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.
Answer quick MicroSurveys for cash. Designed with convenience and timeliness in mind, 70% of surveys are answered on a mobile device in just a few minutes.
Physicians, Pharmacists, and other healthcare professionals are invited to join Incrowd today!
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
| FSKAX | FZROX | Edge | |
|---|---|---|---|
| Fund Type | Mutual Fund | Mutual Fund | Split Decision |
| Diversification | Dow Jones | Total US Stock Market | Split Decision |
| Inception Date | 2011 | 2018 | FSKAX |
| Number of Holdings | 3,944 | 2,667 | Split Decision |
| Risk Rating | Moderate | Moderate | Tie |
| Minimum Investment | $0 | $0 | Tie |
| Expense Ratio | 0.015% | 0.00% | FZROX |
| Tax Efficiency | Mutual funds | Mutual funds | Tie |
| Tax Loss Harvesting | Funds can be reinvested on the same-day | Funds can be reinvested on the same-day | Tie |
| Trading & Liquidity | EOD trading on NAV | EOD trading on NAV | Tie |
| Performance | 20.69% in 2023 | 20.52% in 20213 | FZROX |
| Dividend Yield | 1.57% in 2022 | 1.62% in 2022 | Tie |
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.
| Industry | FZROX | FSKAX |
|---|---|---|
| Information Technology | 26.20% | 26.11% |
| Financials | 13.19% | 13.22% |
| Health Care | 13.11% | 13.16% |
| Consumer Discretionary | 10.72% | 10.77% |
| Indsutrials | 9.67% | 9.74% |
| Communication Services | 8.21% | 8.14% |
| Consumer Staples | 6.01% | 6.05% |
| Energy | 4.79% | 4.78% |
| Real Estate | 2.80% | 2.84% |
| Materials | 2.69% | 2.69% |
| Utilities | 2.31% | 2.32% |
| Multi Sector | 0.31% | 0.19% |
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%.
| Company | FZROX | FSKAX |
|---|---|---|
| Apple Inc. | 6.05% | 5.99% |
| Microsoft Corp. | 5.61% | 5.58% |
| Amazon.com Inc. | 2.71% | 2.75% |
| NVIDIA Corp | 2.57% | 2.56% |
| Alphabet Inc. A | 1.86% | 1.85% |
| Tesla Inc C | 1.61% | 1.64% |
| Alphabet Inc. Class C | 1.61% | 1.59% |
| Meta Platforms Inc Class A | 1.59% | 1.58% |
| Berkshire Hathaway Inc Class B | 1.49% | 1.52% |
| Exon Mobile Corp | 1.14% | 1.12% |
| Total | 26.24% | 24.66% |
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 | |||
|---|---|---|---|
| Year | FZROX | FSKAX | Difference |
| 2023 | 12.51% | 12.45% | 0.06% |
| 2022 | -19.19% | -19.51% | 0.32% |
| 2021 | 26.01% | 25.65% | 0.36% |
| 2020 | 20.50% | 20.78% | -0.28% |
| 2019 | 31.15% | 30.92% | 0.23% |
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 | |||
|---|---|---|---|
| Year | FZORX | FSKAX | Difference |
| 1-Yr | 20.69% | 20.52% | 0.17% |
| 3-Yr | 9.51% | 9.28% | 0.23% |
| 5-Yr | 9.18% | 9.02% | 0.16% |
| 10-Yr | 11.21% | ||
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 | |||
|---|---|---|---|
| Year | FZROX | FSKAX | Difference |
| 2022 | 1.57% | 1.62% | -0.05% |
| 2021 | 1.25% | 1.15% | 0.10% |
| 2020 | 1.27% | 1.45% | -0.18% |
| 2019 | 1.51% | 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.
