Both funds track the S&P 500 index and hold nearly identical stocks in almost the same proportions. The key difference is cost since FXAIX has half the fees, making it the more cost-effective option with slightly better long-term performance. Even so, VOO remains far more popular with nearly $200 billion more invested, despite not being the superior fund. This popularity makes VOO feel overrated, while FXAIX quietly offers the same exposure at a lower cost and with better compounding over time. The differences may seem small, but when managing larger portfolios even fractional percentage points can add up to meaningful amounts. The Wizards are obsessed over the small details and what is ultimately best.
A common argument that we hear is that ETFs are more tax-efficient than mutual funds. While this is normally true when comparing ETFs to actively managed mutual funds, it does not hold up for low-cost index funds like FXAIX. Actively managed funds often trigger taxable events through frequent trading and capital gains distributions, but FXAIX has not distributed capital gains since April 2019. Both VOO and FXAIX are highly tax-efficient, with minimal differences in this regard. The main structural difference is accessibility, since FXAIX as a mutual fund allows automatic reinvestment and built-in fractional ownership across all brokerages. VOO as an ETF depends on the brokerage for this kind of functionality. Its higher liquidity can be attractive to short-term traders, but for long-term investors, market timing is not a strategy worth pursuing.
For those focused on steady, long-term growth, FXAIX stands out as an underrated yet excellent S&P 500 index fund and it is our top pick for investors.
Source: Fidelity
Check out the link on our page to learn more about the best investing course ever created. Also, be sure to read the disclaimer on our page.
© 2025 The Personal Finance Wizards, LLC