By Jamie Johnson, WCI Contributor
FSKAX and FZROX are two popular funds offered by Fidelity. Both are low-cost mutual funds that invest in large-cap stocks. Both, by virtue of being index funds, are likely a good (and cheap!) place to invest your money. But there are some differences. If you’re having trouble choosing between FSKAX vs. FZROX, let's highlight some of the benefits of both funds.
What Is FSKAX?
The Fidelity Total Market Index Fund (FSKAX) is a low-cost mutual fund that holds nearly 4,000 stocks. It’s one of the largest funds in the world and is a good option for investors looking for broad market exposure.
FSKAX tracks the Dow Jones US Total Stock Market Index, and it currently has nearly $66 billion in net assets, as of March 2023. The fund has returned 11.66% over the past three years and 11.79% over the last decade [2023].
Here is a list of the funds’ top 10 performing stocks:
- Apple Inc.
- Microsoft Inc.
- Amazon.com Inc.
- NVIDIA Corp.
- Tesla Inc.
- Berkshire Hathaway Inc.
- Alphabet Inc. (Cl A)
- Alphabet Inc. (Cl C)
- Exxon Mobil Corp.
- UnitedHealth Group Inc.
The fund invests in a variety of markets, but here are its primary sectors:
- Information technology — 25.88%
- Healthcare — 14.009%
- Financials — 12.41%
- Consumer discretionary — 10.8%
What Is FZROX?
FZROX stands for the Fidelity ZERO Total Market Index Fund, and it’s one of four zero-fee funds offered by Fidelity. Created in 2018, FZROX, which holds about 2,800 stocks, is a large blend fund that invests its assets in common stocks included in the US Total Investable Market Index.
As of March 2023, the fund has returned 11.89% over the last three years, which is all the data we have to look at. FZROX is appealing to many investors since there are no fees or expense ratios attached to the fund, and there’s no minimum investment to get started. However, the fund only pays a dividend once a year in December. That could be a potential downside if you rely on dividend income for your expenses.
Here is a list of the funds’ top 10 performing stocks:
- Apple Inc. (at 5.6% of the fund, this stock is the largest holding in FZROX)
- Microsoft Corp.
- Amazon.com Inc.
- NVIDIA Corp.
- Tesla Inc.
- Berkshire Hathaway Inc. Class B
- Alphabet Inc. Class A
- Alphabet Inc. Class C
- Exxon Mobil
- UnitedHealth Group Inc.
Like FSKAX, the fund invests in a variety of markets, but here are its primary sectors:
- Technology — 25.85%
- Healthcare — 14.09%
- Financial Services — 12.35%
- Consumer Discretionary — 10.84%
More information here:
FSKAX vs. VTSAX: What Is the Best Total Stock Market Index Fund?
FSKAX vs. FZROX: Similarities and Differences
Though FSKAX and FZROX are different funds, there are some similarities between the two. Both are low-cost funds issued by Fidelity with no minimum investment required to get started. The two funds also invest in similar stocks in similar markets.
Though FSKAX has a higher expense ratio, the difference is pretty small. Here is a chart highlighting the similarities and differences between the two funds.
One of the primary differences between the two funds is the index they track—FSKAX tracks the Dow Jones, and FZROX tracks the US Total Investable Market Index. The size of the funds and the number of stocks held is another significant difference.
As of March 2023, FSKAX has $66 billion in net assets and about 4,000 different holdings, while FZROX has $12.3 billion in net assets and about 2,800 stocks. That means FSKAX is a more diversified fund, and you can expect more volatility with FZROX.
And since FSKAX has been around since 2011, more data about its performance exists. The fund has performed well over the last 10 years and returned 11.79% (naturally, that number would look much higher if the bear market of 2022 hadn't occurred). However, when you compare both funds over the last three years, the returns are very similar. But FZROX did have slightly better returns overall.
More information here:
Tax-Loss Harvesting with Fidelity: A Step-by-Step Guide
How to Do a Backdoor Roth IRA at Fidelity
FSKAX vs. FZROX: Which Should I Choose?
Both FSKAX and FZROX are good investment options, and they can both help you reach your financial goals. Both funds invest in large-cap stocks and utilize similar investment strategies. That means you can expect similar performance from both funds.
FSKAX does have a slightly higher expense ratio, so FZROX is a better choice if you’re trying to avoid fees. But if you’re looking for a more diversified portfolio, FSKAX is the better option. Ultimately, the fund that is the best fit will depend on your lifestyle and long-term objectives. Really, though, you're probably not going to go wrong either way. If investing in a taxable account at Fidelity, these would make excellent tax-loss harvesting partners. Perhaps start with FZROX given its higher returns, despite the fact that the fund is a little smaller and has fewer holdings.
FAQs
Is FZROX a Good Fund?
FZROX is a mutual fund that was created by Fidelity in 2018. Morningstar gave this fund three (out of five) stars in comparison to the 1,237 funds within its category.
Although FZROX is a newer fund, it's managed by Fidelity, which has a long track record of excellence. And the fund doesn’t come with any fees or a minimum investment, so it’s a good fund for the average investor or for somebody who's just getting started in the stock market.
Is FSKAX a Good Long-Term Investment?
Yes, FSKAX is widely considered one of the best US large blend funds. Total stock market index funds are always a good investment strategy, and FSKAX has delivered solid returns over the last 10 years.
Does FZROX Pay Dividends?
Yes, FZROX pays dividends annually, and the fund hasn’t missed a year yet. The dividend you receive will depend on the value of your holding and the performance of the stocks in the fund.
Do you have experience with FZROX? If you're a Fidelity customer, which fund would you choose? And why? Comment below!
