Index funds of the top 500 US stocks are some of the most popular investment options for index investors. Even Warren Buffett suggested that his heirs should invest in an S&P 500 fund after his passing. Today, we’ll compare the infamous IVV with FXAIX. What are the exact differences?
IVV and FXAIX are both large blend index funds. IVV is issued by iShares and FXAIX by Fidelity. The main difference between these two funds is their current expense ratio; while FXAIX only charges 0.02%, IVV investors pay up to 0.03% in fees. As a result, FXAIX also has around 50 billion dollars worth of assets more under management than IVV.
In this article, I’ll go over the main differences between these two funds as well as the similarities they share. We’ll look at the fund composition, exposure to different industries, risk metrics, and historical performance. Let’s get into it!
IVV vs. FXAIX – Overview
What’s The Difference?
|Category||Large Blend||Large Blend|
IVV is a Large Blend ETF. Large blend funds comprise a vast mix of large and mid-cap stocks that typically make up more than 50% of the entire stock market. IVV holds the top 500 US companies weighed by market cap that make up around 80% of the total market.
FXAIX is a Large Blend ETF. FXAIX falls into the same category of funds and – in fact – holds the exact same assets as IVV. The only difference can occur when the indices are updated at different times during each quarter; however, any discrepancies will be negligible.
IVV is issued by iShares. iShares is one of the biggest and most well-known fund issuers and is part of the financial conglomerate Blackrock. They are Vanguard’s closest competitor for the number one spot in total assets under management.
FXAIX is issued by Fidelity Investments. Fidelity investment has recently taken a novel marketing approach by issuing zero-cost index funds. However, FXAIX is one of the old-school funds that charge 0.02% (which is also more sustainable).
Assets Under Management
IVV has 294.95B total assets under management. With nearly 300 billion in assets under management, IVV is a behemoth on the ETF market. It ranks among the top 5 largest index funds by market cap alongside funds such as SPY and VOO.
FXAIX has 343.34B total assets under management. If you thought IVV was large, consider FXAIX with nearly 350 billion dollars in assets. This inflow of funds in recent years is likely due to Fidelity’s extremely low expense ratios.
IVV has a Year-to-date return of 19.99%. As of this year, IVV has had a fantastic return of nearly 20% YTD. This high return is largely due to the recovery from the COVID market crash in 2020.
FXAIX has a Year-to-date return of 21.37%. While 19.99% is already tremendous growth FXAIX can do even better! Although both funds basically hold the same securities Fidelity has managed to keep the cost lower, resulting in an additional 1.34% growth of FXAIX compared to IVV.
IVV has a dividend yield of 1.28%. When stock prices soar and the market is at all-time highs you will typically see a low dividend yield. While this isn’t good news for dividend investors it generally indicates a strong previous market performance.
FXAIX has a dividend yield of 1.31%. Even when it comes to the dividend yield FXAIX is slightly ahead of IVV. However, this difference is mainly due to fluctuations of holdings in the index itself and not necessarily a long-term factor.
IVV has an expense ratio of 0.03%. As mentioned before IVV comes in with an extremely low expense ratio of only 0.03%, comparable to most Vanguard funds! This means that a $100 investment in IVV would only cost you 3 cents per year.
FXAIX has an expense ratio of 0.02%. Although Vanguard and iShares are known for their low-fee funds Fidelity has seemingly pulled another rabbit out of the hat and dropped its fees by another 0.01%. The current expense ratio of 0.02% makes FXAIX one of the lowest-cost funds on the market!
In this section, I’ll go over the differences in fund composition referring to large-, mid-, and small-cap sizes and their distribution.
IVV is comprised of 85% large-cap stocks and just 15% mid-cap stocks. Small-cap stocks are not at all included in the fund’s holdings. This is simply the case because IVV aims to track the performance of the top 500 largest companies on the market.
Unsurprisingly, FXAIX’s fund composition looks very similar to that of IVV. A large share – 84% – is comprised of large-cap stocks and mid-cap stocks amount to the remaining 16% of the fund’s total assets.
Again we see a slight difference in the index holdings that were also visible in the dividend yield. And here, we see the reason for the difference in dividend yield: FXAIX holds 1% more mid-cap stocks than IVV.
When it comes to industry exposure, we as defensive investors try to diversify our funds. However, with both IVV and FXAIX there is no need to worry. Both funds have broad market exposure and consist of a large blend of different industries.
IVV is dominated by technology stocks making up around 25% of the total fund’s securities. This is followed by companies in the financial services and healthcare sector at around 12-14%.
The least common industries in IVV are basic materials, real estate, utilities, and energy. These kinds of companies tend to be few and far between.
The picture for FXAIX looks nearly identical: the tech sector makes up roughly one-quarter of all assets and is followed by financial services, healthcare, consumer cyclical, and communication services.
FXAIX also includes real estate at around 3% as well as companies from the energy, and basic materials sector.
IVV vs. FXAIX – Analysis
In this part, we’ll look at some important risk metrics such as volatility and drawdown for both funds. As you might expect from two funds tracking a similar index, these metrics will be fairly identical as well.
|Arithmetic Mean (monthly)||$0.01||$0.01|
|Arithmetic Mean (annualized)||17.40%||17.43%|
|Geometric Mean (monthly)||1.28%||1.28%|
|Geometric Mean (annualized)||16.44%||16.47%|
|Downside Deviation (monthly)||2.25%||2.25%|
|US Market Correlation||1||1|
IVV has a monthly volatility of 3.74% which adds up to an annualized volatility of 12.96%. These ups and downs are fairly common for a large fund such as IVV.
FXAIX shows similar signs of volatility throughout the months and years ranging between 3-4% monthly and 10-15% annually.
As can be seen from the chart above both funds also follow very similar drawdown patterns. The most severe drawdown occurred quite recently at the beginning of 2020 with the COVID pandemic. Here IVV and FXAIX both experienced drawdowns of up to 20%.
Throughout the previous time period, however, the funds have been mostly stable only going into the red up to 5-10%.
IVV vs. FXAIX – Performance
Before actually looking at the portfolio performance of each fund let’s have a quick look at the annual returns side-by-side to get an impression of the profit margin.
If it is not obvious from the chart above: there are basically no differences in return between IVV vs FXAIX. Both funds have had an extremely strong decade with only one year of negative returns: 2018.
All other years have resulted in growth rates between 10-30%!
In order to compare IVV and FXAIX side-by-side, I’ve set up a portfolio backtest of $10,000 invested in both funds in 2012. Below you can see the result:
|Portfolio||Initial Balance||Final Balance||CAGR|
In fact, the chart typically returns a red and a blue line representing each fund, however, in this case, IVV’s and FXAIX’s performance has been nearly identical which is why the lines overlap nearly 100%.
Nonetheless, looking at the actual numbers we can see some very slight differences: FXAIX actually outperformed IVV with a CAGR (compound annual growth rate) of 16.47% compared to 16.44%.
This difference in growth resulted in a portfolio balance of $100 more for FXAIX. This is simply the result of lower fees! Over time the 0.01% you save in fees with FXAIX compounds and eventually makes you $100.
The differences between IVV and FXAIX are subtle. Both funds essentially hold the same securities, but with FXAIX you save a little in fees.
But, for our purposes, both funds perform nearly identical and the additional $100 per $10,000 invested over 10 years is hardly worth mentioning with yearly returns upwards of 30%.
In the end, it comes down to your personal preference of the issuer and the simple availability of each fund. Picking a low-fee broker will ultimately make a much greater difference than saving 0.01% in fees.
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