FSKAX vs. FZROX: A Comprehensive Analysis
Before a deep dive into the nitty-gritty, let’s start with a clear overview of these funds:
FSKAX Overview
FSKAX is a total stock market mutual fund provided by Fidelity Investments. Founded in 1997 and holding an extensive number of stocks spanning multiple sectors, FSKAX aims to emulate the performance of the Dow Jones U.S. Total Stock Market Index.
Over the years, FSKAX has garnered a notable reputation for offering substantial diversification by investing in around 3,500 different holdings.
FZROX Overview
FZROX is one of Fidelity’s most innovative fund offerings. It was launched in 2018 as the first-ever zero-fee index fund. However, since it doesn’t have an expense ratio, you can only purchase the fund with a Fidelity account. Additionally, the dividends are only paid annually rather than quarterly, like most funds.
It’s important to note that FZROX differs from FSKAX in its index selection; it follows the proprietary Fidelity U.S. Total Investable Market Index rather than an index provided by traditional index providers.
Despite being relatively young, FZROX offers substantial diversification with over 2,500 stocks in its portfolio.
Expense Ratio Comparison: FSKAX and FZROX
Ease up on the pocketbook because this is one critical aspect where FZROX indisputably takes the crown.
The most glowing feature of FZROX is its 0.00% expense ratio - further aged by the fact you won’t find this offer in any other family of funds in the current marketplace. Technically, you are not being charged for the management of your investments in this fund.
In contrast, FSKAX has an expense ratio of 0.015%, which, although minimal, can’t compete with the allure of zero fees. Still, one should note that the difference in expense ratios can often amount to just a few dollars annually – insignificant for most casual investors.
Dividend Yield Comparison: FSKAX and FZROX
While the exact numbers can fluctuate, FSKAX offers a trailing twelve-month (TTM) dividend yield of 1.52%.
On the other hand, the TTM dividend yield for FZROX stands at around 1.44%.
Keep in mind, though, that FZROX distributes its dividends annually, while FSKAX does so semi-annually.
Most funds offer quarterly payments, which is where these funds do not shine compared to others that pay quarterly dividends.
Holdings Comparison: FSKAX and FZROX
In terms of holdings, both funds offer comprehensive exposure to U.S. equities. However, there is a divergence when it comes to the exact number of stocks held.
FSKAX is made up of approximately 3,500 stocks, which significantly outweighs the number of constituents in FZROX’s portfolio - which comprises around 2,500 holdings.
This difference in holdings transpires from FSKAX’s index – the Dow Jones U.S. Total Stock Market Index – having a broader gamut of companies than the Fidelity U.S. Total Investable Market Index tracked by FZROX.
Therefore, when it comes to sheer diversification, FSKAX generally appears to be the more diversified option.
Performance Comparison: FSKAX and FZROX
Investment performance is a big selling point, and the historical returns of both FSKAX and FZROX prove to be nearly identical.
As a rule of thumb, in periods of a strong stock market, expect both FSKAX and FZROX to excel. However, it’s crucial to remember that during times of market turbulence or downturns, both of these index funds are likely to follow suit, given their broad market exposure.
This does mean they’re reflective of the market’s overall ups and downs, serving as more reliable for long-term investments rather than short-term speculation.
Which is Better For You: FSKAX or FZROX?
Ultimately, the decision boils down to your specific financial objectives, and there are compelling arguments for both funds.
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If pure affordability is your top criteria, FZROX holds a strong upper hand with its 0.00% expense ratio, a unique trait currently unmatched in the marketplace.
Similarly, if you’re a not-so-regular dividend recipient and okay with annual distributions, FZROX should serve you well.
However, if broader exposure to diverse stocks across various sectors holds more appeal, FSKAX could be your optimal choice. Similarly, quarterly dividend distributions from FSKAX can offer a more regular income stream if that’s your preference.
In the grand scheme of things, both funds offer an efficient, inexpensive, and simplified way to buy into the wealth-building power of American companies.
Regardless of your selection, you’ll be acquiring an enormous, diversified portfolio of U.S. stocks at a rock-bottom cost!
FAQ
Is FSKAX a Good Long-term Investment?
There’s a well-deserved consensus among many investors that the Fidelity Total Market Index Fund (FSKAX) is a fantastic long-term investment. The rationale behind this is its diversification advantage, as it is designed to represent the entire U.S. equity market by holding approximately 3,500 different securities.
Should I invest in FZROX or Fxaix?
Choosing between FZROX and Fidelity® 500 Index Fund® (FXAIX) primarily depends on your preference for market scope. FXAIX dedicates its investments to the 500 leading U.S. companies, closely mirroring the performance of the S&P 500. On the other hand, FZROX encompasses the total U.S. stock market, providing a broader exposure. If you seek to closely track the performance of the S&P 500 with large-cap orientation, FXAIX would be a good choice. Alternatively, FZROX could be the better option if you want wider-reaching exposure, including companies beyond the top 500, in the absence of expense ratios.
What ETF is Comparable to FSKAX?
For those seeking an ETF equivalent to FSKAX, the Vanguard Total Stock Market ETF (VTI) could be the best pick. Just like FSKAX, the VTI offers wide-ranging exposure to the U.S. stock market and follows a cap-weighted approach, encompassing a portfolio of small, mid, and large-cap equities. Given the similarities, VTI operates as a fitting ETF counterpart to FSKAX.
