FSKAX vs. VTI - Which is Better For You?
A Quick Overview of FSKAX and VTI
FSKAX is a mutual fund, while VTI is an ETF
FSKAX has a lower expense ratio
FSKAX pays semi-annual dividends instead of quarterly like VTI
While both aim to offer investors extensive exposure to the U.S. equity market, there are some crucial differences between them.
FSKAX, managed by Fidelity, is a mutual fund that aims to match the performance of the U.S. stock market as closely as possible. It typifies index fund investing, a strategy that involves buying a broad-market index to enjoy the benefits of diversification and lowered risk.
VTI, on the other hand, is an exchange-traded fund (ETF) managed by Vanguard. Like FSKAX, VTI aims to replicate the performance of the U.S. stock market. However, as an ETF, VTI offers the flexibility of intraday trading, something mutual funds like FSKAX cannot accommodate.
Expense Ratio Comparison
In investment terms, the cost of managing a fund or ETF is expressed as its ‘expense ratio.’ It measures the cost incurred per unit of investment in percentage terms.
As of writing, FSKAX has an expense ratio of 0.015%, which implies that for every $10,000 invested, the annual cost is approximately $1.50.
On the other hand, VTI carries an expense ratio of 0.03%, which translates to an annual cost of about $3 per $10,000 invested.
Albeit the difference is small, keep in mind that over a long period, the effect of compound interest will make this difference much more significant.
Dividend Yield Comparison
Both FSKAX and VTI pay dividends to investors. As of the last recording, FSKAX posted a 12-month yield of 1.30%, while VTI posted a similar 12-month yield of 1.43%.
While these figures fluctuate over time due to market conditions and fund performance, they are fairly comparable for these two funds.
Holdings Comparison
By investing in either FSKAX or VTI, the investor effectively gains exposure to all major US-based public companies, thereby benefiting from the prowess of the American economy.
Both mimic the entire US equity market, and their top holdings include industry giants such as Apple, Microsoft, and Amazon.
Performance Comparison
To better contextualize the performance of FSKAX and VTI, imagine a scenario where the US economy enters a phase of rapid growth. Technology companies see their profits soaring and start to dominate the market.
In this situation, the tech-heavy portfolios of our two contenders are likely to perform quite well. However, during a market downturn, when investors usually shift to more stable value stocks, the relative performance may dampen.
Nevertheless, the aim of both FSKAX and VTI is to mirror the overall market performance and not beat it.
Which is Better for You?
The final verdict on FSKAX vs. VTI ultimately comes down to the investor’s preference over mutual funds or ETFs.
If regular and automatic investments styled towards a traditional method of investing are your priority, FSKAX assists with that and gives you the flexibility of fractional shares. However, most brokers do allow fractional shares for ETFs now anyway.
On the contrary, if trading flexibility and potentially lower costs with the option of buying through various brokerages are relevant aspects to you, then VTI may be a better choice.
Both FSKAX and VTI are robust investment tools, offering broad exposure to the US market with minimal expense ratios and decent dividend yields.
As an investor, reflecting on their differences and considering personal priorities will lead you to the choice that better suits your portfolio.
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Frequently Asked Questions
1. What is the Fidelity equivalent of VTI?
The Fidelity equivalent of Vanguard’s VTI is the Fidelity Total Market Index Fund (FSKAX). Both FSKAX and VTI aim to deliver broad exposure to the U.S. equity market. However, FSKAX is a mutual fund, while VTI is an exchange-traded fund (ETF).
2. What is the ETF equivalent of FSKAX?
The ETF equivalent of Fidelity’s FSKAX can arguably be the Vanguard Total Stock Market ETF (VTI). Both aim to provide comprehensive coverage of the U.S. stock market, but FSKAX operates as a mutual fund and VTI as an ETF.
