Which Fidelity International Index Fund Should You Buy? - The Wall Street Physician (2024)

The backbone of a three-fund portfolio consists of a domestic stock fund (usually the ), an international stock fund, and a U.S. bond fund.

For Fidelity investors, there are many international stock funds to choose from, which can make it difficult for new investors to decide which one they should buy. In this article, I’ll break down the Fidelity international index fund options, so that you can pick the one that is right for you.

Who This Article Is For

Before we dive into the analysis, I wanted to highlight who this analysis is intended for. This article applies primarily to Fidelity investors or those who have Fidelity index funds as part of their retirement investment options.

Vanguard investors should use Vanguard international index funds, such as Vanguard FTSE All-World ex-US Index Fund (VFWAX, ER = 0.11%) or ETF (VEU, ER = 0.11%).Vanguard Total International Stock Index Fund Admiral Shares (VTIAX, ER = 0.11%) or ETF (VXUS, ER = 0.11%) is another option.

Schwab investors should use Schwab international index funds, such as Schwab International Index Fund (SWISX), which has an expense ratio of 0.06% and tracks the MSCI EAFE index.

The reason why you shouldn’t buy Fidelity funds from a Vanguard or a Schwab account is because there is a transaction fee to purchase Fidelity funds from Vanguard (typically $8-$20 if you buy online) or Schwab ($76 transaction fee for online purchases).

For investors with other brokers that might also charge transaction fees to buy Fidelity funds, you should purchase a low-cost index ETF, such as Vanguard’s VXUS or VEU or iShares’s IEFA or IXUS, and pay the usual low commission fee that you would pay to buy any other stock.

Fidelity International Index Funds — What You Should Not Buy

Using Fidelity’s mutual fund screener, you can quickly filter for international equity funds offered by Fidelity. There are a whopping 44 of them:

When I’m reviewing a new mutual fund, the first thing I look at is its expense ratio. It’s easy to do this with Fidelity, as you can simply sort by net expense ratio to find the lowest cost mutual funds. These will almost always be the index funds.

Fidelity does offer a number of actively managed mutual funds — I would avoid them because of their high fees and lower diversification compared to the index fund options.

They also have introduced “smart beta” international ETFs such as Fidelity International High Dividend ETF (FIDI) Fidelity International Value Factor ETF (FIVA). I would avoid these as well. Stick with the international index funds that I will discuss below.

Fidelity International Index Fund (FSPSX)

This index fund (FSPSX) tracks the MSCI EAFE (Europe, Asia, Far East) index, which tracks developed markets. It has the lowest expense ratio of all of the Fidelity international index funds at 0.045%. One downside of the fund is that it does not give you exposure to emerging markets. It also does not give you access to small-cap international stocks. These differences are small and probably won’t make a big difference in the long-run, but if you can get access to these international stock markets with a minimal increase in expense ratio, why not?

Fidelity Global ex U.S. Index Fund (FSGGX)

FSGGX is an older version of Fidelity’s total international index fund. It has an expense ratio of 0.06%, and tracks the MSCI All Country World Ex-US Index. It gives exposure to large-cap developed and emerging markets stocks.

In my opinion, because it has the same expense ratio as the Fidelity Total International Index Fund, with slightly less diversification (no small-cap exposure), I don’t think FSGGX makes sense for most investors unless you have a particular aversion to small cap international stocks.

Fidelity Total International Index Fund (FTIHX)

FTIHX tracks the MSCI ACWI (All Country World Index) ex-USA Investable Market Index. It was only introduced in 2016, and already has $1.9 billion in assets under management. Because it gives you the broadest exposure to international stocks (developed and emerging markets, small-cap and large-cap), all at a very low expense ratio of 0.06%.

Fidelity Total International Index Fund (FTIHX) offers the broadest exposure to international stocks (developed and emerging markets, small-cap and large-cap), all at a very low expense ratio of 0.06% Click To Tweet

Fidelity Emerging Markets Index Fund (FPADX)

For investors who may have the Fidelity International Index Fund (FSPSX) in their 403(b), or just want to slice and dice and get more or less exposure to emerging markets, Fidelity offers a low cost emerging markets index fund (FPADX). It has an expense ratio of just 0.08%.

As you can see, Fidelity has many international index fund options. I would pick either theFidelity Zero International Index Fund (FZILX) or Fidelity Total International Index Fund (FTIHX). FZILX has the lowest expense ratio (zero!) and gives exposure to developed international and emerging markets stocks, while FTIHX gives exposure to small-cap and large-cap developed international and emerging markets stocks at a low expense ratio of 0.06%.

My preference at Fidelity is to use mutual funds in retirement accounts and ETFs in taxable accounts, because mutual funds are less tax-efficient than ETFs at Fidelity. My preferred ETFs for Fidelity investors are the iShares ETFs IXUS or IEFA, which have low fees and are commission-free at Fidelity.

What do you think? If you are a Fidelity investor, which international index fund do you use?