FSKAX vs ITOT

The Fidelity Total Stock Market Index fund (FSKAX) and the iShares Core S&P Total US Stock Market ETF (ITOT) are two of the largest “total market” index funds in existence and easily two of the most popular among individual investors. ITOT and FSKAX are the core of many investor portfolios and many investors compare FSKAX vs ITOT 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 very few differences between the two funds. In my view, the largest difference is that FSKAX is a mutual fund and ITOT is an ETF. This difference in structure leads to differences in taxes, tradability, etc.

The underlying benchmark indices that these funds track are technically different (S&P Total Market Index vs Dow Jones US Total Market Index), but they are identical is most respects. Consequently, the risk and return of FSKAX and ITOT is nearly identical and I consider these two funds equivalent and interchangeable.

The Longer Answer

These two funds are incredibly similar and leads some to question: is ITOT the same as FSKAX?

Technically, ITOT is a different fund with a different structure than FSKAX. But for many intents and purposes, ITOT and FSKAX are identical. Both funds are broad-based indices that represent the US equity markets.

Historical Performance: FSKAX vs ITOT

ITOT was launched in 2004, while FSKAX was launched on September 7, 2011 (although other share classes of the Fidelity fund existed prior to this date). Since that time, the two funds have had identical performance: 12.65% vs 12.68% on an annualized basis. Over those 11 years, the cumulative performance differential has been only been about 1%!

Differences Between FSKAX and ITOT

Geography

Both the ITOT and FSKAX only include stocks of US-domiciled companies.

Market Capitalization

The two funds have a similar number of holdings (as of 11/30/2022); ITOT holds 3,362 stocks versus FSKAX’s 3,989 stocks. Perhaps not surprisingly, the market cap weighting of the funds are essentially identical.

ITOTFSKAX
Large Cap72%73%
Mid Cap20%19%
Small Cap9%9%
Source: ThoughtfulFinance.com, Morningstar.com (as of 11/30/2022)

Sector Weights

The sector weights of each fund are nearly identical, with many sector weights within .10% of each other!

ITOTFSKAX
Basic Materials2.74%2.66%
Consumer Cyclical10.21%10.43%
Financial Services14.25%14.04%
Real Estate3.58%3.46%
Communication Services6.93%6.91%
Energy5.04%5.13%
Industrials9.86%9.58%
Technology23.57%23.18%
Consumer Defensive6.77%6.77%
Healthcare15.07%14.97%
Utilities3.00%2.87%
Source: ThoughtfulFinance.com, Morningstar.com (as of 1/6/23 for ITOT and 11/30/2022 for FSKAX)

Factors to Consider

Expenses

Some investors may point out that the expense ratios between FSKAX and ITOT differ. This is true, but it is also reflected in the net performance chart above. At a certain level, differences in expense ratios do not matter. A small absolute difference (in basis points) is essentially meaningless (even if it appears large on a percentage basis). Since these portfolios are essentially identical, I would most likely lean towards ITOT.

Transaction Costs

ETFs are free to trade at many brokers and custodians, although many 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 that would allow their mutual funds to trade for free on many platforms. So if an investor account is at Fidelity, it is free to trade FSKAX or ITOT. However, only ITOT is free to trade in non-Fidelity accounts.

There is a bid-ask spread when trading ETFs, but this spread is typically less than .01% for ITOT and individual investor trades will not generally be large enough to “move” the market. In the case of ITOT, individual investors should not have a problem trading.

Tax Efficiency & Capital Gain Distributions

ETFs are typically more tax-efficient than mutual funds, due to their ability to avoid realizing capital gains through like-kind redemptions (a process that is beyond the scope of this post).

FSKAX routinely makes capital gains distributions, while ITOT does not make capital gains distributions nor do I expect it to (since it is an ETF). FSKAX is relatively tax-efficient since it is an index fund, but ITOT is even more tax-efficient.

Tax Loss Harvesting

My personal preference is to keep a portfolio entirely mutual funds or entirely ETFs, due to the mechanics of settlement during tax loss harvesting. If an ETF has declined in value and an investor sells it, the trade and cash proceeds will not settle for two business days (T+2). That investor may want to “replace” the sold ETF immediately and attempt to buy another ETF or mutual fund simultaneously.

However, mutual funds settle on T+1 basis, so cash for the mutual purchase would be due in one business day (which is one day earlier than the cash from the ETF sale is received). This can obviously cause problems and (even though this issue can be addressed with careful planning) I find it easier to keep accounts invested in similar vehicles. In this case, if a portfolio is all mutual funds, I might lean more towards FSKAX. If all ETFs, I might lean more towards ITOT.

Final Thoughts on FSKAX & ITOT

Except for the fact that FSKAX is a mutual fund and ITOT and ETF, these two funds are nearly identical. Personally, I would not spend too much time trying to divine which is “better” and would just choose whichever makes more sense for my portfolio based on the above factors.

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.