOO is the obvious winner. Otherwise, these funds are very, very similar.

fxaix vs voo comparison mutual funds


When you strip the funds down to their core, you can see that they’re nearly identical in holdings and performance. That’s why convenience should lead you to pick your favorite investment.

Remember that those who are proponents of ETFs say, as compared to mutual funds, they have better tax efficiency, higher transparency, lower average fees, intraday liquidity, and insulation from forced buying (on the other hand, their detractors point out you might have to pay a wider bid-ask spread with ETFs and that dividend reinvestment isn't as universal as it is with mutual funds).

fxaix vs voo

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FXAIX vs. VOO: Which Is Better?

So, which is better? Is it the low-cost Vanguard ETF or the low-cost Fidelity mutual fund? Both are better, depending on your investment goals. The tax efficiency and the trading abilities of an ETF could give VOO an edge, but FXAIX has a slightly lower cost.

While 0.03% was recently considered rock-bottom pricing, Fidelity charges half as much. And with better customer service and IT interface, Fidelity also takes the lead over Vanguard when choosing a brokerage. If you can buy and sell without additional transaction fees and you don’t care about having trades go through instantly, you would likely be best off with FXAIX.

But that doesn’t mean VOO is a bad choice. It’s nearly twice the size of FXAIX, indicating its higher popularity. All of those investors are not wrong. While VOO is more costly, it’s still a pretty good choice for most long-term investors. If you pick either of these funds for a long-term investment goal, you likely won't regret it. Rather than hem and haw between the two, it’s most important to start investing regularly in general so you’ll experience financial success for years to come.

Before buying an S&P 500 index fund, though, consider whether you would be better off with a total stock market index fund instead. There's a reason the Vanguard Total Stock Market Fund (available as a traditional mutual fund or ETF) is Dr. Jim Dahle's favorite mutual fund and makes up 25% of his portfolio. Total stock market funds offer more diversification (about 4,000 stocks instead of 500) while also avoiding front-running issues that S&P 500 funds face.

Do you have experience with either FXAIX or VOO? Which would work better in your portfolio? Do you like investing in mutual funds or ETFs more? Comment below!