FXAIX vs VOO: Fidelity vs Vanguard for S&P 500 Investors
Both FXAIX and VOO track the S&P 500, but FXAIX is actually cheaper. The catch: it is a mutual fund, not an ETF. Here is when each makes sense and why your brokerage matters.
The Fund That Is Cheaper Than VOO
Most people assume Vanguard has the lowest-cost index funds. Fidelity disagrees. FXAIX, Fidelity's S&P 500 index mutual fund, charges 0.015% -- half the expense ratio of VOO's 0.03%.
That surprises a lot of people. So does the fact that FXAIX is a mutual fund, not an ETF. That distinction matters more than most investors realize, and it's the core of the FXAIX vs VOO decision.
What Each Fund Is
FXAIX (Fidelity 500 Index Fund) is a mutual fund that tracks the S&P 500 Index. It's managed by Fidelity and available exclusively at Fidelity. Being a mutual fund means it prices once per day at the closing NAV (net asset value), trades in dollar amounts (not shares), and automatically allows fractional investing. Expense ratio: 0.015%. VOO (Vanguard S&P 500 ETF) is an exchange-traded fund that tracks the S&P 500 Index. It trades on the NYSE Arca exchange like a stock, prices continuously throughout the trading day, and can be purchased at most US brokerages. Expense ratio: 0.03%.Both track the same S&P 500 Index. Both are among the largest and most respected investment vehicles in the world. The differences are structural.
The Cost Comparison
| FXAIX | VOO | |
|---|---|---|
| Type | Mutual fund | ETF |
| Index | S&P 500 | S&P 500 |
| Expense ratio | 0.015% | 0.03% |
| AUM | ~$550B+ | ~$550B+ |
| Intraday trading | No | Yes |
| Fractional investing | Yes (natively) | Depends on broker |
| Available outside Fidelity | No | Yes |
On $100,000 held for 10 years:
- FXAIX annual fee: $15
- VOO annual fee: $30
- Annual savings with FXAIX: $15
The ETF vs Mutual Fund Trade-Off
The bigger question isn't the expense ratio -- it's the structure.
FXAIX advantages:- Automatic fractional investing. If you invest $500, you get exactly $500 worth of FXAIX. No leftovers.
- Automatic dividend reinvestment. Dividends go straight back into more shares, including fractional amounts.
- Automatic investing works seamlessly. Set up a recurring $500/month deposit and it just works.
- Slightly cheaper.
- Works at any brokerage. Fidelity, Schwab, Vanguard, Interactive Brokers, TD Ameritrade -- everywhere.
- Intraday trading. You can buy or sell during market hours at the current price.
- Transparency. The price you see is the price you pay, right now.
- Options market. If you want to sell covered calls against your position, VOO has an options market. FXAIX doesn't.
- Portability. If you move brokerages, VOO transfers in-kind. FXAIX may need to be sold (possible tax event) if you move to a non-Fidelity broker.
Who Should Own FXAIX
FXAIX is ideal if:
- You're a Fidelity customer and plan to stay one
- You invest through automatic recurring transfers and want fractional simplicity
- You're in a tax-advantaged account (IRA or 401k) at Fidelity
- You don't trade options or need intraday pricing
- You want the absolute lowest cost for S&P 500 exposure
Who Should Own VOO
VOO is better if:
- You use multiple brokerages or plan to switch
- You want intraday flexibility
- You use options strategies (covered calls, etc.)
- You're not at Fidelity
- You value portability more than the 0.015% cost difference
The Important Tax Note
For taxable accounts, mutual funds like FXAIX can sometimes distribute capital gains to shareholders at year end, which creates a taxable event even if you didn't sell anything. ETFs like VOO are generally more tax-efficient because of the in-kind creation/redemption mechanism.
For tax-advantaged accounts (IRA, 401k), this doesn't matter -- no taxes either way.
The Bottom Line
If you're at Fidelity: FXAIX is arguably the better choice for a core S&P 500 holding in tax-advantaged accounts. Lower cost, simpler automatic investing, no structural downside if you're staying at Fidelity.
If you're not at Fidelity, or you want flexibility and portability: VOO. It's still very cheap and it works everywhere.
Compare Them Yourself
See how FXAIX and VOO have tracked each other historically -- they should be nearly identical since they track the same index.
Compare FXAIX vs VOO on StockResearchThis post is for informational purposes only and does not constitute financial advice. Mutual funds may have different tax implications than ETFs in taxable accounts. Consult a tax advisor for your specific situation.