FSKAX vs FNILX

The Fidelity ZERO Large Cap Index Fund (FNILX) and the Fidelity Total Stock Market Index fund (FSKAX) are two of the largest mutual funds in existence. FNILX and FSKAX are the core of many investor portfolios. Many investors compare FNILX vs FSKAX in order to decide which should be the foundation of their portfolio.

A quick reminder that this site does NOT provide investment recommendations. Fund comparisons (such as this one) are not conducted to identify the “best” fund (since that will vary from investor to investor based on investor-specific factors). Rather, these fund comparison posts are designed to identify and distinguish between the fund details that matter versus the ones that don’t.

The Short Answer

There are two main differences between FNILX and FSKAX. Firstly, FNILX is a large- and mid-cap fund, while FSKAX is a total market fund. Despite these differences, the total return between these two funds is pretty close.

Secondly, and perhaps more importantly, FNILX cannot be bought or owned outside of Fidelity.

The Long Answer

Historical Performance: FNILX vs FSKAX

FSKAX was launched on September 8, 2011 (although other shares classes of the fund existed prior to that), while FNILX was launched in September 2018. Since then, FNILX has outperformed by about a .6% annually. This is not a huge performance differential, but it does compound over time. The cumulative difference between the two funds since common inception is approximately 3.5%.

Of course, the outperformance of FNILX is reflective of large-cap stocks’ dominance over the past decade. If mid-caps and/or small-caps lead, then I suspect FSKAX would outperform.

Differences between FNILX vs FSKAX

The biggest difference between FNILX and FSKAX is the market cap exposure of the funds. FNILX tracks the S&P 500 index which includes mostly large-caps and some mid-caps, while FSKAX covers much more of the market by including more mid-caps and small-caps.

Geographic Exposure

Both FNILX and FSKAX hold essentially 100% stocks, so I will not dig into country exposures or market classification here. For most intents and purposes, the two funds have identical exposures.

Market Cap Exposure

FNILX focuses on the Fidelity US Large Cap Index and so it mostly holds large-caps with a bit of mid-cap exposure. FSKAX tracks the broader Dow Jones U.S. Total Stock Market Index and so it owns many more mid-caps and small-caps (as of 11/30/2022). In other words, FNILX is a large-cap vehicle, while FSKAX is a total market vehicle. That being said, due to market cap weighting, both funds are overwhelmingly influenced by the large-cap holdings.

FNILXFSKAX
Large-Cap84%73%
Mid-Cap16%19%
Small-Cap0%9%
Source: ThoughtfulFinance.com, Morningstar

Sector Weights

The sector weights between FNILX and FSKAX are nearly identical, as of 11/30/2022. The weights are generally within 1% for every single sector.

FNILXFSKAX
Basic Materials2.41%2.68%
Consumer Cyclical9.95%10.43%
Financial Services13.69%14.04%
Real Estate2.64%3.46%
Communication Services7.53%6.91%
Energy5.12%5.13%
Industrials8.48%9.58%
Technology24.76%23.18%
Consumer Defensive7.18%6.77%
Healthcare15.38%14.97%
Utilities2.86%2.87%
Source: ThoughtfulFinance.com, Morningstar

Factors to Consider

Tradability

In my view, the most important factor to consider when evaluating FSKAX vs FNILX is the fact that FNILX cannot be bought or owned outside of Fidelity. Personally, this is a non-starter for me as there are reasons to transfer assets to other custodians, such as transferring one’s accounts or making a donation. Some investors may not value flexibility as much, but they should be aware of this limitation.

Transaction Costs

Many brokers and custodians still charge commissions and/or transaction fees to buy/sell mutual funds. To my knowledge, Fidelity does not participate in the pay-to-play arrangements (with their competitor custodians) that would allow their mutual funds to trade for free on many platforms. So if an investor account is at Fidelity, it is generally free to trade FSKAX and FNILX; other custodians will likely charge a fee to trade Fidelity mutual funds.

It is worth noting that neither fund has a minimum for initial or additional investments. That being said, investors looking for free trades at other custodians may want to consider an a total market ETF or large-cap ETF, rather than FSKAX or FNILX.

Expenses

FNILX grabbed headlines when Fidelity announced it, due to the 0% expense ratio. While zero expenses is great, it is only .015% less than FSKAX. So ever though the difference in expenses is infinite in relative terms, its only a basis point and a half difference. At a certain level (such as this one), differences in expense ratios do not matter.

Tax Efficiency & Capital Gain Distributions

Both funds have made capital gains distributions in the past and will likely make them in the future. It is not possible to say which one will be more tax-efficient in the future. As index funds, the tax drag on both funds is very low. However, tax-sensitive taxable investors may want to consider using an ETF in lieu of either of these funds.

Final Thoughts: FNILX vs FSKAX

Both FNILX and FSKAX are large, core funds sponsored and managed by one of the largest asset managers in the world (Fidelity). Beyond market cap exposures, the funds appear and act very similar. Long-term performance has been nearly identical. I view these two funds as essentially interchangeable and would not spend too much energy splitting hairs to decide which one is “better.”

That being said, investors should not consider FNILX unless their account is at Fidelity. If my accounts were at Fidelity, I might consider FNILX in a tax-exempt or tax-deferred account. However, I would never buy FNILX in a taxable account due to the inability to transfer the assets (without realizing a potential gain) out of Fidelity if I wanted to move my accounts, donate the shares, etc.

For those asking: which is better, FSKAX or FNILX? I believe FSKAX is better than FNILX in most situations. Personally, I would never buy or recommend FNILX due to the limitations.

Posted by Matt

Matt is an investor and investment adviser. He is a CFA charterholder and a CAIA charterholder. His writing on this site is purely educational; he will not make recommendations on this site since he does not know individual readers' situations.