In this guide, we compare two of the most popular S&P 500 tracking investment products: VFIAX vs FXAIX.
VFIAX and FXAIX are comparable products, but there are notable differences between the two funds.
Regardless, both hold some very Undervalued Stocks that can reward investors over the long run.
VFIAX vs FXAIX – Full Comparison
Below you will find an in-depth comparison between VFIAX vs FXAIX.
Here is the VFIAX description from Vanguard’s website.
“As the industry’s first index fund for individual investors, the 500 Index Fund is a low-cost way to gain diversified exposure to the U.S. equity market.
The fund offers exposure to 500 of the largest U.S. companies, which span many different industries and account for about three-fourths of the U.S. stock market’s value.”
For transparency purposes, I currently own over $40,000 of VFIAX, but this guide is as objective as possible.
Best Vanguard Index Funds
Here is the FXAIX description from Fidelity’s website.
“Seeks to provide investment results that correspond to the total return performance of common stocks publicly traded in the United States.
Normally investing at least 80% of assets in common stocks included in the S&P 500 Index, which broadly represents the performance of common stocks publicly traded in the United States.”
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VFIAX vs FXAIX – Minimum Investment
VFIAX has a $3,000 minimum investment, but there is no minimum investment requirement for FXAIX.
Thus, FXAIX is a more “beginner-friendly” product by eliminating any minimum investment.
$3,000 may seem a little intimidating if you don’t have any money saved, but Vanguard does offer similar products with no minimum.
Both VFIAX and FXAIX allow partial share purchases.
For example, you can buy 0.45 shares of either fund. This pairs great with our dividend reinvestment strategy discussed below.
VFIAX vs FXAIX – Dividend Reinvestment
VFIAX and FXAIX both allow automatic dividend reinvestments, contributions, and withdrawals.
This is probably one of my favorite things about both of these investments.
I still get excited about every quarterly dividend payment, and I get a dopamine kick when I see those dividends reinvested.
This is one of the best ways to tap into the power of compounding interest.
I see a lot of new investors spending their dividends, and this drives me crazy!
I always reinvest for more future dividends and portfolio growth.
VFIAX vs FXAIX – Passive Management
VFIAX and FXAIX are both referred to as “passively managed funds”, contrary to “actively managed funds”.
In laymen’s terms, passively managed means a human is not driving the investment strategy and buying or selling.
Everything is driven by the S&P 500 and computer code. Does this seem scary for you? It shouldn’t.
Passively managed funds have proved to outperform 95% of actively managed funds over a 20-year time horizon.
VFIAX vs FXAIX: Custodial Provider
VFIAX is an index fund vehicle offered by Vanguard. FXAIX is an index fund vehicle offered by Fidelity.
Both Vanguard and Fidelity are extremely well-respected brokerage institutions.
They almost always top the list of most favored investment companies by retail investors.
So, you may be asking, “What are the underlying holdings for VFIAX and FXAIX?” Here are some of the top holdings for VFIAX (in no particular order):
- Goldman Sachs
- Cardinal Health
Here are some of the top holdings for FXAIX (in no particular order):
- United Health Group
- Berkshire Hathaway
Now, I may have pulled a little trick on you here for fun.
VFIAX and FXAIX really own the exact same holdings of the S&P 500, in the exact same proportion.
VFIAX has been growing in popularity as a staple fund for Vanguard in recent years. Here are a few of my favorite things about VFIAX.
- Vanguard Product
- Dividends and Partial Share Purchases
- Passively Managed
- Broad Diversification, Low Cost
- Historical Performance
AS I mentioned above, VFIAX has become my main investment vehicle in my Roth IRA.
While historical returns are never guaranteed, VFIAX will always deliver on matching the market returns. Nothing more, nothing less.
I thoroughly enjoy that VFIAX allows investors to buy partial shares and always reinvest dividends.
Currently, a new investor would have to have $122,000 invested to receive enough quarterly dividends to buy a full share.
Luckily, VFIAX is an index fund, so we can settle with fractional share purchases, while our accounts are growing.
Finally, VFIAX offers extremely broad diversification, across industries, asset classes, currencies, all for the low cost of one share.
This is one of the main reasons I don’t suggest buying individual stocks!
Here are a couple of downsides to investing in VFIAX.
- 0.04% Expense Ratio
- No Real-Time Pricing or Intraday Trading
- $3,000 minimum investment
VFIAX, unfortunately, has a 0.04% expense ratio, and this is over two times higher than FXAIX (we discuss this below).
VFIAX and FXAIX have the exact same investment holdings, so it only makes sense to pay the lowest expense ratio.
While an extra basis point or two isn’t going to make or break your retirement, it can erode a significant amount of money when compounded over decades.
Additionally, VFIAX has no access to intraday trading, which makes it difficult to close out a position.
You have to sell, wait until the end of the day, let the net asset value be calculated, and then you will receive your final price.
It’s a tedious, long process if I say so!
FXAIX has been a flagship fund with Fidelity for decades now. Here are some of the best perks!
- Fidelity Product
- 0.015% Expense Ratio
- Broad Diversification
- Low Turnover
- Easy Brokerage Statements
While Vanguard is my favorite investment company, Fidelity is a close second.
I hold investments with both firms. Fidelity has an excellent website and mobile app, so you can’t go wrong with either firm.
Next, FXAIX has a 0.015% expense ratio, which is less than half of VFIAX’s expense ratio.
FXAIX has extremely low turnover, especially when compared to actively managed investment funds.
Low turnover means the underlying securities are not bought and sold frequently.
By not selling frequently, FXAIX does not generate capital gains; this is why index funds are so tax-efficient.
Finally, I personally believe that Fidelity has the most user-friendly 1099 brokerage statements.
This is the statement you give to your CPA, and it contains dividends, interest, and gain/loss calculations.
Here are a couple of downsides to investing in FXAIX.
- Not 0% Expense Ratio
- No Intraday Trading
Fidelity offers a few products that contain a 0% embedded fund expense ratio, and they have the same investment holdings.
If you like FXAIX, you might as well buy the Fidelity fund that saves you even more money!
Similar to VFIAX, there is no intraday trading for FXAIX. It is the same process to close out a position.
Other Fund Comparisons
I have written many other investment fund comparison reviews. I highly recommend reading any of the following for more information.
- VFIAX vs VOO
- FXAIX vs SPY
- FNILX vs FXAIX
For more investing information, I suggest subscribing to the Wall Street Journal. They have tremendous information and reporting!
VFIAX and FXAIX – Final Thoughts
VFIAX and FXIAX are both S&P 500 index funds. The biggest differences are expense ratios, investment returns, and custodial providers.
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VFIAX vs FXAIX FAQ
What’s the Difference Between VFIAX and FXAIX?
VFIAX is an S&P 500 index fund offered by Vanguard, and FXAIX is an S&P 500 index fund offered by Fidelity.
Is VFIAX or FXAIX Better?
FXAIX offers a lower expense ratio than VFIAX. The returns will be comparable.
What are the Holdings of VFIAX and FXAIX?
VFIAX and FXAIX track the S&P 500.
How do I Buy VFIAX or FXAIX?
You can buy VFIAX or FXAIX on any brokerage website. I prefer to use Vanguard or Fidelity.