FXAIX vs VOO: Which S&P 500 Index Fund Should You Buy?

FXAIX vs VOO: Overview

Despite their structural differences, both funds hold almost the same basket of around 500 large-cap US stocks like Apple, Microsoft, Amazon, and Nvidia.

The main differences are how they trade, how they handle taxes, and which platform makes them easiest to use. For most long-term investors, either fund gives you the same exposure to the US stock market’s largest companies.

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What Is the S&P 500?

The S&P 500 is a market-cap weighted index that contains roughly 500 of the largest US companies, launched in 1957 and is widely considered the main benchmark for “the US stock market”.¹ When financial news reports that stocks are up or down, they’re usually referring to this index.

Historical long-term nominal returns have averaged around 10% per year since the mid-20th century, with real (inflation-adjusted) returns closer to 7%. More recent 15-year annualized returns have been even stronger, around 12–13% depending on the measurement period.

As of 2024, the largest holdings are:

• Apple
• Microsoft
• Alphabet (Google)
• Amazon
• Nvidia
• Meta (Facebook)
• Berkshire Hathaway

These mega-cap technology and communication companies give the S&P 500 a growth tilt that has driven strong performance in recent decades.

Index funds like FXAIX and VOO aim to match rather than beat the S&P 500 because decades of research show that most active managers fail to outperform after fees.² By accepting “market returns” at rock-bottom costs, investors get broad diversification without paying for stock-picking that rarely adds value.

Because both funds track the same S&P 500 index, any major differences come from structure (mutual fund vs ETF), fees and tax implications, not from different stock selection or investment goals.

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Fidelity S&P 500 Index Fund (FXAIX)

FXAIX is Fidelity’s flagship S&P 500 index mutual fund, designed for long-term, low cost index investing. It’s one of the most popular funds for investors who want straightforward exposure to America’s largest companies without active management.

Key Facts:

• Launch Date: February 17, 1988
• Structure: Mutual fund
• Provider: Fidelity
• Benchmark: S&P 500 Index
• Expense Ratio: The expense ratio is 0.015% per year, or $1.50 per $10,000 invested per year.³ This is one of the cheapest S&P 500 funds out there.

Trading:

FXAIX is priced once per day when the market closes at 4 PM ET based on net asset value (NAV). Orders placed during the day are executed at that one end of day price. You can’t time market movements but you avoid bid-ask spreads and the temptation to trade frequently. The fund offers fractional shares and automatic investing with $0 minimum at Fidelity, so you can invest $50, $137 or any dollar amount you want on a regular schedule.

Performance:

Ten-year annualized returns are around 14-15% through 2025, with tracking error of just a few basis points per year to the S&P 500. The fund does what it says it does: index returns minus minimal fees.

Taxes:

While FXAIX has low turnover and is very tax efficient compared to active funds, it’s a mutual fund. So it still has the chance to distribute capital gains to shareholders even if you didn’t sell shares yourself. These taxable capital gains are usually very small and even non-existent for low turnover index mutual funds like FXAIX over recent years, but distributions could still happen and more common than ETFs.

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Vanguard S&P 500 ETF (VOO)

VOO is Vanguard’s S&P 500 ETF and one of the largest ETFs in the world. It’s the same broad market exposure as FXAIX but in an ETF wrapper.

Key Facts:

• Launch Date: September 7, 2010
• Structure: ETF
• Provider: Vanguard
• Benchmark: S&P 500 Index
• Expense Ratio: 0.03% ($3 per $10,000 per year as of 2024)

Trading:

VOO trades on the NYSE throughout market hours like individual stocks.⁴ You can place limit orders, set stop-losses, use margin and even trade options on VOO shares. Prices fluctuate throughout the day based on supply and demand and intraday market movements. This flexibility makes VOO suitable for tax-loss harvesting and intraday rebalancing, features that mutual funds can’t offer.

With ETFs, you must buy full shares at market prices unless your broker offers fractional ETF shares (which many now offer). With VOO trading in the $400–$500 range in 2024, this means you may need a higher investment amount compared to FXAIX’s $0 minimum.

Note: Fidelity also offers fractional shares when buying ETFs.

Performance:

Ten-year annualized returns are very close to FXAIX, around 12–13% through 2024, with tracking error only a few basis points to the S&P 500. When you compare funds tracking the same index, performance differences are minor.

Taxes:

Here’s where VOO is simplest for taxable accounts. The ETF’s in-kind creation/redemption process lets the fund swap shares without triggering taxable gains for investors.⁵ While tax efficiency differences are minor or even non-existent for low-turnover index mutual funds like FXAIX, VOO’s ETF structure can provide extra confidence in tax efficiency, making it an easy and attractive choice for taxable accounts.

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FXAIX vs VOO: Key Similarities

For most long-term investors, these two funds behave almost the same in terms of what you own and how your money grows. The differences are structural, not substantive.

Portfolio:

Both funds hold roughly 500 large US stocks with nearly identical sector weights:

• Information Technology: 25–30%
• Health Care: 12–14%
• Financials: 10–13%
• Consumer Discretionary: 10–12%
• Communication Services: 8–10%

The individual stocks and their weights are the same because they track the same index.

Risk:

• Beta: Very close to 1.0 vs S&P 500 (by definition).
• Volatility: Annualized standard deviation in the mid-teens over long periods.
• Historical Max Drawdowns: Exceeding -30% during crises like 2008–2009 and March 2020.

Correlation:

FXAIX and VOO have very high correlation: 0.99. So owning both doesn’t provide meaningful diversification beyond the S&P 500. If you want to reduce risk you need different asset classes like bonds, international stocks or real estate.

Return:

Long-term year to date returns, 3-year, 5-year, and 10-year total returns differ by only a few basis points. Any gap is usually due to fee differences, timing of dividend reinvestment and minor tracking error rather than fundamental performance advantages.

Dividends:

Both funds distribute dividends from S&P 500 constituents, quarterly, with yields around 1.0–1.5% in recent years depending on market conditions. These dividends flow through to shareholders regardless of which fund structure you choose.

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FXAIX vs VOO: Key Differences

The real decision between FXAIX and VOO comes down to structure, how you plan to invest, and the features offered from your broker, not which will beat the market more.

Expense ratios:

FXAIX usually has a slightly lower expense ratio (0.015% vs 0.03%), but this is tiny. We’re talking $1.50 per $10,000 per year in favor of FXAIX. 

Tax efficiency:

While both funds are very tax efficient, VOO’s ETF structure may boost confidence to avoid any unintentional capital gains from being triggered in taxable accounts. 

Platform and availability:

FXAIX is best accessed through Fidelity accounts where it has no transaction fees and full automation support. VOO is available across nearly all brokers because ETFs are directly traded on the stock exchange. 

Trading style and use case:

• VOO suits: Investors who want intraday trading, options strategies or advanced tax-loss harvesting.
• FXAIX suits: Investors who want set-and-forget automatic contributions and don’t need intraday control.

Historical performance:

Since both funds track the S&P 500, performance differences are minimal and mostly due to fees and tax handling. The investments themselves are almost identical.

FXAIX might have a slight edge due to lower fees as you notice the difference the longer of a time horizon between the two.

Market events:

Major events such as the 2011 U.S. downgrade, 2013–2019 bull market, 2020 COVID crash, and 2022 rate-hike bear market affected both funds almost identically. Their correlation during market downturns and recoveries shows they move together.

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Costs and Fees

Both FXAIX and VOO are among the cheapest investment products out there and the difference from their impact is minimal. 

Expense ratio:

Over 30 years with a $100,000 investment growing at 10% annually, the fee difference compounds to roughly $5,000, meaningful, but modest compared to total portfolio growth of over $1.5 million.

Brokerage commissions:

Most major brokers (including Fidelity) now offer $0 commissions for ETF trades and no transaction fees for their own mutual funds. Legacy commission structures are increasingly rare for mainstream index products.

Hidden costs:

• VOO: Small bid-ask spread (often 1–2 cents per share in normal markets) and potential minor premium/discount to NAV during volatile periods.
• FXAIX: No spread or premium/discount since everything prices at net asset value (NAV).

Bottom line:

For long-term investors, the expense ratio difference is negligible. Choose based on tax placement, platform convenience, and how you want to invest rather than obsessing over a $15 annual fee difference on a $100,000 portfolio.

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Tax Efficiency: Mutual Fund vs ETF

For those in regular taxable brokerage accounts, tax efficiency may very well be a deciding factor for you between FXAIX and VOO. The structural difference between traditional mutual funds and ETFs creates meaningful tax implications over time.

How ETF tax efficiency works:

ETFs like VOO use in-kind redemptions with authorized participants. When large institutional investors want to exit VOO they receive a basket of actual stocks rather than cash. This process allows Vanguard to remove low-basis shares from the portfolio without triggering realized gains inside the fund.

The result: ETFs typically distributes zero or near-zero capital gains to shareholders even in years with significant fund inflows and outflows.

» Read more: ETFs vs. Mutual Funds Tax-Efficiency Explained

How mutual funds differ:

FXAIX and other mutual funds may often sell securities for cash to meet redemptions. When other investors sell FXAIX shares the fund may need to sell stocks to raise cash, potentially realizing gains that flow through to all remaining shareholders as capital gains distributions, even if you personally didn’t sell shares. The fund can also trigger unintentional capital gains to investors if an underlying holding is sold.

Regardless, FXAIX has distributed no capital gains over the past few years, building confidence for investors, but the chance for distributions is still more likely than ETFs if it were to happen.

Tax-Advantaged account summary:

In tax advantaged accounts (401(k), IRA, HSA), tax efficiency differences don’t matter because gains and income are sheltered until withdrawal. The choice reverts entirely to expense ratios, platform convenience and automation preferences.

Taxable account summary:

In taxable accounts VOO usually has a slight edge on a purely tax-efficiency basis.

Liquidity and Trading Flexibility

How you plan to trade; lump sums versus dollar-cost averaging, intraday versus occasional rebalancing, can tilt the choice between FXAIX and VOO.

VOO’s liquidity advantages:

• High average daily volume (millions of shares)
• Narrow bid-ask spreads (often 1–2 cents)
• Full range of order types: limit, stop, market, and margin
• Options available for hedging or income strategies
• Ideal for precise intraday entries, exits and tax-loss harvesting

If you want to sell shares at a specific price during market hours VOO gives you that control.

FXAIX trading mechanics:

• Orders batch at end-of-day NAV with no intraday price control
• Simpler experience that removes temptation for frequent trading
• Can be a behavioral advantage for investors prone to overtrading
• Perfect for those who prefer investing without watching market movements

Who should choose what:

• Active traders and tax-conscious investors using any brokerage: VOO
• Fidelity investors in tax-advantaged accounts who prefer set-and-forget investing: FXAIX

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Dividends: Yield and Growth

Both FXAIX and VOO pass through dividends from S&P 500 companies. The power of dividends comes not from high yields but from decades of reinvestment.

Recent trailing 12-Month yields (As of 12/16/2025):

• FXAIX: 1.12%
• VOO: 1.12%

Yields fluctuate based on market valuations and corporate dividend policies. A small yield difference in a given year isn’t a deciding factor.

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Distribution schedule:

Both funds distribute dividends quarterly. Most are “qualified dividends” taxed at preferential long-term rates (0%, 15%, or 20% at the federal level depending on income).⁶

Dividend reinvestment:

Both funds allow dividend reinvestment with no commission:

• FXAIX: Automatically purchases fractional shares at NAV
• VOO: Reinvests through DRIP programs, potentially in fractional or whole shares depending on broker

Tax considerations:

In taxable accounts you owe taxes on dividends in the year received, even if reinvested. This creates small annual tax liability regardless of which fund you choose.

In tax advantaged accounts dividends compound tax-deferred (traditional) or tax-free (Roth) without immediate tax consequences.

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Risk, Volatility, and Drawdowns

Both funds fully participate in market ups and downs since they track the S&P 500. Understand this risk profile before making a decision.

Typical volatility:

• Annualized standard deviation of returns: 14–18% over long periods
• Monthly volatility: 2–3%

Historical drawdowns

If you held FXAIX or VOO during these periods, your experience would have been virtually the same. Both funds fell because the S&P 500 itself fell.

Risk metrics comparison:

Since FXAIX and VOO track the same index, their volatility and maximum drawdowns are almost identical. Risk metrics like Sharpe, Sortino and Ulcer Index are the same within rounding error. Neither fund has a risk advantage over the other.

Diversification reality:

Holding both FXAIX and VOO in the same portfolio doesn’t reduce risk much. They have a correlation of 0.99. True diversification requires adding other asset classes like bonds, international stocks, real estate or similar funds with different underlying holdings.

» Read more: Index Funds for Retirement: The Ideal Allocation at Every Age

Time horizon:

The structural differences between mutual funds and ETFs don’t change market risk. Investors should still expect multi-year downturns and need a time horizon of 10+ years for heavy S&P 500 exposure. Short-term investing in either fund exposes you to potential big losses.

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Which Fund Is Right for You?

“Better” depends entirely on your account type, platform, and investing style. Here’s how to make an informed decision based on your situation.

Scenario 1: Fidelity tax-advantaged accounts – 401(k), IRA, etc.

Recommendation: FXAIX

In tax-advantaged accounts, FXAIX is a great core holding due to ultra low fees, seamless automation, and irrelevance of tax efficiency. Any potential capital gains distributions don’t affect your tax liability. 

Scenario 2: Taxable accounts with any broker

Recommendation: VOO

For taxable brokerage accounts, VOO’s ETF is considered a “safer” long-term option to consider. The confidence to avoid any potential capital gains distributions (while minimal or inexistent for FXAIX in the coming years), there is still a chance due to a mutual funds structure, which can cause an impact over decades of investing. 

Scenario 3: Multi-Broker Use

Recommendation: VOO

If you use Vanguard as your main broker or want flexibility across platforms, VOO is portable and widely available. You can hold it at any brokerage, making tax-loss harvesting and transferring investments much easier.

In Summary:

Either fund is a great choice for US equity exposure. Choose one, keep costs low, diversify across asset classes, and stick to your long-term plan rather than constantly switching investments or second guessing yourself.

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