FZROX vs. FXAIX [Fidelity ZERO Total Market Index vs. 500 Index]

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Andrew321
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FZROX vs. FXAIX [Fidelity ZERO Total Market Index vs. 500 Index]

Post by Andrew321 »

Hi folks,
As I prepare to make my Jan. 2019 stock picks, I've narrowed it down to FXAIX or FZROX. Which is better, in your opinion? I'm not worried about the expense ratio for FXAIX-15 cents per thousand dollars is OK with me.

This is for a Roth IRA with a retirement goal for 2054.

If you're really passionate about another fund, feel free to post it.

Andrew
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oldcomputerguy
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Re: FZROX vs. FXAIX

Post by oldcomputerguy »

Define "better".

FXAIX (S&P500 Index) follows an established index and is mostly large-cap with a small bit of mid-cap at the bottom of the index. FZROX is billed by Fidelity as a "total market" index fund, and according to Morningstar contains the "total-market" proportion of mid- and small-cap stocks, but it follows a proprietary Fidelity index.

Does your plan call for investing in the total market, or is just holding the S&P500 "good enough"? From an ideological standpoint I prefer to hold the total market, just to include mid- and small-cap holdings (FSKAX, for the record), but practically speaking there's not that much difference.

In short, it's up to you, either is probably fine.
"I’ve come around to this: If you’re dumb, surround yourself with smart people; and if you’re smart, surround yourself with smart people who disagree with you." (Aaron Sorkin)
terran
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Re: FZROX vs. FXAIX

Post by terran »

oldcomputerguy wrote: Wed Dec 19, 2018 6:15 pm FXAIX (S&P500 Index) follows an established index and is mostly large-cap with a small bit of mid-cap at the bottom of the index. FZROX is billed by Fidelity as a "total market" index fund, and according to Morningstar contains the "total-market" proportion of mid- and small-cap stocks, but it follows a proprietary Fidelity index.
Right. It seems to me that FSKAX and FZROX are more similar with one having an expense ratio (a very low one), but having a proven track record and following an external index and the other having no expense ratio, but following an internal proprietary Fidelity index. Both are total market funds though.
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oldcomputerguy
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Re: FZROX vs. FXAIX

Post by oldcomputerguy »

terran wrote: Wed Dec 19, 2018 6:20 pm
oldcomputerguy wrote: Wed Dec 19, 2018 6:15 pm FXAIX (S&P500 Index) follows an established index and is mostly large-cap with a small bit of mid-cap at the bottom of the index. FZROX is billed by Fidelity as a "total market" index fund, and according to Morningstar contains the "total-market" proportion of mid- and small-cap stocks, but it follows a proprietary Fidelity index.
Right. It seems to me that FSKAX and FZROX are more similar with one having an expense ratio (a very low one), but having a proven track record and following an external index and the other having no expense ratio, but following an internal proprietary Fidelity index. Both are total market funds though.
Yes, FSKAX and FZROX are both total market funds. The OP, however, was asking for comparisons between FZROX and FXAIX (which is an S&P500 fund).
"I’ve come around to this: If you’re dumb, surround yourself with smart people; and if you’re smart, surround yourself with smart people who disagree with you." (Aaron Sorkin)
terran
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Re: FZROX vs. FXAIX

Post by terran »

oldcomputerguy wrote: Wed Dec 19, 2018 6:26 pm
terran wrote: Wed Dec 19, 2018 6:20 pm
oldcomputerguy wrote: Wed Dec 19, 2018 6:15 pm FXAIX (S&P500 Index) follows an established index and is mostly large-cap with a small bit of mid-cap at the bottom of the index. FZROX is billed by Fidelity as a "total market" index fund, and according to Morningstar contains the "total-market" proportion of mid- and small-cap stocks, but it follows a proprietary Fidelity index.
Right. It seems to me that FSKAX and FZROX are more similar with one having an expense ratio (a very low one), but having a proven track record and following an external index and the other having no expense ratio, but following an internal proprietary Fidelity index. Both are total market funds though.
Yes, FSKAX and FZROX are both total market funds. The OP, however, was asking for comparisons between FZROX and FXAIX (which is an S&P500 fund).
Sorry, I wasn't implying your statements were wrong, I was trying to give you credit for pointing out the issue and to suggest that the OP might consider another fund that would be a more similar comparison with the exception of the expense ratio and internal vs external index.
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smarcus3
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Re: FZROX vs. FXAIX

Post by smarcus3 »

As this is a retirement tax Advantaged account the fidelity zeros mutual funds are a good choice. If this was in a brokerage an ETF or vanguard mutual fund would be better.
This is my personal opinion. I'm an engineer not a financial advisor.
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F150HD
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Re: FZROX vs. FXAIX

Post by F150HD »

I use 80/20 of FXAIX and FSMAX to simulate total market.

I had these holdings before the ZERO funds appeared and will continue to hold. Big fan of FXAIX.

Worth noting:

FZROX has 2530 total stock holdings

FXAIX has 508

FSMAX has 3156

You seem to get a larger net of companies using the 2 funds vs the one.

(At each link look under 'Composition' in the fund tabs)
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smarcus3
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Re: FZROX vs. FXAIX

Post by smarcus3 »

F150HD wrote: Wed Dec 19, 2018 9:33 pm I use 80/20 of FXAIX and FSMAX to simulate total market.

I had these holdings before the ZERO funds appeared and will continue to hold. Big fan of FXAIX.

Worth noting:

FZROX has 2530 total stock holdings

FXAIX has 508

FSMAX has 3156

You seem to get a larger net of companies using the 2 funds vs the one.

(At each link look under 'Composition' in the fund tabs)
It will be interesting to see what effect if any this will have. My current plan has been to utilize Fido Zeros for all new contributions / retirement accounts at Fido and leave everything at Vanguard in VTI / VXUS.
This is my personal opinion. I'm an engineer not a financial advisor.
MisterMister
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Re: FZROX vs. FXAIX

Post by MisterMister »

Another alternative is FSKAX (Fidelity Total Market Index Fund), which I would imagine is very close to FZROX in terms of the index (closer than FXAIX, which use the SP500).

One thing to consider with all the new zero Fidelity funds. They are only available in Fidelity accounts.

For example if you want to move your IRA to Vanguard, I believe this can be done as a transfer without exiting the market, but ONLY if the funds in your account are also available at Vanguard. FSKAX and FXAIX are available at Vanguard, but FZROX is not. IOW you would have to swap out the FZROX shares for something else, or liquidate them, in order to transfer those assets out of Fidelity.

No doubt this is one of Fidelity's major benefits in pushing the zero funds--it adds a nuisance factor to those who want to move, thus improving customer retention.

I own FZROX and I like it, but I'm not thrilled by the fact I can't hold it outside Fidelity.
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Re: FZROX vs. FXAIX

Post by jhfenton »

MisterMister wrote: Sun Jan 13, 2019 3:29 pm Another alternative is FSKAX (Fidelity Total Market Index Fund), which I would imagine is very close to FZROX in terms of the index (closer than FXAIX, which use the SP500).

One thing to consider with all the new zero Fidelity funds. They are only available in Fidelity accounts.

For example if you want to move your IRA to Vanguard, I believe this can be done as a transfer without exiting the market, but ONLY if the funds in your account are also available at Vanguard. FSKAX and FXAIX are available at Vanguard, but FZROX is not. IOW you would have to swap out the FZROX shares for something else, or liquidate them, in order to transfer those assets out of Fidelity.

No doubt this is one of Fidelity's major benefits in pushing the zero funds--it adds a nuisance factor to those who want to move, thus improving customer retention.

I own FZROX and I like it, but I'm not thrilled by the fact I can't hold it outside Fidelity.
I agree that this is a problem in taxable accounts, in addition to the slight tax inefficiency with (non-Vanguard) mutual funds. But I don't see this as a big deal in retirement accounts. If you own a ZERO fund in your IRA and you want to move the IRA to Vanguard, you can exchange the ZERO fund into a fund or ETF that you can transfer. There is no need to have any time out of the market.
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Re: FZROX vs. FXAIX [Fidelity ZERO Total Market Index vs. 500 Index]

Post by grandnexus »

Hi, re-activating this thread. Why is FZROX good in terms of taxes in an IRA as opposed to a regular brokerage account? What are the tax implications of FZROX?
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Re: FZROX vs. FXAIX [Fidelity ZERO Total Market Index vs. 500 Index]

Post by smarcus3 »

In an IRA tax inefficiencies of a mutual fund vs an ETF doesn't matter as everything in an IRA is treated as taxable income at withdrawal. Most ETFs are more tax efficient compared to their mutual fund counterparts other than Vanguards (I believe...) due to Vanguards patent in this area. This would only be a concern in a taxable investment account.
This is my personal opinion. I'm an engineer not a financial advisor.
MrJedi
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Re: FZROX vs. FXAIX [Fidelity ZERO Total Market Index vs. 500 Index]

Post by MrJedi »

grandnexus wrote: Tue Sep 15, 2020 12:43 pm Hi, re-activating this thread. Why is FZROX good in terms of taxes in an IRA as opposed to a regular brokerage account? What are the tax implications of FZROX?
The biggest downside of the zero funds is that they are not portable and can only be held at Fidelity. This means if you were to ever want to move to another broker, you would have to sell which would be a taxable event, as opposed to ETFs or more portable mutual funds that can be transferred in-kind without selling. In an IRA this doesn't matter as you can exchange into a portable fund without producing a taxable event.
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Re: FZROX vs. FXAIX [Fidelity ZERO Total Market Index vs. 500 Index]

Post by grandnexus »

The biggest downside of the zero funds is that they are not portable and can only be held at Fidelity. This means if you were to ever want to move to another broker, you would have to sell which would be a taxable event, as opposed to ETFs or more portable mutual funds that can be transferred in-kind without selling. In an IRA this doesn't matter as you can exchange into a portable fund without producing a taxable event.

Any reason why I'd want to move my FZROX to somewhere else though? Why not just keep it in the Fidelity account? Or is there an advantage going somewhere else?
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Re: FZROX vs. FXAIX [Fidelity ZERO Total Market Index vs. 500 Index]

Post by sycamore »

grandnexus wrote: Tue Sep 15, 2020 1:04 pm
The biggest downside of the zero funds is that they are not portable and can only be held at Fidelity. This means if you were to ever want to move to another broker, you would have to sell which would be a taxable event, as opposed to ETFs or more portable mutual funds that can be transferred in-kind without selling. In an IRA this doesn't matter as you can exchange into a portable fund without producing a taxable event.

Any reason why I'd want to move my FZROX to somewhere else though? Why not just keep it in the Fidelity account? Or is there an advantage going somewhere else?
One advantage is to capture a bonus offered by another brokerage for transferring in assets. E.g., $200 for transferring in $20,000 and holding for at least 6 months.

Here's a long-running thread on the latest brokerage transfer bonuses.
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Re: FZROX vs. FXAIX [Fidelity ZERO Total Market Index vs. 500 Index]

Post by MrJedi »

grandnexus wrote: Tue Sep 15, 2020 1:04 pm
The biggest downside of the zero funds is that they are not portable and can only be held at Fidelity. This means if you were to ever want to move to another broker, you would have to sell which would be a taxable event, as opposed to ETFs or more portable mutual funds that can be transferred in-kind without selling. In an IRA this doesn't matter as you can exchange into a portable fund without producing a taxable event.

Any reason why I'd want to move my FZROX to somewhere else though? Why not just keep it in the Fidelity account? Or is there an advantage going somewhere else?
If you are happy with staying with Fidelity, there is no issue.

Others like to take advantage of sign up bonuses by transferring their assets to other brokers. Another popular one is to transfer assets to Merrill Edge to qualify for extra rewards on BOA credit cards. Or you want to go to a broker with more competitive margin rates.

Or occasionally you have the person who has a really sour experience and wants to just move everything and not give any more business to the offender.

I'm not recommending any particular broker, just some of the things going on out there if you are flexible. I use Fidelity, but I don't use the Zero funds in taxable to stay mobile.
Last edited by MrJedi on Tue Sep 15, 2020 2:26 pm, edited 1 time in total.
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Re: FZROX vs. FXAIX [Fidelity ZERO Total Market Index vs. 500 Index]

Post by smarcus3 »

grandnexus wrote: Tue Sep 15, 2020 1:04 pm
The biggest downside of the zero funds is that they are not portable and can only be held at Fidelity. This means if you were to ever want to move to another broker, you would have to sell which would be a taxable event, as opposed to ETFs or more portable mutual funds that can be transferred in-kind without selling. In an IRA this doesn't matter as you can exchange into a portable fund without producing a taxable event.

Any reason why I'd want to move my FZROX to somewhere else though? Why not just keep it in the Fidelity account? Or is there an advantage going somewhere else?
For the no portable issue I only hold zeros in IRAs and vanguard ETFs in brokerage just in case. I guess Fidelity could close the funds causing a sell as well.
This is my personal opinion. I'm an engineer not a financial advisor.
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Re: FZROX vs. FXAIX [Fidelity ZERO Total Market Index vs. 500 Index]

Post by dcdowden »

Our Fidelity Adviser suggested we use FNILX - Fidelity Zero Large Cap index fund as a very close approximation to an S&P 500 Index without paying a premium to S&P. It's performance appears identical to the S&P 500.
grandnexus
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Re: FZROX vs. FXAIX [Fidelity ZERO Total Market Index vs. 500 Index]

Post by grandnexus »

dcdowden wrote: Tue Sep 15, 2020 1:32 pm Our Fidelity Adviser suggested we use FNILX - Fidelity Zero Large Cap index fund as a very close approximation to an S&P 500 Index without paying a premium to S&P. It's performance appears identical to the S&P 500.
What to premium to S&P?
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Re: FZROX vs. FXAIX [Fidelity ZERO Total Market Index vs. 500 Index]

Post by DaftInvestor »

dcdowden wrote: Tue Sep 15, 2020 1:32 pm Our Fidelity Adviser suggested we use FNILX - Fidelity Zero Large Cap index fund as a very close approximation to an S&P 500 Index without paying a premium to S&P. It's performance appears identical to the S&P 500.
When the OP posted this original question back in 2018 the FNILX fund was pretty new so he may have not heard about it.
You are right in that:
- FNILX is a better comparison to FXAIX (both Large 500 Index Funds); and
- and FZROX is a better comparison to FSKAX (both Total US Market Index Funds)

Fidelity has won the lowest Expense-Ratio war with the Zero funds.
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Re: FZROX vs. FXAIX [Fidelity ZERO Total Market Index vs. 500 Index]

Post by dcdowden »

grandnexus wrote: Tue Sep 15, 2020 3:52 pm
dcdowden wrote: Tue Sep 15, 2020 1:32 pm Our Fidelity Adviser suggested we use FNILX - Fidelity Zero Large Cap index fund as a very close approximation to an S&P 500 Index without paying a premium to S&P. It's performance appears identical to the S&P 500.
What to premium to S&P?
FNILX does not have to pay royalties to S&P for using their proprietary index. Fidelity just uses their own Large Cap index which is very similar.
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Re: FZROX vs. FXAIX [Fidelity ZERO Total Market Index vs. 500 Index]

Post by Mode32 »

dcdowden wrote: Wed Sep 16, 2020 2:22 pm
grandnexus wrote: Tue Sep 15, 2020 3:52 pm
dcdowden wrote: Tue Sep 15, 2020 1:32 pm Our Fidelity Adviser suggested we use FNILX - Fidelity Zero Large Cap index fund as a very close approximation to an S&P 500 Index without paying a premium to S&P. It's performance appears identical to the S&P 500.
What to premium to S&P?

FNILX does not have to pay royalties to S&P for using their proprietary index. Fidelity just uses their own Large Cap index which is very similar.
I had posted this in another thread recently, but realize that it may fit in well here.

I’m trying to give advice to my sibling about FXAIX vs. FNILX for Roth IRA at Fidelity. Looking at the two funds, they seem to hold the same companies; however, the benchmark indexes, % turnover, and YTD performance are different (FNILX higher).

I understand that YTD/short-term performances mean nothing (and past performance doesn't mean future performance), but interesting to see how two similar funds performed during this downturn.

1. Is the performance difference explained by ER difference?

2. Comparing FXAIX (which I used to think was the "go to" passively managed index fund at Fidelity) to FNILX, it seems like a no brainer to go with FNILX for a tax-advantaged account...but, am I missing something; whats the catch? Is there something inferior about FNILX (I’m tracking reduced mobility to other firms with zero funds)?

3. FNILX (like most of the zero funds) has higher % turnover, so assuming less tax-efficient...so not as ideal for taxable acct compared to FXIAX?

4. How are two similar funds following different benchmarks?

Thanks for your time and thoughts.
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JoMoney
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Re: FZROX vs. FXAIX [Fidelity ZERO Total Market Index vs. 500 Index]

Post by JoMoney »

If you want to track the S&P 500 index, which has different methodology requirements (for better or worse), and has widely available data/info on its performance available by which you can compare to your fund... Then go with the S&P 500 fund.
If you want to track some other index, or tracking close enough is good enough, and the lower ER appeals to you, then go with an alternative.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
Affable at 50
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Re: FZROX vs. FXAIX [Fidelity ZERO Total Market Index vs. 500 Index]

Post by Affable at 50 »

Mode32 wrote: Wed Sep 16, 2020 9:58 pm
dcdowden wrote: Wed Sep 16, 2020 2:22 pm
grandnexus wrote: Tue Sep 15, 2020 3:52 pm
dcdowden wrote: Tue Sep 15, 2020 1:32 pm Our Fidelity Adviser suggested we use FNILX - Fidelity Zero Large Cap index fund as a very close approximation to an S&P 500 Index without paying a premium to S&P. It's performance appears identical to the S&P 500.
What to premium to S&P?

FNILX does not have to pay royalties to S&P for using their proprietary index. Fidelity just uses their own Large Cap index which is very similar.
I had posted this in another thread recently, but realize that it may fit in well here.

I’m trying to give advice to my sibling about FXAIX vs. FNILX for Roth IRA at Fidelity. Looking at the two funds, they seem to hold the same companies; however, the benchmark indexes, % turnover, and YTD performance are different (FNILX higher).

I understand that YTD/short-term performances mean nothing (and past performance doesn't mean future performance), but interesting to see how two similar funds performed during this downturn.

1. Is the performance difference explained by ER difference?

2. Comparing FXAIX (which I used to think was the "go to" passively managed index fund at Fidelity) to FNILX, it seems like a no brainer to go with FNILX for a tax-advantaged account...but, am I missing something; whats the catch? Is there something inferior about FNILX (I’m tracking reduced mobility to other firms with zero funds)?

3. FNILX (like most of the zero funds) has higher % turnover, so assuming less tax-efficient...so not as ideal for taxable acct compared to FXIAX?

4. How are two similar funds following different benchmarks?

Thanks for your time and thoughts.
1. The performance difference between FXAIX and FNILX more likely caused by its different holdings. For instance, FNILX’s methodology allows it to add a large cap stock like Tesla whether it qualifies to be added to S&P index fund or ETF. For now, Tesla has not been added to the S&P 500 by its board.

2. I don’t know if it’s a no brainer to choose FNILX or FXAIX even in a tax advantaged account. The short term performance advantage may or may not continue. Choose FNILX over FXAIX if you like the the index methodology described in its prospectus If you like the long term reliability of a fund that tracks the S&P 500, FXAIX. Nobody knows how the long term performance competition will play out.

4. The index methodologies of the two funds are different.
REITired
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Re: FZROX vs. FXAIX [Fidelity ZERO Total Market Index vs. 500 Index]

Post by REITired »

I'm happy with FXAIX :sharebeer
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