FXAIX vs. IVV: Which is Best For You?
This article aims to compare two popular investment funds - Fidelity® 500 Index Fund (FXAIX) and iShares Core S&P 500 ETF (IVV) - to help you decide which is best for you.
FXAIX vs IVV: An Overview
FXAIX and IVV both track the S&P 500 index or 500 of the largest U.S. companies.
Therefore, these funds are popular for investors seeking broad exposure to the overall U.S. stock market.
That said, it’s crucial to understand that despite their similar investment objective, both have unique attributes determined by their respective management practices.
While FXAIX is a mutual fund managed by Fidelity, IVV is an ETF managed by Blackrock. ETFs are actively tradeable during stock market hours, while mutual funds only update once per day. This is the most noticeable difference when comparing these funds.
Expense Ratio Comparison
The Expense Ratio can significantly impact your returns over the long term.
FXAIX takes the cake here - the fund has a minuscule expense ratio of 0.015%, among the industry's lowest.
On the other hand, IVV, with an expense ratio of 0.03%, is still on the lower side compared to many other exchange-traded funds but is still twice as high as that of FXAIX.
Dividend Yield Comparison
Dividends are an additional source of income beyond capital appreciation and matter a lot in long-term investment scenarios. Both FXAIX and IVV distribute dividends to investors. Let’s review their dividend yields.
FXAIX exhibits an average dividend yield of 1.25% while IVV trails close by with a yield of around 1.22%. Both these yields are significantly reflective of the general dividend yield of the S&P 500 itself.
Holdings Comparison
FXAIX and IVV logically share a similar portfolio constitution reflecting their shared benchmark, the S&P 500 index. However, the exact weights of their holdings may vary slightly due to the different fund management strategies of Fidelity and iShares.
Typically, both have significant allocations to Information Technology, commanding around 20-25% of the portfolio composition, reflecting the domination of tech companies in the S&P 500 index.
Performance Analysis
Investment performance is hinged on a plethora of market factors. Other factors constant, in a bull market scenario, where large-cap stocks are performing well, both FXAIX and IVV will likely see stellar performances. Since both track the S&P 500, their returns are often closely matched.
Any discrepancies in performance could emanate from the funds’ expense ratios or small variations in portfolio weightings, causing one to nudge ahead of the other.
Also, it is crucial to remember that past performance does not guarantee future returns, and both FXAIX and IVV carry their inherent risks.
Which Fund is Better for you?
This question finds its answer in your individual investment goals, risk appetite, and investment horizon. Both FXAIX and IVV present an opportunity to gain comprehensive exposure to the U.S. equity market with a single investment.
If you have a predisposition towards lower costs, the FXAIX, with its negligible expense ratio, might be the better choice. However, if you have a penchant for the flexibility of intraday trading that comes with ETFs, you might be inclined toward IVV.
The final verdict hinges on your preference and trading style, making one an optimal choice.
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FAQ
Is FXAIX the best index fund?
No fund can indisputably claim the title of ‘the best’, given that each has unique features, and their profitability depends on various market conditions and individual investor’s requirements. However, FXAIX is a strong contender, with its low expense ratio and a comprehensive representation of the US large-cap equity market.
Is IVV a good long term investment?
IVV has a solid track record, closely following the performance of the S&P 500 Index, making it a good long-term investment option. With its low expense ratio and fairly consistent returns, IVV can be an excellent addition to a long-term investment portfolio.
Is investing in FXAIX a good investment?
As a representation of the broader S&P 500, FXAIX holds appeal for a wide array of investors. It allows investors to benefit from robust diversity across multiple sectors with a single investment. Additionally, its negligible expense ratio makes it a good investment option.
Is IVV the same as S&P 500?
IVV mimics the S&P 500 index and thus represents a wide swath of the U.S. stock market, encompassing about 500 of the largest U.S. companies. Therefore, while it’s not the same as S&P 500, it does track the S&P 500 closely, resulting in similar performance.
With these critical basics settled, let’s dive deeper into a comprehensive comparison of the two funds.
