FZROX vs. FNILX: A Comprehensive Comparison
FZROX and FNILX are both Fidelity funds with no management fees, meaning you can get free exposure to the stock market with a passively managed fund.
However, free comes with another set of downsides like less frequent dividend payouts and other factors we will cover in this article.
Expense Ratio Analysis
One of the most striking features of both FZROX and FNILX is the absence of expense ratios. Fidelity made history in 2018 by launching the first two zero-fee index funds, FNILX and FZROX.
This means that investors face no charges for fund management, making these options exceptionally affordable for both experienced and novice traders. This feature could boost long-term returns, as even small charges would reduce cumulative earnings over time.
Dividend Yield Comparison
When it comes to dividends, both FZROX and FNILX only pay annually, whereas most other funds pay quarterly dividends. Since other funds pay dividends 4x as frequently, they will compound better and probably outweigh the benefit of having no expense ratio.
While the exact dividend yield varies with market conditions and fund performance, as of the end of Q3 2023, FZROX and FNILX produced yields of approximately 1.4% and 1.5%, respectively.
Holdings Examination
The makeup of their portfolios marks a distinguishing factor between FZROX and FNILX. The FZROX, tracking a total market index, holds over 2,600 securities stretching across large, mid, and small-cap categories. Conversely, FNILX, a large-cap fund, holds roughly 500 companies, aligning it closely to the S&P 500.
While FNILX is more focused on large-cap institutions, FZROX offers a wider range of market exposure. Depending on your investment strategy, the versatility of FZROX might be attractive, or the stability of the significant firms in FNILX could be more appealing.
Performance Comparison
Speaking purely on performance, FZROX and FNILX have displayed very similar results over time.
While FNILX’s strategy of focusing on large-capitalization has proven fruitful in bullish market trends, FZROX’s diversification amongst small and mid-cap stocks gave it an upper hand during favorable conditions for smaller companies. Therefore, market conditions significantly impact each fund’s performance.
Selecting the Right Option for You
Deciding between FZROX and FNILX requires a good understanding of your personal financial goals, risk tolerance, and the degree of diversity desired in your portfolio.
For investors seeking extensive market coverage, FZROX offers an attractive choice with its diverse holdings across all market caps. Conversely, those aiming for large-cap exposure favoring potential stability and growth might consider FNILX more closely.
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 - An Overview
Is FZROX a good investment?
The Fidelity ZERO Total Market Index Fund (FZROX) can be an excellent choice for investors seeking broad exposure to the U.S. stock market. It covers large-, mid-, and small-cap companies spanning across sectors, thereby offering comprehensive diversification. Coupled with its unbeatable expense ratio of 0.00%, FZROX offers a cost-effective avenue for long-term growth potential.
Is FNILX a good investment?
The Fidelity ZERO Large Cap Index Fund (FNILX) invests primarily in large-cap US companies, mimicking the performance of the S&P 500, with some flexibility as it is not officially an S&P 500 index fund. If you believe in the strength and stability offered by big firms, FNILX, with its zero-expense ratio, is a solid investment.
Is FNILX the same as the SPY?
The SPDR S&P 500 ETF Trust (SPY) and FNILX both track large-cap U.S. companies and mirror S&P 500’s performance. However, FNILX could include companies not yet added to the S&P 500 and has an expense ratio of 0.00%. On the other hand, SPY is an ETF providing real-time trading, unlike FNILX, which settles at the day’s end.
