FNILX vs FZROX: Which Fidelity Fund Is Better?

In this article, we will explore the difference between FNILX vs FZROX.

Choosing between Fidelity's ZERO Large Cap Index Fund (FNILX) and Fidelity's ZERO Total Market Index Fund (FZROX).

Investors may find it difficult to choose between FNILX and FZROX.  They are both tremendous total market funds.

This article will break down their differences.

 

FNILX vs FZROX

The primary difference between FNILX and FZROX is the index they track.  FZROX tracks the U.S. Total Investable Market Index, while FNILX tracks the Fidelity U.S. Large Cap Index.

Both are Fidelity funds.

Fidelity made major headlines when they announced FZROX would not have any fees or expense ratio attached to the fund.

Another significant difference is the number of holdings in each fund.

FNILX holds 503 stocks

FZROX holds 2,631 stocks

This means FZROX provides more diversification compared to FNILX.

FNILX

• Tracks The Fidelity U.S. Large Cap Index
• Expense Ratio: 0%
• No Minimum Investment
• Holds 503 Stocks
• Is a Mutual Fund
• Offered By Fidelity

FZROX

• Fund Inception: 2018
• Tracks U.S. Total Investable Market Index
• No Minimum Investment
• Expense Ratio: 0%
• Number Of Stocks: 2,631

Just like FZIPX and FZILX, FNILX and FZROX are Fidelity's zero-fee index funds, meaning the absence of an expense ratio.

This makes them attractive investment options for long-term investors.

Aside from low-cost benefits, these mutual funds share standard features in other areas, including performance, dividend distribution, and holdings.

However, while FNILX concentrates on large-capitalization U.S. companies, FZROX seeks to cover the entire U.S. market.

This means it seeks to track the performance of large-, mid-, and small-cap US stocks.

As a result, FZROX offers better diversification than FNILX. 

This FNILX vs FZROX analysis x-rays the two funds to help you choose wisely. As an investor, you need to “look before you leap,” so read on to derive insights and make an informed decision.

 

FNILX vs FZROX Performance

FNILX and FZROX invest in the largest US companies, meaning they have similar performance.

Below is a summary of the performance of the two funds: 

Historically, large-capitalization companies have shown better performance than small and medium-capitalization companies.

Fidelity U.S. Large Cap Index, FNILX, has slightly outperformed FZROX, as the one-year and three-year performance reveals.

 

FNILX vs FZROX Holdings

Fortunately, FNILX and FZROX have similar holdings; the biggest S&P 500 companies are still underlying FZROX holdings.

This is not surprising since FNILX is an S&P 500 index fund, and FZROX holds all the companies that comprise the S&P 500.  

Here are the top 10 holdings of each fund: 

The  investment by sectors is as follows: 

The two funds invest in almost similar sectors.

However, FZROX tends to have higher total market index percentage points in most sectors.

 

FNILX vs FZROX Overlap

Let's consider the critical similarities between FNILX and FZROX: 

Minimum Investment 

Both FNILX and FZROX have no minimum investment.

In other words, you can begin investing in these funds with a very minimal amount, unlike some mutual funds that require as much as $1,000 as a minimum investment.

This makes them attractive options for beginner investors looking to start investing.    

Fees 

Another exciting feature of these funds is that they do not charge any fees, meaning you can save a significant amount of money off fees that go into your invested capital.

Avoiding fees is essential.

High fees can eat into your potential returns. But with these funds, you’ll have no management fees which means more money compounding over time.

Dividends 

Both FNILX and FZROX allow you to automatically reinvestment your dividends, contributions, and withdrawals. FNILX and FXROX are index funds, meaning they can purchase fractional shares.

This is a huge gain for investors with a slim budget.

 

FNILX vs FZROX Key Differences 

Here are the main differences between FNILX and FZROX: 

Asset Classes

One of the most significant differences between the FNILX and FZROX is their asset class. FZROX is Fidelity's total market index fund. This means it invests in U.S. large-cap, medium-cap, and small-cap stocks and stocks in European and Asian countries.

On the flip side, FNILX is Fidelity's S&P 500 index fund. As a result, it tracks the performance of the largest 500 U.S. companies.  

Fund Size

The fund size can be a good indicator of which of these funds is more popular. FZROX has net assets of $13 billion, while FNILX has net assets of $5 billion. 

Volatility

Undoubtedly, all stock investments are volatile, and FNILX and FZROX are no exception.

However, since FZROX is an all-cap index fund, it is more susceptible to market fluxes than FNILX. Large-capitalization funds tend to be more stable because these companies are already established.

This, however, does only mean you're likely to have more losses; it also presents an opportunity for gains.

 

FNILX Overview

Fidelity ZERO Large Cap Index Fund (FNILX) is a mutual fund established in 2018 and is one of four zero fund choices.  FNILX has over $5.4 billion in portfolio net assets.

Also, it boasts consistent returns by investing in 100% domestic equity while keeping costs at zero.

FNILX is categorized as a large blend fund with 4 out of 5 stars from Morningstar.

FNILX has a turnover rate of 5% and charges investors an expense ratio of 0%.

A good advantage of FNILX is there is no minimum initial purchase requirement which means you can invest as little as $100.

Fidelity also offers professionally managed portfolios across nine risk levels, ranging from conservative to aggressive.

Some other platforms offer both mutual funds and ETFs.

However, because FNILX is a mutual fund, only Fidelity funds offer FNILX, the platform that issues FNILX.

FNILX's fees are as low as possible, but eventually, Fidelity will raise prices.

To purchase FNILX, you will have to start a fidelity account.

 

FNILX Performance

Since FNILX's inception in 2018, its performance has been good.

FNILX's performance for the past 3 years has averaged 18% growth annually.

FNILX also had no significant down year in the last three years.

FNILX is categorized as a large blend fund.  As a large blend fund, it makes for an excellent investment for those looking at buying and holding over the long term.

Furthermore, FNILX has a beta of 1.00 and a standard deviation of 17.77.

FNILX Pros and Cons

Pros

• Fidelity's FNILX Provides Consistent Returns
• Zero Expense Ratio
• Fidelity Is A Reputable Brokerage
• No Minimum Investment
• No Significant Down Years In The Last Three Years
• FNILX Tracks The Fidelity U.S. Large Cap Index

Cons

• Lacks Proven Long-Term Returns
• Fidelity Will Likely Increase FNILX's Expense Ratio
• Only Available On Fidelity's Platform
• Annual Dividends

 

FNILX Holdings

Here are the top 10 Holdings with total assets of 28%.

 

FZROX Overview

• Fund Inception: 2018
• Expense Ratio: 0%
• Number Of Stocks: 2,631
• Top 10 Holdings: 24%
• Yield 1.12%

THE Fidelity ZERO Total Market Index Fund (FZROX) is 1 of 4 new Fidelity funds with a zero expense ratio.  These are the only market index funds with a zero expense ratio.

The other 3 Fidelity funds with a zero expense ratio are:

1. (FNILX) Fidelity ZERO Large Cap Index Fund
2. (FZIPX) Fidelity ZERO Extended Market Index Fund
3. (FZILX) Fidelity ZERO International Index Fund

These zero-expense ratio funds are likely a result of market pressures to lower investment costs and compete with other big brokerages with low-cost funds like Vanguard.

Another critical aspect of FZROX is that it only pays a dividend once a year in December.  This is a big difference compared to most other funds that pay quarterly dividends.

FZROX only pays a dividend once a year in December

This might be important for someone in retirement and depends on dividend income for yearly expenses.

 

FZROX Performance

Fidelity's FZROX has averaged 19% annually over the last 3 years.  However, the fund doesn't have a 5 or 10-year performance history since its inception in 2018.

Here is how $10,000 would have grown with FZROX over the last 3 years:

This is a significant return, especially considering the zero-expense ratio.  Therefore, you keep 100% of the performance returns as an investor.

 

FZROX Holdings

FZROX comprises Microsoft, Apple, Amazon, Alphabet, and Tesla and provides exposure to over 2,000 stocks.

Fidelity's FZROX provides diversification and is less volatile than other funds with fewer holdings.

 

Which Fund is Better, FNILX or FZROX? 

FNILX and FZROX are great funds to invest in. Zero fees and no minimum investment make them a top pick on our list.

Also, both funds invest in undervalued stocks, offering investors the opportunity for significant returns in the long term.

Frankly, the differences between FNILX and FZROX are slight. This is because the two funds track approximately 80% of the same companies.

Secondly, since they both invest in large U.S. companies, their performances are highly similar. 

Here's the thing: if you already have an S&P 500 index fund in your portfolio,  choosing FZROX will help you further diversify your portfolio.

FZROX offers you exposure to all publicly traded securities.

If you are looking for a fund to invest in a 401(k) or any other investment account, FZROX is an excellent option. 

Small and medium-cap companies have growth potential advantages, and so are great long-term investment options.

Also, historically, these companies have outperformed the S&P 500 in terms of growth. If the trend continues, FZROX is set to experience steep growth with added diversification. 

Since you’re choosing between two highly recommended mutual funds with lots of similarities, choosing the one that will provide better diversification is best.

This will help you hedge investment risk while building a better foundation for returns.

 

FNILX vs FZROX: Which is Better For Financial Independence? 

With no fees, investing in either of the funds sets you up for financial independence.

Calculate Your FI Number With My Free FIRE Calculator

[convertkit form=2812706]

However, with greater diversification, FZROX has an added advantage.

 

My Winner: FZROX 

Since FNILX focuses on large-capitalization U.S. companies, while FZROX aims to cover the total U.S. market, FZROX offers a more significant opportunity for a  reward through diversification.

However, consider your long-term plans and investment goals to help narrow your choice of which fund best suits you. Investment decisions depend on what works best for you.