If you’re looking for a simple, affordable, and easy way to invest in the U.S. stock market over the long term, the Fidelity 500 Index Fund (ticker symbol: FXAIX) is a name that’s hard to ignore. This mutual fund tracks the S&P 500 Index, which includes the 500 largest U.S. companies, including global giants like Apple, Microsoft, Amazon, NVIDIA, and Alphabet. In this article, we’ll take a closer look at FXAIX’s fees, performance, advantages, disadvantages, and investment approach so you can make an informed decision and make the decision easier.
What is the Fidelity 500 Index Fund (FXAIX)?
FXAIX is a passive index mutual fund launched by Fidelity Investments in May 2011. The fund aims to provide results that match the performance of the S&P 500 Index. The S&P 500 is a market capitalization-weighted index of large-cap companies in the U.S. stock market that represents approximately 80% of the value of the entire U.S. It makes up about 80% of the total value of the U.S. equity market.
FXAIX invests at least 80% of its assets in stocks that are included in the S&P 500. Because it is a passively managed fund, the fund manager does not pick stocks himself but rather tracks the index, keeping expenses extremely low.
FXAIX Fees and Expense Ratio
FXAIX is characterized by its extremely low expense ratio of just 0.015 percent, which is negligible. This means that if you invest $10,000, the annual fee will be only $1.50. FXAIX costs only half as much as VOO (Vanguard S&P 500 ETF), which charges 0.03%. This makes FXAIX one of the lowest-cost S&P 500 funds you can buy. Its low cost is a big reason why investors choose it.
Why is a low fee important?
Over the long term, the difference in expense ratio compounds to a large amount. For example, on a $300,000 investment, the difference between 0.015 percent and 0.03 percent over 30 years amounts to hundreds of dollars. Therefore, low-fee funds are always beneficial for long-term investors.
FXAIX Historical Performance
FXAIX has always shown excellent performance in its history. According to recent data, this fund has given returns of more than 22% in the last one year, the three-year average annual return has been more than 20%, while the ten-year average annual return has been about 15%. In 2024, it returned 25%, and in 2023, it returned 26.29%.
Remember that past performance is not a guarantee of future performance. Volatility in the stock market is natural, and in 2022, this fund also gave a negative return of 18.13%.
How to invest in FXAIX?
To invest in FXAIX, you need to open a brokerage account with Fidelity Investments. This fund is available only on Fidelity’s platform and cannot be transferred in-kind to any other broker.
No minimum investment
A major advantage of FXAIX is that it has no minimum investment requirement. You can start with just one dollar and buy in exact dollar amounts, which is great for dollar-cost averaging. There are also no transaction fees.
How to Trade
Since FXAIX is a mutual fund and not an ETF, it is not traded on a stock exchange throughout the day. All buy and sell orders are processed at the fund’s Net Asset Value (NAV) after the market closes.
FXAIX vs. Other S&P 500 Funds
FXAIX vs. VOO
VOO is the most popular S&P 500 ETF from Vanguard. Both track the same index, but here are the key differences: FXAIX has an expense ratio of just 0.015%, while VOO has an expense ratio of 0.03%. FXAIX is a mutual fund that can be purchased in exact dollar amounts, while VOO is an ETF that trades in shares. However, VOO may be better in terms of tax efficiency because ETFs are generally more tax-efficient than mutual funds.
FXAIX vs. FNILX
FNILX (Fidelity ZERO Large Cap Index Fund) has an expense ratio of zero %. However, FNILX does not follow the S&P 500 index. Instead, it follows Fidelity’s own large-cap index. Of course, the performance of both is very similar, but FXAIX’s tracking is more accurate because it follows the actual S&P 500.
FXAIX Pros and Cons
Pros
The biggest advantages of FXAIX include its extremely low expense ratio (0.015 percent), no minimum investment, instant access to the 500 largest U.S. companies, consistently strong historical performance, and a 5-star Morningstar rating. It also offers the ability to purchase in exact dollar amounts for dollar-cost averaging.
Cons
The biggest limitation of FXAIX is that it is only available through a Fidelity account and cannot be transferred in-kind to another broker. It is also limited to large-cap U.S. stocks; mid-cap, small-cap, and international stocks are not included. Mutual funds may be less tax-advantaged than ETFs in taxable accounts.
Who is FXAIX suitable for?
This fund is best for investors who have a long-term view, prefer low fees, and want stable exposure to the US large-cap market. FXAIX is a great choice for 401(k), IRA, and retirement accounts because the tax efficiency difference becomes less significant in these accounts.
Important Disclaimer: Investment Risks
This article is for educational and informational purposes only and is not investment advice in any way. Investing in the stock market involves risks, and your original investment may be reduced or eliminated. It is very important to consult a qualified financial advisor before making any investment decision. It is important to verify your country’s laws and available platforms for investing directly in US funds from Pakistan or other countries.
The bottom line
The Fidelity 500 Index Fund (FXAIX) is a simple, affordable, and convenient way to invest in the 500 largest companies in the US stock market. Its 0.015% expense ratio makes it one of the cheapest platforms on the market, and its 5-star Morningstar rating confirms its quality. FXAIX can be a great core holding if you use the Fidelity platform and want to adopt a long-term, passive investment strategy. However, adding international stocks and bonds is also essential for complete portfolio diversification. Before making any financial decisions, be sure to evaluate your personal situation and seek guidance from a qualified advisor.
FAQs:
Q: What is the expense ratio of FXAIX?
A: FXAIX has an expense ratio of just 0.015%, making it one of the lowest-fee S&P 500 funds on the market. The annual fee is just $1.50 for every $10,000 invested, which is negligible.
Q: Is there a minimum investment in FXAIX?
A: No, there is no minimum investment in FXAIX. You can start investing with as little as $1 and buy in exact dollar amounts. That’s why FXAIX is so important.
Q: What’s the difference between FXAIX and VOO?
A: Both track the S&P 500. FXAIX is a mutual fund (expense ratio: 0.015%) that is only available at Fidelity. VOO is an ETF (expense ratio: 0.03%) that can be purchased from any broker and can be more tax-efficient in taxable accounts.
Q: Is it possible to invest in FXAIX from Pakistan?
A: FXAIX is a US mutual fund, and direct access may be limited. It is important to verify your country’s financial laws, available brokerage platforms, and tax regulations before investing from Pakistan or other countries.
Q: What is FXAIX’s Morningstar rating?
A: FXAIX has been rated 5 stars by Morningstar in the Large Blend category, reflecting its consistently strong risk-adjusted performance. Morningstar analysts also give the fund a Gold rating.
Q: Is FXAIX a mutual fund or ETF?
A: FXAIX is a mutual fund, not an ETF. Therefore, it is not traded on a stock exchange throughout the day, but is bought and sold at NAV after the market closes. Fidelity’s alternative ETF form is not currently available for FXAIX.
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