Best S&P 500 Index Funds (2025): VOO vs SPY vs FXAIX Compared
TL;DR Summary
- All three funds — VOO (Vanguard ETF), SPY (State Street ETF), and FXAIX (Fidelity mutual fund) — track the S&P 500 Index with high fidelity. Their long-term returns are nearly identical once fees are accounted for.
- The main differentiating factors: cost (expense ratios), structure (ETF vs mutual fund), liquidity/trading volume, and tax/timing features.
- Expense wise: FXAIX is the cheapest (~0.015-0.02 %), VOO next (~0.03 %) and SPY higher (~0.0945 %). :contentReference[oaicite:6]{index=6}
- For a long-term buy-and-hold investor, the choice between them is less important than simply owning *an* S&P 500 fund — but if you invest large sums or want to minimise every basis point, cost & structure matter.
1. Fund Basics & Overview
The S&P 500 index measures the stock performance of 500 of the largest U.S. publicly traded companies and is widely used as a proxy for the U.S. large-cap equity market. :contentReference[oaicite:7]{index=7}
Each of these funds provides exposure to that index at very low cost, essentially giving you broad U.S. large-cap diversification in one holding.
2. Comparison Table: VOO vs SPY vs FXAIX
| Fund |
Ticker / Provider |
Structure |
Expense Ratio |
Launch/Notes |
| Vanguard S&P 500 ETF |
VOO (Vanguard) |
ETF |
≈ 0.03% per year :contentReference[oaicite:8]{index=8} |
Launched Sept 2010; highly popular for buy-and-hold investors. |
| SPDR S&P 500 ETF Trust |
SPY (State Street) |
ETF (Unit Investment Trust) |
≈ 0.0945% per year :contentReference[oaicite:9]{index=9} |
Oldest U.S. S&P 500 ETF (since Jan 1993); extremely liquid. |
| Fidelity 500 Index Fund |
FXAIX (Fidelity) |
Mutual Fund (Index) |
≈ 0.015-0.02% per year :contentReference[oaicite:10]{index=10} |
Mutual fund version; very low cost; ideal for those within Fidelity ecosystem. |
3. What the Differences Mean in Practice
3.1 Cost Impact Over Time
A lower expense ratio means you keep more of the index return. With thousands of dollars invested, the difference between 0.015% and 0.0945% becomes noticeable over decades.
For example, over a $100,000 investment, the extra cost of a 0.08% higher fee is about $80 per year, which can compound significantly. :contentReference[oaicite:11]{index=11}
3.2 Structure & Trading Considerations
-- VOO and SPY as ETFs can be traded intra-day like stocks; FXAIX as a mutual fund trades once per day (end of day NAV).
-- SPY as a unit investment trust has slightly different mechanics, and may be preferred by traders/institutions for liquidity and derivatives. :contentReference[oaicite:12]{index=12}
-- FXAIX may be especially efficient for investors already using Fidelity (fund transfers, no-load buying, etc.).
3.3 Liquidity and Investor Type
SPY remains the most heavily traded S&P 500 product, which may matter if you are a very large investor or trade actively. :contentReference[oaicite:13]{index=13}
For typical long-term buy-and-hold investors, liquidity differences are less relevant — all three are sufficiently massive and widely held.
3.4 Tax Efficiency & Broker Considerations
ETFs often offer tax-efficient features (in-kind creation/redemption), but mutual funds like FXAIX are also well-established. Choose what aligns with your account type (taxable, retirement) and broker offerings.
4. Verdict: Which One Should You Pick?
If I had to sum up recommendations:
- Want the absolute lowest cost and you’re in Fidelity? → FXAIX.
- Prefer an ETF, want low cost, widely recommended, are in Vanguard / generic brokerage? → VOO.
- Need the utmost liquidity, trade actively, or value SPY’s heavy trading volume? → SPY — but accept modestly higher cost.
For most long-term investors, the choice among these is not going to make or break your portfolio — owning *an* S&P 500 index fund is far more important than the small differences among them.
5. FAQ
Does a lower expense ratio guarantee better returns?
Not entirely — since all three track the same index, their gross returns before fees are almost identical. Lower fees simply let you keep more of that return. Differences in tracking, tax drag, or structure may cause minuscule variation. :contentReference[oaicite:14]{index=14}
If I already own SPY, should I switch to VOO or FXAIX?
Only if the cost difference matters for your scale and you’re comfortable with trading or fund transfer. If you’re investing modest amounts and holding for decades, staying with SPY is perfectly acceptable.
Which is best for retirement accounts vs taxable accounts?
Either works. But you may favour:
– ETF versions (VOO, SPY) if you plan frequent trading or want intra-day flexibility.
– Mutual fund version (FXAIX) if you prefer automatic investments, lower minimums, or are fully inside Fidelity.
Sources / Official References
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Always consult your financial advisor or tax professional before making investment decisions.
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