FXAIX vs. SPY: A Comprehensive Comparison
FXAIX and SPY are S&P 500 funds designed to give you exposure to the top 500 large-cap U.S. companies on the stock market.
However, there are differences, including the fund structure and expense ratios you must understand before investing in one.
Expense Ratio Comparison
Choosing a fund with a low expense ratio can significantly influence your returns as an investor over time. Lower costs mean you keep a larger slice of your investment’s returns.
Analyzing Expense Ratios of FXAIX and SPY
Among the biggest appeals of FXAIX is its low expense ratio of 0.015%, making it one of the most cost-effective options for investors aiming to replicate the performance of the S&P 500. On the other hand, the expense ratio for SPY is moderately higher at 0.09%.
Impact on Long-Term Performance
Compared to higher-cost mutual funds, low-cost funds like FXAIX have a considerable advantage, especially over more extended periods. Over time, a seemingly small difference in fees can create a significant wealth gap.
Dividend Yield Analysis
Your investments’ dividend yield can be critical to an investor’s total return, supplying steady income and potential reinvestment growth.
Examining Dividend Yields of FXAIX vs SPY
Both FXAIX and SPY have a dividend yield of about 1.45%. There shouldn’t be a considerable difference between them for these funds since they track the same index.
Therefore, the dividend yield isn’t that important to consider when choosing between these funds.
Holdings Comparison
The Fidelity 500 Index Fund and SPDR S&P 500 ETF both aim to replicate the S&P 500 index, meaning they both hold a similar variety of the largest publicly traded companies in the U.S.
Comparative Analysis of FXAIX and SPY Holdings
The holdings of FXAIX and SPY mainly consist of the same set of stocks that represent different sectors, the most significant being Technology, Healthcare, and Consumer Discretionary. This similarity in holdings forms the foundation for their comparable performances.
Evaluating Diversification and Risk Exposure
Both funds maintain nearly identical sector distributions and are diversified across more than 500 holdings. This broad diversification reduces the impact of any one company’s poor performance on the overall portfolio, mitigating risk.
Long-Term Performance Analysis: FXAIX vs SPY
The Fidelity 500 Index Fund and SPDR S&P 500 have demonstrated similar long-term performance, each providing substantial capital appreciation possibilities. They both aim to generate returns in line with the S&P 500.
Factors Influencing Returns
Although the difference in performance between the two funds can depend on a series of factors, such as changes in the economy, their management fees, and the timing of dividend reinvestment, a key metric to consider for both passive investments is that their success is heavily tied to the well-being of the overall market.
Factors to Consider for Individual Investors
Both of these funds are excellent choices for investors seeking diversified exposure to large-cap U.S. stocks. However, individual factors such as your brokerage arrangement, trading habits, and personal preference for mutual funds or ETFs may swing your decision one way or the other.
For long-term investors, either will likely suffice as the cornerstone of a portfolio.
For active traders, SPY will be more advantageous.
SPY vs. FXAIX - Key Takeaways and Recommendations
When choosing between SPY or FXAIX, the individual characteristics of each investment, as well as personal factors, should be taken into consideration. Make sure the fund aligns with your investment expectations, as both are unique in their own way.
In conclusion, decision-making depends on an individual’s financial goals: while handling costs, the flexibility of trading, liquidity, dividend yield, and risks also play an essential role in creating a healthy, diversified portfolio.
If you want to learn more about investing in the stock market, 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.
