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I've Been Buying Fidelity's Gigantic FXAIX Fund For Six Years Straight Before Realizing The True Cost
FXAIX's 0.015% expense ratio undercuts VOO's 0.03%, but taxable account investors pay capital gains distributions annually that quietly compound into measurable drag.
IVV delivers the same ETF tax efficiency as VOO at 0.03%, while FNILX eliminates fees entirely but locks investors into a Fidelity-only proprietary index.
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I’ve been buying Fidelity’s gigantic FXAIX fund every month for six years straight. You can see the first purchase in March, 2020. But, this was the first time I sat down to review the cost of Fidelity’s fund compared to other options.
Forget VOO’s 0.03%: Fidelity Will Sell You Large-Cap America for Exactly $0
Despite charging nothing, FNILX trailed VOO by over 2 percentage points over five years, as proprietary index tracking erased the fee advantage.
Fidelity's FXAIX tracks the actual S&P 500 at 0.015%, cutting VOO's cost in half while avoiding FNILX's proprietary index drag.
Selling VOO in a taxable account to chase FNILX's zero fee triggers capital gains that dwarf the $3 annual savings per $10,000.
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Owning Vanguard S&P 500 ETF (NYSEARCA:VOO) is the closest thing to a default answer in American investing. It tracks the S&P 500, trades like a stock, and charges a 0.03% expense ratio that most holders barely notice on their statements. VOO earned that trust by doing one job cheaply and predictably for years.
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Fidelity's FXAIX fund has lower fees but higher tax costs than Vanguard's VOO ETF in taxable accounts.
Fidelity's FXAIX mutual fund, while boasting a very low expense ratio of 0.015%, incurs higher tax costs due to quarterly capital gains distributions, especially in taxable accounts. Over six years, FXAIX returned 149.67%, slightly less than Vanguard's VOO ETF at 150.03%, which benefits from a tax-efficient ETF structure that avoids capital gains distributions. FXAIX is ideal for retirement accounts like IRAs and 401(k)s where tax drag is irrelevant, but taxable investors may prefer VOO despite its higher 0.03% fee for better after-tax returns. Both track the S&P 500, but the choice depends on account type and tax considerations.
July's Consumer Price Index (CPI) increased by 0.1% month-over-month and 3.4% year-over-year, leading markets to reduce expectations of a Federal Reserve rate hike in September. Despite this, risks of tighter monetary policy remain due to energy-driv…
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