FXAIX vs VOO: What's the Difference? (2024)

The Fidelity 500 Index Fund (FXAIX) & Vanguard 500 Index Fund ETF (VOO) are investment funds designed to track the S&P 500.

If you are in a hurry, here is a table summarizing the major differences:

With that being said, the rest of this post will explore and break down the differences in more detail.

FXAIX vs VOO: Two Different Types of Funds

The most significant difference between FXAIX and VOO is that they represent two different investment classes.

FXAIX is a mutual fund managed by Fidelity, whereas VOO is an Exchange Traded Fund (ETF) managed by Vanguard.

As a result, they do differ in some key respects such as:

• ETFs can be traded throughout the day whereas mutual funds only exchange hands once a day
• ETF investments can not be automated whereas mutual fund investments can be automated

It is worth noting that ETFs do not usually have investment minimums whereas mutual funds do (ex: Vanguard has a $3,000 minimum investment for most mutual funds). However, in the case of FXAIX, there is no minimum investment requirement.

This translates to both FXAIX and VOO having minimum barriers of entry in order to get started.

FXAIX vs VOO: Differences in Performance & Dividends

FXAIX and VOO have an identical investing strategy: mirror the composition and performance of the S&P 500.

With that being said, let’s visualize FXAIX vs VOO when it comes to overall fund performance:

Looking back at the previous 10 years of returns, there are no major differences in returns between FXAIX and VOO. In fact, during this time period the average annual return for FXAIX was 13.93% while the average annual return for VOO was 13.90%.

Furthermore, these nearly identical yearly returns become more apparent when looking at the % difference in returns between both funds:

From 2012 – 2022, the greatest % difference in returns between the two funds was 0.20%. Given that both funds have an identical investing strategy, this shouldn’t be too much of a surprise.

In spite of that, there is a major difference between FXAIX vs VOO: dividend payments.

Below is a visualization detailing the last 10 years of dividend payments for both funds:

From a dividend perspective, there is clear winner.

When looking at the yearly dividends over the last 10 years,VOO had a 152% greater dividend payout over FXAIX on average.

FXAIX vs VOO: Differences in Fees

One of the most important aspects of investing is understanding the fees associated with a particular investment. That is because fees can compound over time and have the ability to make a significant dent in any investments’ returns.

With that all that being said, FXAIX and VOO have some of the lowest expense ratios in the industry.

And while FXAIX is technically 50% less expensive than VOO, the expense ratios for both funds are so low that the impact on total returns is close to nothing.

However, let’s still go ahead and create a visualization to look at the impact of each portfolio’s expense ratio on total returns. Let’s make the following assumptions:

• One Time Investment of $10K in FXAIX and VOO
• Time Period = 20 Years
• Rate of Return = 10% YoY
• Real Rate of Return = Rate of Return (10%) – Expense Ratio for each Investment

Here is the final result after 20 years (FXAIX – Blue Line, VOO – Orange Line):

But wait – where’s the orange line? I only see the blue line?

That is because in this hypothetical example,the values between both funds are nearly identical.

Here is the performance of both investments in table form:

The 0.015% difference between the expense ratios only led to a difference of $182.77 over the course of 20 years.

In other words, all else being equal, the expense ratios are “essentially identical.” So while VOO may be a hair more expensive, it doesn’t represent a significant difference between the two funds.

Final Thoughts

Investing in a S&P 500 index fund is a solid, simple & efficient way to invest.

Don’t just take my word for it though, here’s a quote from the man, the myth, the legend himself:

Consistently buy anS&P 500low-cost index fund… Keep buying it through thick and thin, and especially through thin.

Warren Buffet

Thank you for reading 🙂

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