Fidelity offers some of the best index funds for investors seeking low costs, market exposure, and long-term growth. Here's a quick rundown of their top-performing options:
- Fidelity 500 Index Fund (FXAIX): Tracks the S&P 500, providing exposure to large-cap U.S. companies. Known for low fees and steady performance.
- Fidelity ZERO Large Cap Index Fund (FNILX): A fee-free fund offering access to top U.S. large-cap stocks, ideal for cost-conscious investors.
- Fidelity Total Market Index Fund (FSKAX): Covers the entire U.S. stock market, including small, mid, and large-cap stocks, offering broad market exposure.
- Fidelity Mid Cap Index Fund (FSMDX): Focuses on mid-cap stocks, balancing growth potential with moderate risk.
Each fund stands out for its low expense ratio, strong historical returns, and tax efficiency, making them excellent choices for building a diversified portfolio. Your selection will depend on your goals, risk tolerance, and investment strategy.
The 4 Best Fidelity Index Funds To Own For Life
1. Fidelity 500 Index Fund (FXAIX)
The Fidelity 500 Index Fund (FXAIX) is designed to mirror the performance of the S&P 500, giving investors exposure to some of the largest companies in the U.S. across sectors like technology, healthcare, financials, consumer goods, and industrials.
The fund has consistently delivered returns in line with the S&P 500, benefiting from strong market conditions and showing resilience during recoveries from downturns.
One of FXAIX’s standout features is its low expense ratio, which keeps costs minimal. This cost efficiency can significantly enhance long-term growth, especially when compared to actively managed funds.
Beyond affordability, FXAIX provides broad diversification across various sectors of the market. Its low turnover rate is another plus, as it minimizes taxable distributions - an appealing aspect for those investing through taxable accounts.
For Mezzi users, FXAIX serves as a solid foundation for a portfolio. Its simplicity, extensive market exposure, and low minimum investment requirements make it an excellent choice for building a diversified portfolio. Plus, the quarterly dividend payments offer an added income stream.
2. Fidelity ZERO Large Cap Index Fund (FNILX)
The Fidelity ZERO Large Cap Index Fund (FNILX) stands out with its 0.00% expense ratio, meaning there are no management fees chipping away at your returns. This fee-free structure offers a cost-effective way to gain exposure to the market.
FNILX tracks the Fidelity U.S. Large Cap Index, which includes around 500 of the largest publicly traded companies in the U.S. This gives investors access to big names like Apple, Microsoft, Amazon, and Google, while also offering diversification across industries like technology, healthcare, consumer discretionary, and financial services.
Since its debut in August 2018, FNILX has mirrored the performance of the broader large-cap market, benefiting from the growth of some of the most prominent companies in the U.S. Its low turnover rate adds to its appeal by minimizing taxable distributions, making it a smart choice for taxable brokerage accounts.
The zero expense ratio isn’t just a nice feature - it can lead to substantial savings over time. Plus, with no minimum investment required, FNILX is accessible for beginners and seasoned investors alike. Its focus on large-cap stocks provides a mix of stability and growth potential, ensuring that more of your money stays invested and working for you.
Another perk? FNILX pays quarterly dividends in March, June, September, and December. These dividends can be reinvested automatically, allowing you to take full advantage of compounding over time. This makes it a solid option for those looking to build a diversified portfolio with steady income potential.
3. Fidelity Total Market Index Fund (FSKAX)
The Fidelity Total Market Index Fund (FSKAX) provides comprehensive exposure to the entire U.S. stock market. It includes small-cap, mid-cap, and large-cap stocks across various sectors, offering a mix of well-known names like Apple and Microsoft alongside smaller and mid-sized companies that could emerge as future market leaders. By tracking the Dow Jones U.S. Total Stock Market Index, FSKAX covers nearly every publicly traded company in the United States, making it a broad and efficient investment choice.
One of FSKAX's standout features is its low expense ratio - 0.015% as of April 29, 2025. That means for every $10,000 you invest, the annual fee is just $1.50. Morningstar rates these expenses as "Low", placing the fund in the most affordable 20% of its category. Compared to the category average expense ratio of 0.85%, FSKAX offers a clear cost advantage, ensuring more of your investment stays in the market working for you.
The fund’s performance mirrors the overall U.S. economy by capturing the full range of market activity. It benefits from the stability of large-cap companies while also tapping into the growth potential of smaller, emerging businesses. This diversified approach helps balance out market volatility while still allowing for growth opportunities across all segments.
For those looking to simplify their investment strategy, FSKAX is an excellent choice. It delivers broad sector coverage in a single, low-cost fund designed for long-term growth. With its inclusive market strategy, FSKAX underscores Fidelity's commitment to offering effective and affordable tools for building wealth over time.
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4. Fidelity Mid Cap Index Fund (FSMDX)
The Fidelity Mid Cap Index Fund (FSMDX) focuses on mid-cap stocks, tracking the Russell Midcap Index. These stocks typically represent companies with market capitalizations between $2 billion and $10 billion. Mid-cap businesses are often past their early growth stages but still hold significant potential for expansion, making them an attractive option for investors seeking a balance between growth and stability.
Mid-cap stocks offer a unique mix of attributes - combining the steadiness of larger companies with the growth opportunities often associated with smaller firms. FSMDX's portfolio spans a variety of sectors, including technology, healthcare, consumer goods, and financial services. This diversification helps reduce the impact of downturns in any single industry.
One standout feature of FSMDX is its low expense ratio, which enhances its cost-effectiveness for investors. Additionally, as an index fund, FSMDX tends to be more tax-efficient. Its low portfolio turnover - primarily adjusting holdings when the Russell Midcap Index changes - results in fewer taxable events compared to actively managed funds.
The fund spreads its investments across industries such as technology, healthcare, industrials, financials, and consumer discretionary, further reducing risk by avoiding overconcentration in any one sector. Financial advisors often suggest allocating 10%-20% of a portfolio to mid-cap investments, as this can enhance returns while maintaining a balanced risk profile. Historically, mid-cap stocks have delivered returns that sit between those of large-cap and small-cap stocks.
FSMDX's performance reflects the typical behavior of mid-cap investments. While it may experience more volatility than large-cap funds, it also offers the potential for stronger long-term growth. Mid-cap stocks are particularly sensitive to economic cycles, meaning FSMDX could see larger fluctuations during market turbulence but also benefit significantly during periods of economic recovery.
For those looking to fine-tune their portfolio, FSMDX provides a strategic way to increase mid-cap exposure. While total market funds include some mid-cap stocks, adding FSMDX allows investors to overweight this segment for more precise asset allocation. Pairing FSMDX with broader market funds offers a targeted approach to diversification and growth potential.
Pros and Cons
Here’s a breakdown of the key strengths and weaknesses of each fund, along with insights into which type of investor they’re best suited for:
| Fund | Key Advantages | Main Drawbacks | Best For |
|---|---|---|---|
| FXAIX | Strong historical performance, very low expense ratio, solid liquidity | Focuses solely on large-cap stocks, which may lead to concentration risks | Investors seeking steady, stable growth |
| FNILX | No expense ratio, broad exposure to large-cap stocks, and no minimum investment requirement | A relatively new fund with a shorter performance history and a proprietary index methodology | Investors prioritizing cost efficiency |
| FSKAX | Broad diversification across U.S. market segments | Exposure to smaller companies can result in increased volatility | Long-term investors looking for comprehensive market exposure |
| FSMDX | Offers a balanced approach with mid-cap exposure | May experience higher volatility than large-cap funds and can be sensitive to economic cycles | Investors aiming for growth with moderate risk |
Now, let’s dig deeper into the specifics of performance, costs, liquidity, and risk for each fund.
FXAIX stands out for its consistent returns, driven by its focus on established large-cap companies. This makes it a go-to option for those prioritizing stability. On the other hand, FSKAX provides exposure to the entire U.S. market, including small-cap stocks, offering higher growth potential over the long term but with more short-term fluctuations.
When it comes to costs, FNILX shines with its zero expense ratio, making it an attractive option for cost-conscious investors. The other funds also feature low fees, which minimally impact long-term returns. In terms of liquidity, established funds like FXAIX and FSKAX offer a sense of security during market turbulence due to their long track records and substantial asset bases. Despite being newer, FNILX has quickly gained traction under Fidelity’s management.
All four funds benefit from the tax advantages typical of passively managed funds. However, broader holdings, like those in FSKAX, may occasionally lead to taxable events during rebalancing.
Risk levels vary across the funds. FXAIX offers lower volatility, making it suitable for conservative investors. FSKAX, with its broader market exposure, entails higher short-term swings. Meanwhile, FSMDX provides moderate risk and focuses on mid-cap stocks, which can add a growth-oriented element to a diversified portfolio.
Your choice should align with your long-term investment goals. For those with extended time horizons, FSKAX could be appealing for its comprehensive market exposure. If stability is your priority, FXAIX may be the better fit. And for investors looking to balance risk and growth, FSMDX can play a valuable role in a diversified strategy.
Conclusion
Picking the right index fund from Fidelity’s offerings depends on your investment goals, risk tolerance, and timeline. FXAIX delivers steady growth through large-cap stocks, FNILX offers fee-free access to large-cap exposure despite its shorter track record, FSKAX provides broad coverage of the entire U.S. market, and FSMDX focuses on mid-cap stocks for growth potential.
All of these funds come with extremely low fees, ensuring more of your money stays invested and working for you. However, building a well-rounded portfolio that includes these funds takes careful planning and management.
Handling multiple accounts can get tricky, but Mezzi’s unified platform simplifies the process. It helps avoid costly tax errors, like wash sale rule violations, and its X-Ray feature identifies hidden overlaps or concentration risks. With these insights, you can rebalance your portfolio strategically to stay aligned with your long-term objectives.
Whether you go with a single fund or mix and match from this list, staying committed to a disciplined, long-term investment strategy is essential. By incorporating Mezzi’s tools, you can fine-tune your portfolio, reduce unnecessary taxes, and keep fees to a minimum.
FAQs
How do Fidelity's index fund fees compare to those of actively managed funds?
Fidelity's index funds stand out for their notably lower expense ratios compared to actively managed funds, making them a budget-friendly option for investors. On average, index funds have expense ratios around 0.60%, while actively managed funds typically fall between 0.50% and 0.89%.
Some of Fidelity's index funds, such as FXAIX, boast incredibly low expense ratios - about 0.015%. These minimal costs can add up to significant savings over time. In contrast, actively managed funds tend to have higher fees due to the extensive research and management required. This cost efficiency positions index funds as a smart choice for those focused on building wealth over the long term.
What are the risks of investing in the Fidelity Mid Cap Index Fund (FSMDX) compared to the Fidelity 500 Index Fund (FXAIX)?
The Fidelity Mid Cap Index Fund (FSMDX) carries more volatility and market risk compared to the Fidelity 500 Index Fund (FXAIX). FSMDX primarily invests in mid-cap stocks, which are typically more responsive to market shifts and economic changes. This heightened sensitivity can result in sharper short-term losses, particularly during market downturns.
On the other hand, FXAIX mirrors the performance of the S&P 500, which is composed of large-cap companies. These firms tend to be more stable and less susceptible to dramatic price fluctuations. While FSMDX has the potential for stronger long-term growth, it also comes with greater risk. As such, it may be a better fit for investors who have a higher tolerance for risk and are prepared to invest over a longer time frame.
How can I use the Fidelity Total Market Index Fund (FSKAX) to build a diversified portfolio?
The Fidelity Total Market Index Fund (FSKAX) provides access to more than 3,000 U.S. stocks, spanning multiple sectors and market sizes. This broad coverage makes it a solid option for spreading risk and reducing the impact of fluctuations in individual stock prices.
FSKAX works well as a cornerstone for a long-term investment plan. To enhance diversification, you might pair it with other asset classes, such as bonds or international funds. This combination can help you build a balanced portfolio tailored to your financial goals, offering a more comprehensive approach to growing your wealth over time.
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