FXAIX vs. SPY: Which one should you invest in?

Someone asks:

SPY vs FXAIX (a Fidelity fund) that tracks the S&P 500. Which is better for a taxable investment account and why? Does this change for a tax-sheltered Fidelity IRA?

SPY vs. FXAIX: What Are the Differences

  • FXAIX is a mutual fund from Fidelity. SPY is an ETF (exchange-traded fund) from State Street Global Advisors.
  • Fidelity 500 Index Fund charges 0.02% per year, while SPY has an expense ratio of 0.09% .
  • Because SPY is an ETF, it is more favorable in a taxable brokerage account due to its tax efficiency .
  • SPY is slightly larger than FXAIX in terms of total net assets. The ETF has over 455 billion in assets, with over 29% of its holdings focused on 10 companies.
COMPANY SYMBOL TOTAL NET ASSETS
Apple Inc. AAPL 6.86%
Microsoft Corp. MSFT 6.26%
Amazon Inc. AMZN 3.60%
Alphabet Inc. Cl A GOOGL 2.16%
Tesla Inc. TSLA 2.13%
Alphabet Inc. Cl C GOOG 2.01%
Meta Platforms Inc. FB 1.97%
NVIDIA Corp. NVDA 1.82%
Berkshire Hathaway Inc. Cl B BRK.B 1.36%
UnitedHealth Group Inc. UNH 1.17%

SPY vs. FXAIX: How Are They Similar?

  • FXAIX and SPY tracks the S&P 500 index. Both funds give you exposure to every major sector of business.
  • Morningstar classified Fidelity 500 Index Fund and SPDR S&P 500 ETF Trust as “Large Blend.” This means they invest in companies with market values greater than $10 billion.
  • Both index funds pay dividends to shareholders every quarter.

Compare Performance and Returns

Let’s look at how FXAIX and SPY have been performing within the last 5 years.

Funds SPDR® S&P 500 ETF Trust Fidelity® 500 Index Fund
1 month +4.47% +4.48%
3 months +11.00% +11.02%
6 months +11.63% +11.66%
1 year +28.59% +28.69%
3 years +25.92% +26.06%
5 years +18.34% +18.46%

An investment of $10,000 in SPY, since January 2012, now would be worth $45,789.

An investment of $10,000 in FXAIX, since January 2012, now would be worth $46,210.

Which is Better? FXAIX or SPY?

With such similarity, it shouldn’t matter which one you invest in. If you are investing in a taxable brokerage account, SPY is a better choice. If you are investing in a retirement account, it makes no difference.

Both funds have comparable asset allocations, distribution schedules, expense ratios (FXAIX is slightly less expensive), and historical returns.

We asked our community of Fidelity investors and here’s what they have to say about SPY and FXAIX.


David J:

While both track the S&P 500 index, FXAIX is a mutual fund and SPY is an ETF.

FXAIX (0.015) is less expensive than SPY (0.09). I like to keep my expenses low. I don’t need the flexibility of selling anytime that an ETF offers. FNILX is similar and has no expenses.

Chris M:

FXAIX will have more capital gains distributions if in a taxable account. If in an IRA then regarding taxes there would no difference. David describe the fee differences. They are like any other ETF regarding fees if you want the benefits of an ETF (trade throughout day, minimums, etc).

Huy N:

SPY is more tax efficient than FXAIX but FXAIX is better for IRA.

In a taxable account, dividends are taxed the year they are distributed. It doesn’t matter what you do with them, they are taxed.

Mutual funds like FXAIX distribute capital gains made from sales made within the fund. ETFs like SPY, being on the exchange, don’t.

Todd A:

As for why you’d rather have ETFs in a taxable account simply comes down to the taxable capitals gains distributions that mutual funds tend to payout. This can generate a rather hefty tax bill and Fidelity funds in particular are notorious for this.

ETFs are able to make “in kind” transfers when they modify holdings within the ETF, eliminating the need to distribute capitals gains and avoiding a taxable event to the investors.

Paul R:

I believe FNILX is also an S&P500 index fund. It has the same holdings, but it just doesn’t use the name S&P500 because it would have to pay a fee and it’s a zero expense ratio fund.

Andrew B:

If you own a Fidelity 500 Index Fund like FXAIX, you won’t be able to sell your shares until the market is closed. That’s one of the many differences between SPY and FXAIX.