FNILX vs. FXAIX: Key similarities & differences

The short version

• FNILX tracks the Fidelity U.S. Large Cap Index while FXAIX tracks the S&P 500.
• FXAIX has posted slightly higher returns over time, but FNILX is completely fee-free.
• Low-cost index funds are a great way to grow your portfolio over time.

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What are FNILX and FXAIX?

FNILX and FXAIX are two low-cost index funds offered by Fidelity. FNILX is the Fidelity ZERO Large Cap Index Fund that was created in 2018. It boasts a 0.00% expense ratio.

FXAIX is the Fidelity 500 Index Fund and has been around since 1988. While not quite a zero-fee fund, FXAIX’s expense ratio is 0.015% making it an almost equally affordable option.

Both FNILX and FXAIX offer exposure to top-performing companies, allowing investors to capture gains in the economy without taking on the risk or the heavy expense of buying individual stocks. Because of their low expense ratios, investors can leverage these cost savings to grow their portfolios even more.

An introduction to FNILX

FNILX is Fidelity’s Large Cap Index Fund, so it’s almost entirely composed of companies with market values over $10 billion. It tracks alongside 80% of the companies in the Fidelity U.S. Large Cap Index and many companies on which is meant to mirror the performance of large cap stocks.

Index it tracks: Fidelity U.S. Large Cap Index

Expense ratio: 0.0%

Minimum investment requirement: $0.00

Last annual dividend: $0.161/share (December 2021)

The high market cap of companies in the S&P 500 can make the average share price out of reach for investors who don’t have a lot of cash to invest. FNILX makes it easier for investors to benefit from the growth of large cap companies.

More: Large cap vs. mid cap va. small cap stocks - balance your portfolio for the long run

Holdings

There are 504 companies in FNILX’s portfolio. Approximately 27% of FNILX’s portfolio is invested in the following companies:

• Apple (AAPL)
• Microsoft (MSFT)
• Amazon (AMZN)
• Tesla (TSLA)
• Google (GOOGL) + (GOOG)
• Berkshire Hathaway (BRK/B)
• United Healthcare (UNH)
• Johnson & Johnson (JNJ)
• Exxon Mobil (XOM)

Sectors

FNILX is concentrated in the tech sector with exposure to healthcare, consumer discretionary, and financial services. The weighted breakdown by industry includes:

• Information Technology — 27.33%
• Health Care — 15.06%
• Consumer Discretionary — 11.33%
• Financials — 10.90%
• Communication Services — 8.21%
• Industrials — 7.58%
• Consumer Staples — 6.58%
• Energy — 4.71%
• Utilities — 2.96%
• Real Estate — 2.64%
• Materials — 2.42%
• Multi Sector — 0.25%

As mentioned earlier, FNILX is a zero-cost mutual fund. It's part of Fidelity’s series of ZERO funds, and [they really mean “zero”].

There is a 0% expense ratio, no service or distribution fees, and no minimum investment to get started.

This free fund is offered to investors the same way a door crasher is doled out on Black Friday: to introduce new investors to Fidelity’s other services and products.

That being said, it's a door crasher that has made real money for investors. Since the fund’s inception in 2018, it has generated an average 8.94% return. FNILX also posts annual dividends once a year, creating a passive income opportunity for investors.

FNILX is a medium-to-high-risk mutual fund. It has a three out of five star rating from Morningstar.

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An introduction to FXAIX

FXAIX is the Fidelity 500 Index Fund. Similar to FNILX, FXAIX also tracks large cap stocks. But while FNILX tracks  its own first-party U.S. Large Cap Index, FXAIX tracks the S&P 500.

Normally at least 80% of FXAIX’s underlying holdings will be companies that are listed in the S&P 500 Index. This means most of the top performing companies in the overall economy are included in this fund.

Index it tracks: S&P 500

Expense ratio: 0.015%

Minimum investment requirement: $0.00

Last quarterly dividend: $0.581/share (October 2022)

More: Best S&P 500 ETFs for 2022

Holdings

Currently, the top 10 holdings of FXAIX are identical to FNILX. This is to be expected, as both funds track very similar indices with majority overlapping securities. There are also 502 companies represented in the fund’s portfolio, compared with FNILX's 504.

Sectors

FXAIX is heavily weighted in tech, healthcare, consumer discretionary, and financial services. The full breakdown by industry is as follows:

• Information Technology — 26.28%
• Health Care — 15.04%
• Consumer Discretionary — 11.67%
• Financials — 10.96%
• Communication Services — 8.04%
• Industrials — 7.84%
• Consumer Staples — 6.85%
• Energy — 4.53%
• Utilities — 3.06%
• Real Estate — 2.79%
• Materials — 2.50%
• Multi Sector — 0.43%

While FXAIX is not a zero-fee fund, it's still a low-cost and affordable option for investors, with a small expense ratio of 0.015%.

Like FNILX, FXAIX does not require a minimum balance to get started. It posts dividends every quarter. Since the fund’s inception in 1988, it has posted a 10.32% return on investment.

FXAIX is also a medium-to-high-risk mutual fund. It has a four out of five star rating from Morningstar.

FNILX vs. FXAIX Performance

Both FNILX and FAIX provide an extremely similar return on investment that tracks the growth in some of the largest companies in the U.S. economy.

Fidelity Fund Research

Since its inception, FNILX has posted a 7.09% return on investment. In the last three years, the annual return has been 8.01%. This is slightly under the S&P 500s average annual return of about 8.16%.

Since its inception, FXAIX has posted a 10.10% return for investors. In the last three years, returns have been 8.15%, nearly identical to the S&P 500.

While over a period of time both funds have posted positive returns, in 2022 they have recorded negative returns along with the overall stock market. The S&P 500 has posted 2022 returns of .

FNILX vs. FXAIX: key differences and similarities

FNILX and FXAIX share the same top holdings and are weighted in favor of the same industries. The risk exposure to both is very similar.

That being said, the funds are different in size. FNILX currently has $5.3 billion in assets under management. This is significantly smaller than FXAIX which has just under $354 billion in assets under management.

Another key difference between the two funds is their expense ratio. FXAIX has a commendable expense ratio of 0.015%, but it’s hard to beat literally 0%. Compared to FNILX, investors may still want to keep FXAIX's cost in mind.

However, the minor fee might be worth it for higher returns. The lifetime returns for FXAIX are about 3% higher than FNILX (10.10% vs. 7.09%). One reason for this is that FXAIX has been around for a few decades while FNILX is only four years old. However, it should be pointed out that even when you consider 2022 alone, FXAIX has outperformed FNILX by over 1.5% (-15.49% vs. -17.10%).

Lastly, there’s the dividend schedule. FXAIX pays out dividends every quarter while FNILX only pays out dividends once per year. The FXAIX dividend has been higher as well. Its last payout was $0.581 per share compared to $0.161 per share with FNILX. Dividends generate passive income and reinvesting those dividends can lead to compounding growth over time.

The takeaway: which one makes sense for you?

When deciding which fund to invest in, it is important to evaluate your personal goals to determine which one is right for you.

On the surface, the two funds look nearly identical. Both FNILX and FXAIX include large-cap companies, have low expense ratios, and pay out dividends. However, there are a few important differences to consider.

While it costs more, FXAIX has been around longer than FNILX and has so far provided returns that are slightly higher. Additionally, the quarterly dividend distributions might make FXAIX a better choice if you're relying on your index fund to provide passive income.

Despite those benefits, FNILX is still a good investment. Investors will be able to grow their wealth without losing any of it to fees. Like FXAIX, FNILX does not require an initial investment amount. Shares of FNILX are also significantly cheaper than FXAIX which makes it more accessible to new investors.

At the end of the day, both options are a good pick for investors looking to reduce costs while tracking the returns of some of the biggest companies on the stock market.

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