FSKAX vs. ITOT: Comparing Total Stock Market Funds
In this article, we will compare two total stock market funds: FSKAX and ITOT.
FSKAX vs ITOT: Fund Comparison
While both funds trace their roots to the offerings of the expansive US equity market, they package it differently. FSKAX is a mutual fund, while ITOT is an ETF or exchange-traded fund.
Both are accomplishing a similar objective—providing you with widespread exposure across the US equity landscape—but the underlying mechanics and accessibility vary.
ETF vs. Mutual Funds
At their core, ETFs and Mutual Funds represent a collection—or a basket—of securities. However, one key difference lies in when and how investors can buy or sell these funds.
ETFs, like ITOT, can be bought and sold during regular trading hours, much like individual stocks. This means the price can fluctuate throughout the day based on supply and demand.
Mutual funds, on the other hand, like FSKAX, are purchased or sold only at the end of the trading day at the net asset value (NAV) price. As a result, all shareholders who put in their orders to buy or sell on a given day receive the same price, irrespective of when the order was placed.
As a long-term investor, it doesn’t make much of a difference. However, ETFs are generally recommended since they are newer and slightly more efficient based on their structure.
FSKAX vs. ITOT Overview
Broadly assessing both funds on their accessibility, cost efficiency, asset under management (AUM), and composition, both FSKAX and ITOT perform admirably well. They give investors wide access to the market at a relatively low cost. However, picking a winner will ultimately boil down to specific investor preferences and strategies.
If an investor prefers ETFs and wants to monitor their trades during market hours, then ITOT would seem like a suitable pick. One of the only benefits of mutual funds is the ability to invest any amount, regardless of share price. However, many brokerages allow you to buy fractional shares of ETFs, which negates this benefit.
Fund Holdings Comparison
Both ITOT and FSKAX are classified as Large Blend funds, meaning that their holdings strike a balance between both growth and value stocks from a variety of sectors. The underlying advantage here is reduced risk relative to funds tilted towards growth or value holdings.
ITOT tracks the S&P 1500, offering exposure to a diverse mix of small, mid, and large-cap US companies. FSKAX, on the other hand, attempts to replicate the performance of the Dow Jones U.S. Total Stock Market Index, delivering similar diversification.
Given their classification and identical goals of mirroring the overall market, both funds are often used as core holdings within a portfolio. So, whether you choose ITOT or FSKAX, you’re likely to achieve sufficient diversification.
Expense Ratio Analysis
One area where FSKAX and ITOT distinctly differentiate themselves is in their expense ratios. FSKAX boasts a slightly lower expense ratio of 0.015% compared to ITOT’s expense ratio of 0.03%. While this difference seems minuscule on the surface, compounded over many years of investing, it may result in a noticeable impact on your total returns.
Remember, lower expenses translate directly into more of your money being invested. Hence, in this context, FSKAX having a lower expense ratio might be more appealing for cost-conscious investors.
Dividend Yield Comparison
ITOT and FSKAX pay around a 1.48% dividend yield to investors.
Given their similar holdings in growth and value stocks, both FSKAX and ITOT tend to yield approximately the same yield. You may, however, see slight fluctuations depending on the specific composition of the fund’s holdings.
Performance Comparison
To fairly compare the performance of ITOT and FSKAX, it is pertinent to understand that they are designed to follow the ups and downs of the US equity market. Hence, in a broad bull market scenario, both funds should typically perform well, and in a bear market, the reverse would likely be seen.
That said, it’s also important to note that ITOT, being an ETF, can also be susceptible to premium or discount issues. This typically surfaces when the actual trading price of the ETF differs from its NAV. This adds an extra flavor to its performance that doesn’t exist with FSKAX.
Which Fund is Right for You?
If you enjoy the mechanics of an ETF, like having the ability to execute intra-trade transactions and have a habit of checking the market often during the day, ITOT will serve you well.
If you lean more towards the simplicity of ‘buy and forget’ investments and enjoy having your transactions mark the end of the business day, FSKAX would be a suitable fit.
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FAQs
What is the FSKAX equivalent to ITOT?
Historically, both FSKAX and ITOT have been found to invest in essentially similar asset classes. If you are trying to find the ETF equivalent to FSKAX, then ITOT is a suitable match. Both funds invest in a broad, diversified scope of stocks in the US equity market.
Is FSKAX a good index fund?
FSKAX is unquestionably a solid index fund choice. With an underlying investment philosophy of tracking the US equity market, FSKAX holds positions in an extensive range of small, mid, and large-cap US companies—the main ingredient in its formula for diversification.
How has FSKAX performed compared to FZROX?
It is important to understand that while both funds are designed to track the total US market, their performances do not entirely mirror each other, thanks to varying company stocks constituting each fund. Aggregate performance may be comparable, but individual investor results can vary significantly depending on factors like investment timing and resident tax laws.
What ETF is comparable to FSKAX?
If an ETF alternative to FSKAX is what you’re after, look no further than ITOT. Both vehicles invest across a broad range of US equities and tend to perform similarly overall.
