FNILX vs. VOO: A Comprehensive Comparison
FNILX and VOO are similar investment funds that both track large-cap U.S. stocks. However, they track different indices and have some slight differences.
This comprehensive guide will address pertinent questions about FNILX and VOO and provide a rigorous comparison to help you decide which options suit your investment strategy best.
Key Characteristics
FNILX at a Glance
FNILX is Fidelity’s zero-fee index fund, which means it does not charge any management fees or commissions - an attractive proposition for cost-conscious investors. As FNILX aims to follow the S&P 500, it covers a large swath of the US equity market, including stocks of large-cap companies across sectors.
The primary offering here is long-term capital growth, making it an appealing component for investors planning for goals that are at least five years away, such as retirement.
VOO at a Glance
VOO is Vanguard’s Exchange Traded Fund (ETF) that keeps its stride with the S&P 500, offering a low expense ratio. Like FNILX, the fund’s goal is to provide long-term capital appreciation.
The distinctive feature here is that, as an ETF, it can be traded throughout the trading day at fluctuating prices as opposed to FNILX, which trades at fixed prices after the market closes.
Correlation
Both FNILX and VOO track around 500 large-cap companies, which means they a similar pool of stocks and have a high correlation. If market conditions push certain sectors or large-cap stocks in a particular direction, FNILX and VOO will likely respond similarly.
Performance Comparison
While precise numbers are subject to change based on variable market conditions, we can discuss the funds’ relative performance levels.
In bullish markets, when large-cap stocks are in an upward swing, both FNILX and VOO should outperform together. These are the times where market leaders –– tech giants, for instance –– can significantly push the value of these funds, thereby benefiting the performance of FNILX and VOO.
On the flip side, during bearish markets characterized by widespread sell-offs, both FNILX and VOO could see a drop in their asset values. However, due to their diversified holdings, these might not fall as drastically as individual stocks.
The primary difference between FNILX’s and VOO’s performance comes to light during market trading hours. FNILX, being an index fund, has its price determined at the market close. Meanwhile, due to its nature as an ETF, VOO’s price fluctuates throughout the day.
Dividend Comparison
A significant difference between FNILX and VOO is the frequency of dividend payments. FNILX, being a 0-cost fund, only pays a dividend once per year, as opposed to VOO, which pays quarterly.
The difference lies in the timeliness of reinvestment. While FNILX automatically reinvests earned dividends on receipt, VOO may slightly lag due to its structure. Precise dividend yields can vary year-to-year based on the individual companies’ performances in the index.
Expense Ratio Comparison
An expense ratio signifies the annual cost of managing the fund, deducting from your total returns. FNILX is a pioneer in this regard with its zero expense ratio, meaning that it charges no management fee.
In contrast, VOO carries an expense ratio of 0.03%. While the difference may seem small for a one-time investment, it can compound over time, especially for larger portfolios, giving FNILX a slight edge over VOO in returns.
Risk-Adjusted Performance Comparison
Reviewing risk-adjusted returns is pivotal, as it gives you a clear idea of the returns you could expect for each unit of risk taken in FNILX and VOO. Both present a similar risk-reward profile, given identical holdings and market pacing.
Seeing as the underlying index is well-diversified with stocks across various sectors, both options fare well in terms of risk adjustment against standalone stocks. The primary volatility arises from market-wide swings influencing the index.
Should I Invest in FNILX or VOO?
The choice between FNILX and VOO will ultimately depend on your personal preference and investing strategy. If you lean toward incurring zero expenses or enjoy Fidelity’s platform, FNILX is an excellent option.
However, if you demand flexibility and trading liquidity or you prefer Vanguard’s platform, VOO might be your go-to choice.
Researching ETFs is a time-consuming process and requires a lot of knowledge to ensure you make the best decisions for your money. If you want to accelerate your learning curve in finance and investing, you can join the HaiKhuu Trading Community.
HaiKhuu offers live trading calls, daily morning reports, and an awesome community of like-minded traders to learn from.
Frequently Asked Questions
Is FNILX Better than the S&P 500?
FNILX holds around 500 U.S. large-cap stocks, which is similar to the S&P 500, but it is not bound to the same requirements. While it is tough to say if it is ‘better,’ it will naturally perform relatively similarly to it, as the objectives are extremely similar.
Is FNILX a Good Investment?
Just as with any investment, the goodness of FNILX hinges on your financial goals and risk tolerance. If you are seeking long-term growth with a low expense ratio and can stomach some degree of market volatility, FNILX could be a great inclusion in your portfolio.
What is the ETF Equivalent of FNILX?
VOO is the ETF equivalent of FNILX. They both aim to track the buoyancy of the S&P 500 but have different structures: VOO is an ETF, and FNILX is an index fund.
Is FNILX Tax Efficient?
Yes, FNILX is designed to be tax-efficient. Unlike traditional mutual funds, FNILX excels in limiting capital gains distributions, which could trigger tax liabilities.
