By Phil West, WCI Contributor
FXAIX isn’t an acronym, exactly—but it’s a recognized abbreviation for an investment vehicle that you might be interested in if you’re looking to add an index fund to your investment profile. FXAIX is shorthand for the Fidelity 500 Index Fund. As we've explained previously, FXAIX is a mutual fund that mirrors the Standard & Poor’s 500 Index (S&P 500).
That’s the index that tracks the stock performance of 500 large U.S.-based companies, and as its online factsheet shows, it’s incredibly diverse and draws from a number of different major sectors of the US economy. That includes financial services, information technology, and healthcare. Familiar names like Apple, Microsoft, Alphabet (the parent company of Google), Berkshire Hathaway, Amazon, Exxon Mobil, and JPMorgan Chase are among the biggest companies in the index.
Here's what you should know about FXAIX.
FXAIX History and Statistics
FXAIX has generated stable growth over time and even weathered the global economic dip that accompanied the COVID-19 pandemic shutdown in the first quarter of 2020, recovering its lost value by July of that year and climbing in value since. As we've noted previously, “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.”
FXAIX is regarded as a sound investment vehicle because it is based on such a diversified portfolio, and though it’s not as broadly diversified as the FSKAX—another Fidelity index fund that anchors itself around the Dow Jones US Total Stock Market Index—it does feature the top-performing stocks in the US in a quite established measure of the American economy.
The S&P 500 was first established in 1957, and it’s possible for companies to be delisted from the index if they deviate significantly from qualifying criteria for making the list, including total market capitalization of at least $14.5 billion, a float-adjusted liquidity ratio (FALR) greater than or equal to 0.75, and a positive sum of the most recent four consecutive quarters of trailing earnings.
In a USA Today comparison of four major S&P 500 index funds that the publication determined to be the best—all with at least a four-star rating from Morningstar—FXAIX was the most favorably viewed, given it had the lowest expense rate of the four (at 0.015%), the best 10-year annualized rate, and the greatest asset amount of those four. The article also noted, “In addition, the fund does not have a minimum initial investment requirement, sales loads, or trading fees.”
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Is There a Risk Involved With FXAIX?
As investor.gov notes regarding index funds, “Like any investment, index funds involve risk. An index fund will be subject to the same general risks as the securities in the index it tracks.” In addition, index funds “may have less flexibility than a non-index fund to react to price declines in the securities in the index.”
But there are certainly more risky investments available to you compared to an index fund, and as index funds go, FXAIX is a solid option for an investor looking for a balance of growth and stability.
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