Looking to invest in the S&P 500 but not sure whether to choose Fidelity's FXAIX mutual fund or Vanguard's VOO ETF? Let's dive in!
FXAIX vs VOO: Which S&P 500 Index Fund Is Best for 2025?
This comprehensive comparison breaks down everything you need to know about these popular index funds to help you make the best decision for your investment portfolio in 2025.
Key Differences Between FXAIX and VOO
FXAIX (Fidelity 500 Index Fund) and VOO (Vanguard S&P 500 ETF) both track the S&P 500 index but differ in structure, accessibility, and certain features. Understanding these differences is crucial for making the right investment choice.
| Feature | FXAIX (Fidelity) | VOO (Vanguard) |
|---|---|---|
| Fund Type | Mutual Fund | Exchange-Traded Fund (ETF) |
| Expense Ratio | 0.015% | 0.03% |
| Minimum Investment | $0 | Price of 1 share (approx. $540) |
| Trading | End of day pricing | Trades like a stock throughout the day |
| Tax Efficiency | Good | Excellent |
| Automatic Investment | Yes | Depends on broker |
1. FXAIX (Fidelity 500 Index Fund)
FXAIX is Fidelity's flagship S&P 500 index fund that provides investors with exposure to 500 of the largest U.S. companies. As a mutual fund, it offers some distinct advantages for certain types of investors.
FXAIX Pros:
- Ultra-low expense ratio of 0.015% - One of the lowest in the industry
- No minimum investment requirement - Start with any dollar amount
- Fractional share investing - Invest exact dollar amounts
- Automatic investments - Easy to set up recurring contributions
- No commission fees when purchased directly through Fidelity
FXAIX Cons:
- Only trades once per day at market close
- Less tax-efficient than ETFs due to potential capital gains distributions
- Only available through Fidelity or certain brokerages
2. VOO (Vanguard S&P 500 ETF)
VOO is Vanguard's popular ETF that tracks the S&P 500 index. As an exchange-traded fund, it provides unique benefits, particularly for investors who value trading flexibility and tax efficiency.
VOO Pros:
- Trades throughout the day like a stock
- Superior tax efficiency due to in-kind redemption mechanism
- Available at most brokerages - Not limited to Vanguard accounts
- Options trading available for advanced strategies
- Slightly more transparent with daily published holdings
VOO Cons:
- Slightly higher expense ratio of 0.03% (still extremely low)
- Requires purchasing full shares at many brokerages
- May incur trading commissions at some brokerages
- Bid-ask spreads can be a factor in trading costs
Performance Comparison
When comparing the performance of FXAIX and VOO, both have nearly identical returns since they track the same index. Over the past 10 years (as of January 2025), both funds have delivered annualized returns of approximately 12.5%, with only minimal tracking differences.
The main performance difference comes from the slightly lower expense ratio of FXAIX (0.015% vs 0.03% for VOO), which gives FXAIX a theoretical edge of 0.015% annually. However, this difference is so minimal that other factors like tax efficiency and trading flexibility are likely more important for most investors.
Who Should Choose FXAIX?
FXAIX might be the better choice if you:
- Already have a Fidelity account and want to keep everything in one place
- Want to invest with small dollar amounts (under $500)
- Prefer to invest exact dollar amounts rather than share quantities
- Value automatic investments and dividend reinvestment
- Are investing in tax-advantaged accounts like 401(k)s or IRAs where tax efficiency is less important
Who Should Choose VOO?
VOO might be the better choice if you:
- Want the flexibility to trade throughout the day
- Are investing in a taxable account where tax efficiency matters more
- Prefer using a non-Fidelity brokerage
- Want to use options strategies with your S&P 500 investment
- Value greater transparency with daily published holdings
Tax Efficiency Considerations
One key difference between these funds is tax efficiency. VOO, as an ETF, has structural advantages that make it more tax-efficient in taxable accounts:
- ETFs can use "in-kind redemptions" to eliminate many capital gains distributions
- FXAIX, as a mutual fund, may distribute capital gains to shareholders even if you haven't sold shares
- For retirement accounts like IRAs or 401(k)s, this tax difference is largely irrelevant
If you're investing in a taxable account and plan to hold long-term, VOO's superior tax efficiency could save you money over time.
Investment Strategy Compatibility
Your personal investment strategy should influence which fund you choose:
- Dollar-cost averaging with small amounts: FXAIX may be more convenient due to no minimum investment
- Lump-sum investing: Either fund works well
- Active trading: VOO's intraday trading capability is advantageous
- Long-term buy-and-hold: Both are excellent, with VOO having a slight edge in taxable accounts
For new investors just starting out, FXAIX's ability to invest with any dollar amount makes it particularly accessible. As explained in our guide on what are index funds, this accessibility is a key advantage for beginners.
Platform Availability
Another important consideration is where you can buy these funds:
- FXAIX is primarily available through Fidelity's platform with no transaction fees
- Some other brokerages offer FXAIX but may charge transaction fees
- VOO is available at virtually all brokerages, often commission-free
If you already have a Fidelity account or plan to open one, FXAIX is very convenient. For those using other platforms, VOO is typically more accessible. For more on ETF investing fundamentals, check out our detailed guide on what is an ETF.
Retirement Account Considerations
In retirement accounts such as 401(k)s and IRAs:
- Tax efficiency differences become less important
- FXAIX's automatic investment features may be more valuable
- Many 401(k) plans offer Fidelity index funds but not ETFs
For most retirement accounts, FXAIX is often the more practical choice, especially if your plan already offers it as an option.
Similar Fund Alternatives
While FXAIX and VOO are excellent options, there are similar alternatives worth considering:
- VFIAX - Vanguard's S&P 500 mutual fund counterpart to VOO (0.04% expense ratio)
- IVV - iShares Core S&P 500 ETF (0.03% expense ratio)
- SPY - SPDR S&P 500 ETF Trust (0.09% expense ratio)
- FNILX - Fidelity ZERO Large Cap Index (0.00% expense ratio, tracks a slightly different index)
If you're interested in exploring more Vanguard ETF options, our comparison of VOO vs VOOG provides insights into how the standard S&P 500 ETF compares to its growth-focused counterpart.
Final Words
Both FXAIX and VOO are exceptional investment options for gaining exposure to the S&P 500 index. Your choice ultimately depends on your specific investment goals, account types, and personal preferences.
For most long-term investors, the differences between these funds are minimal enough that either would be an excellent choice. FXAIX offers a slightly lower expense ratio and easier fractional investing, while VOO provides greater trading flexibility and tax efficiency.
If you're looking to diversify your investments beyond just the S&P 500, consider using an investment tracking platform to monitor your portfolio's performance and allocation. Whatever you choose, both funds represent a low-cost way to own a piece of America's largest companies and build wealth over time.
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Frequently Asked Questions About FXAIX vs VOO
Which is better, FXAIX or VOO?
Neither FXAIX nor VOO is categorically 'better' - they're both excellent S&P 500 index funds with very low expense ratios. FXAIX (0.015% expense ratio) works better for those who prefer mutual funds, want to invest small amounts, or use Fidelity's platform. VOO (0.03% expense ratio) is better for those who value intraday trading, superior tax efficiency in taxable accounts, or use non-Fidelity brokerages.
What's the main difference between FXAIX and VOO?
The main difference is that FXAIX is a mutual fund while VOO is an ETF (Exchange-Traded Fund). This structural difference affects how they're traded (end-of-day vs. intraday), minimum investment requirements (none for FXAIX vs. price of one share for VOO), and tax efficiency (VOO is more tax-efficient in taxable accounts).
Do FXAIX and VOO have different performances?
FXAIX and VOO have nearly identical performances since they both track the S&P 500 index. Any slight difference would primarily come from their expense ratios (0.015% for FXAIX vs. 0.03% for VOO), giving FXAIX a theoretical edge of about 0.015% annually. However, this difference is so minimal that other factors like tax efficiency and trading flexibility should be more important in your decision.
Can I buy FXAIX in any brokerage account?
No, FXAIX is primarily available on Fidelity's platform without transaction fees. Some other brokerages may offer FXAIX but often with transaction fees. VOO, being an ETF, is more widely available across virtually all brokerages, typically commission-free.
Which is better for a retirement account, FXAIX or VOO?
For retirement accounts like 401(k)s and IRAs, FXAIX is often more practical because tax efficiency differences don't matter in tax-advantaged accounts. FXAIX's features like automatic investments and no minimum investment requirement can be more valuable for regular contributions. However, if your retirement account is with a non-Fidelity brokerage, VOO might be more accessible or cost-effective.
