FBGRX vs. FXAIX: What Are the Differences & Similarities?

Someone asks:

Would it probably be a safer play to go FXAIX (Fidelity 500 Index Fund) as opposed to FBGRX (Fidelity Blue Chip Growth Fund) since FXAIX covers multiple sectors? Tech seems kinda murky going forward.

Also, I am wondering if anyone knows if you get paid any dividends through index funds?

Answers:

Chad M:

I own some FXAIX. With mutual funds, they are called distributions. You can see the distribution payouts for FXAIX on Fidelity. I’ve owned FXAIX for several years and I reinvest the distributions.

Gerry S:

Disclosure: I have both, with the majority in FXAIX. First, it is important to note where FBGRX is held. If it’s a taxable account, careful with the turnover percentage of 49% that will eat into those higher returns; this isn’t an issue in a tax-advantaged account.

Second, you have to decide if you think mega-cap tech will lead the market in the next 10-20 years. FBGRX has almost half its portfolio in FANMAG, and will sink or swim based on their performance. These stocks have led the past decade, and the pandemic only exacerbated that trend. FXAIX will have more of a balance with its portfolio.

I decided to keep broad-based index funds as my core and added FBGRX as a modest bet around the edges because I think even if big tech falls out of favor, it won’t underperform the broader market.

Andrew L:

Pretty sure FBGRX is going to be the more volatile of the two. FXAIX is better diversified.

Micheal M:

I have FXAIX in my 401k and FBGRX in my Roth IRA. FBGRX isn’t available in my 401k so that is why it’s in my Roth, I figure it can’t hurt to have both.

Rodney H:

I have been thinking FXAIX and FSKAX as opposed to FBGRX due to the fees being much lower, and the diversification is much more. The top 10 in FBGRX makes up 50% of its overall market cap.

Steve L:

I have both. FXAIX is an index fund and FBGRX is an actively managed fund. If you look at the holdings the blue-chip fund it is heavily oriented towards technology. Whereas of course the S&P 500 is more diversified. The blue-chip fund has a higher management fee but it is actively managed and has a very strong long-term track record.

Jason P:

If you are 49 or younger, a good portion of your portfolio can easily go to FBGRX and/or QQQM. You could then carve out a small portion for niche funds if you’re willing to monitor them at least quarterly. I would put the remainder in any total market fund.

James L:

If you are going long term I think FBGRX is better. They recently changed how they determine what is “blue chip”, has a very open mind approach to seeking the upcoming blue chip companies.

Tom M:

I have FBGRX, in my ROTH. I have FZROX total market index in my regular account. You’ll get more taxable returns on the actively managed, hence, I keep it in the ROTH where you don’t get taxed on it.

Jim C:

A lot of index funds (mutual fund and/or ETFs) pay dividends. When researching, most website’s “summary” page of any given fund will state whether it pays a dividend. Their site should also have a “distribution” or “dividend” page that will show its previous payouts.

Brad B:

FXAIX is the type of fund i invested in during my working years. Good diversification reliable, and cheap fees which allows for more growth.

Shawn B:

I prefer index funds because they typically outperform actively managed funds, and you don’t have to worry about fund managers changing or becoming alcoholics or something. So I’d go with FXAIX or FZROX. 100% in one of those is fine. If you’re a novice I’d highly recommend reading a simple path to wealth.

Hilary D:

FXAIX all the way, even into retirement. FBGRX to park money from stock sales for the capital gains. My reason is that during the years the stock market is down, FBGRX will still be bringing in money from capital gains.

Jesse P:

Really difficult to advise without financial context. This is for your 401k? Do you have other investments? A bond or cash position?

With only 10 years until retirement you’re going to want to begin laddering out of your stock positions. Assuming you have all of that organized and in order, and it’s justified to stay fully invested in one of these, the safest option is FXAIX. It is possible, perhaps even probable that FBGRX will perform better, but now you’re guessing/gambling. FXAIX is a blend fund that will pickup the gains no matter what market sectors thrive.

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