fbpx
Advertiser disclosure

Terms and Restrictions Apply
Physician on FIRE has partnered with CardRatings for our coverage of credit card products. Physician on FIRE and CardRatings may receive a commission from card issuers. Some or all of the card offers that appear on the website are from advertisers. Compensation may impact on how and where card products appear on the site. POF does not include all card companies or all available card offers. Credit Card Providers determine the underwriting criteria necessary for approval, you should review each Provider’s terms and conditions to determine which card works for you and your personal financial situation.
Editorial Disclosure: Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed, or approved by any of these entities.

FSKAX vs FZROX: Which Fidelity Broad Market Mutual Fund is Better?

FZROX (Fidelity Zero Total Market Index) and FSKAX ( Fidelity Total Market Index Fund) are two Fidelity mutual funds that aim to generate similar returns as the broad range U.S. stock market.

To do this, FSKAX uses the Dow Jones index. In contrast, FZROX uses an index with a weighted market capitalization that captures large, medium, and small capitalization stocks.

In this post, we’ll compare FSKAX and FZROX’s key differences: longevity, expense ratio, performance, tax efficiency, and diversification strategy.

 

What is FSKAX?

FSKAX is Fidelity’s Total Market Index Fund. It’s designed to generate returns on par with the broad United States stock market.

FSKAX achieves this by investing at least 80% of its assets into the Dow Jones Total Stock Market Index. The Dow Jones is one of the oldest and most followed index funds in the world, which is comprised of approximately 3,700 companies listed on U.S. stock exchanges and represents the broad U.S. stock market.

 

Incrowd_surveys

Physicians and pharmacists, Register with Incrowd for the opportunity to earn easy money with quick “microsurveys” tailored to your specialty.

 

What is FZROX?

FZROX, also known as Fidelity Zero Total Market Index, is part of Fidelity’s family of zero expense ratio and zero minimum investment mutual funds.

This fund aims to provide investment returns on par with a broad range of U.S. stocks by investing at least 80% of assets in the Fidelity U.S Total Investable Market Index. This market index is a weighted market capitalization index that reflects large, medium, and small-cap stocks.

 

FSKAX vs FZROX

FSKAXFZROXEdge
Fund TypeMutual FundMutual FundSplit Decision
DiversificationDow JonesTotal US Stock MarketSplit Decision
Inception Date20112018FSKAX
Number of Holdings3,9442,667Split Decision
Risk RatingModerateModerateTie
Minimum Investment$0$0Tie
Expense Ratio0.015%0.00%FZROX
Tax EfficiencyMutual fundsMutual fundsTie
Tax Loss HarvestingFunds can be reinvested on the same-dayFunds can be reinvested on the same-dayTie
Trading & LiquidityEOD trading on NAVEOD trading on NAVTie
Performance20.69% in 202320.52% in 20213FZROX
Dividend Yield1.57% in 20221.62% in 2022Tie

 

Diversification – Tie

Let’s examine how these mutual funds differ in terms of portfolio diversification.

As mentioned, FSKAX and FZROX aim to generate returns similar to the broad range of the U.S. stock market. To do this, FSKAX uses the Dow Jones as an index, and FZROX uses a weighted market capitalization approach of the entire U.S. stock market.

The table below shows each mutual fund’s portfolio diversification by industry. Using the table, you can see that, despite the funds’ different approaches, FSKAX and FZROX generate nearly identical portfolios.

 

IndustryFZROXFSKAX
Information Technology26.20%26.11%
Financials13.19%13.22%
Health Care13.11%13.16%
Consumer Discretionary10.72%10.77%
Indsutrials9.67%9.74%
Communication Services8.21%8.14%
Consumer Staples6.01%6.05%
Energy4.79%4.78%
Real Estate2.80%2.84%
Materials2.69%2.69%
Utilities2.31%2.32%
Multi Sector0.31%0.19%

Source: FZROXFSKAX

 

Further, both FZROX and FSKAX hold the same top 10 stocks with very similar proportions, as demonstrated by the table below. The difference is less than 2%, with FZROX top 10 holdings accounting for 26.24% and FSKAX top 10 holdings accounting for 24.66%.

 

CompanyFZROXFSKAX
Apple Inc.6.05%5.99%
Microsoft Corp.5.61%5.58%
Amazon.com Inc.2.71%2.75%
NVIDIA Corp2.57%2.56%
Alphabet Inc. A1.86%1.85%
Tesla Inc C1.61%1.64%
Alphabet Inc. Class C1.61%1.59%
Meta Platforms Inc Class A1.59%1.58%
Berkshire Hathaway Inc Class B1.49%1.52%
Exon Mobile Corp1.14%1.12%
Total26.24%24.66%

Source: FZROXFSKAX

 

Overall, whether you choose FROX or FSKAX, you will get nearly the same diversification of industries and top 10 holdings.

 

Minimum Investment – Tie

Like most Fidelity mutual funds, both FZROX and FSKAX are Fidelity mutual funds that have a $0 minimum investment.

Remember that a $0.00 minimum investment is not standard for mutual funds and brokerage firms. For example, most mutual funds offered by Vanguard have a minimum investment of $3,000, while most ETFs offered have a $1.00 minimum investment.

 

Expense Ratio – FZROX Wins

FZROX is a part of Fidelitiy’s Zero Family Mutual Funds. That means it has a zero percent expense ratio and zero minimum investment mutual funds. In contrast, FSKAX has an expense ratio of 0.015%.

That said, the difference between the expense ratio of these two funds is marginal and unlikely to have a significant impact on your returns. Also, FSKAX’s 0.015% expense ratio is low compared to many other mutual funds on the market.

 

Trading and Liquidity – Tie

Since both FSKAX and FZROX are mutual funds, they have the same trading and liquidity features.

Mutual funds are only traded at the end of the day based on Net Asset Value (NAV). This makes mutual funds less tradable and liquid than other investment options, such as ETFs or individual stocks, which can be traded throughout the day.

That said, compared to ETFs, mutual funds are generally more ideal if you are a buy-and-hold investor not concerned with trading execution strategies.

 

Performance & Dividends – FZROX Wins

Next, let’s look at how FSKAX and FZROX compare in terms of performance and dividends. The table below demonstrates each mutual fund’s total annual returns by NAV.

Remember that we are using data starting from FZROX, which wasn’t established until 2018.

 

Total Returns by NAV
YearFZROXFSKAXDifference
202312.51%12.45%0.06%
2022-19.19%-19.51%0.32%
202126.01%25.65%0.36%
202020.50%20.78%-0.28%
201931.15%30.92%0.23%

Source: FZROXFSKAX

 

As you can see, FZROX has outperformed FSKAX in three of the last four years with an average overperformance of 0.30%. However, as of September 30, 2023, FZROX and FSKAX are performing nearly identically. The difference in performance between these two is marginal and will not make a meaningful difference even at a higher investment amount.

Next, let’s examine the average cumulative returns of each mutual fund using the table below.

 

Average Commulative Returns by NAV
YearFZORXFSKAXDifference
1-Yr20.69%20.52%0.17%
3-Yr9.51%9.28%0.23%
5-Yr9.18%9.02%0.16%
10-Yr11.21%

Source: FZROXFSKAX

 

The table demonstrates that in every time period from 1-year, 3-year, and 5-year, FZROX has outperformed FSKAX. As such, FZORX has an advantage in total returns and average cumulative returns over FSKAX.

Finally, let’s look at dividend yield using the table below.

 

Dividend Yield
YearFZROXFSKAXDifference
20221.57%1.62%-0.05%
20211.25%1.15%0.10%
20201.27%1.45%-0.18%
20191.51%1.80%-0.29%

 

As the table demonstrates, FSKAX has a slight edge in dividend yield over the last five years, while in 2021, FZROX outperformed FSKAX. Still, the difference in dividend yield between these two funds is marginal and has decreased over each additional year.

Overall, both funds generate very similar returns; FZROX has a marginal advantage in total return, and FSKAX has a marginal advantage in dividend yield.

 

Tax Efficiency – Tie

When comparing two different investment options, it’s essential to consider the tax implications, as it can have a meaningful impact on which investment generates higher after-tax returns.

In this case, both FZROX and FSKAX have the same tax efficiency since both mutual funds have very similar portfolio diversification.

 

Tax Loss Harvesting – Tie

Tax-loss harvesting is a strategy that involves selling investments at a loss to offset gains (and up to $3,000 in ordinary income). This strategy only matters in taxable investment accounts since you aren’t taxed on capital gains in tax-deferred accounts.

Mutual funds generally have an advantage in tax-loss harvesting compared to other types of investment, such as ETFs. Because mutual fund trades only happen after the market closes, you can sell your mutual fund and have the proceeds scheduled to be reinvested the same day. This allows you to harvest tax losses and reinvest in a similar (or different) fund that same day.

Since both FZROX and FSKAX are mutual funds, they have the same tax-loss harvesting rules, and you can have funds reinvested on the same day. As such, neither FZROX nor FSKAX have an advantage over each other regarding tax-loss harvesting.

 

FZROX vs FSKAX: Which Is a Better Investment?

FZROX and FSKAX are two Fidelity mutual funds that aim to generate similar returns as the broad range of the U.S. stock market. To do this, FSKAX uses the Dow Jones as an index, and FZROX uses a weighted market capitalization approach of the entire U.S. stock market.

One notable difference between FZROX and FSKAX is their expense ratio. FZROX has a 0% expense ratio, whereas FSKAX has an expense ratio of 0.015%. That said, the difference between the expense ratio of these two funds is marginal and unlikely to have a significant impact on your returns.

Another thing to consider when investing between these two funds is their portfolio diversification. While FSKAX has more holdings compared to FZROX, their portfolio composition by Industry and top 10 holdings are nearly identical.

Further, while FZROX has a slight advantage compared to FSKAX in terms of total returns and cumulative returns, FSKAX has a slight advantage when it comes to dividend yield. That said, these differences are marginal and will have a minimal impact even with significant investments.

One important thing to consider when looking at performance is that FZROX is a much newer mutual fund than FSKAX. Specifically, FSKAX was started in 2011, while FZROX

only began in 2018. This gives FSKAX a more extended performance history.

Overall, both FSKAX and FZROX are great investment options if you want to generate returns similar to the overall stock market.

 



Share this post:

2 thoughts on “FSKAX vs FZROX: Which Fidelity Broad Market Mutual Fund is Better?”

  1. Excellent comparison overall, but please note that the Dow Jones U.S. Total Stock Market Index is comprised of ~ 3700 stocks, not the 30 stocks you refer to above. The Dow Jones Industrial Average contains stocks of only 30 U.S. companies, and is no longer considered an accurate proxy for the total U.S. stock market.

    Reply

Leave a Comment

Doctor Loan up to 100% Financing

Related Articles

Join Thousands of Doctors on the Path to FIRE

Get exclusive tips on how to reclaim control of your time and finances.