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FXAIX vs IVV: A Comprehensive Comparison That You May Refer

fxaix vs ivv

The modern financial landscape offers a plethora of investment options for investors. 

Among the most popular choices are mutual funds and exchange-traded funds (ETFs). Mutual funds and ETFs provide broad diversification across different assets, making them ideal for long-term investors looking for a simple solution to achieve their investment goals. 

In this article, we shall address the fxaix vs ivv comparison in detail. Interestingly they both invest in the same index but have different structures. 

We’ll explore the similarities and differences between mutual funds and ETFs, describe their performance, fees, tax implications, trading mechanisms, flexibility, and investment strategies.

Understanding Mutual Funds and ETFs

Before diving into the comparison of FXAIX and IVV, it’s essential to have a good understanding of mutual funds and ETFs

Mutual funds pool money from different investors and use the funds to purchase a variety of securities. 

ETFs work in a similar way, but the key difference is that they are traded on an exchange, just like individual stocks. 

Mutual funds and ETFs offer a variety of investment products designed to align with various investor goals, risk tolerance, and time horizon.

While mutual funds and ETFs have many similarities, some key differences set them apart. 

Mutual funds are priced only once per day, at the end of trading hours. ETFs trade throughout the day and their prices fluctuate according to market demand and supply. 

As a result of this structure, ETFs have a transparency advantage in that you can monitor market prices in real-time.

Mutual funds require minimum investment amounts, and investors can purchase fractional shares, while ETFs trade at market prices, which may sometimes be higher than the underlying asset value.

mutual funds

FXAIX vs IVV: A Detailed Comparison On Different Parameters

Performance Comparison

Performance is a crucial consideration when choosing between mutual funds and ETFs. 

FXAIX and IVV are two products that track the S&P 500 index, a popular index that consists of 500 large-cap US stocks. 

FXAIX is a mutual fund that seeks to provide investment results that closely correspond to the performance of the S&P 500 index. 

IVV is an ETF that tracks the same index. Both funds are popular and are often used interchangeably. We’ll dig into their historical performance and determine which investment choice is better than the other.

The Historical Performance of FXAIX

FXAIX is a popular mutual fund that tracks the S&P 500 index. The fund has an impressive track record dating back to 1976, when it was first introduced. 

Over the past decade, FXAIX has returned an average of 13.6% per year. Over the past 5 years and 3 years, its returns were 17.35% and 10.25% respectively.

The Historical Performance of IVV

IVV is commonly known as the S&P 500 ETF. The ETF has also delivered impressive returns since its inception. 

Over the past decade, IVV has an annualized return of 13.5%. Over the past 5 years and 3 years, its returns were 17.14% and 10.20% respectively.

Analyzing Key Metrics and Returns

Both FXAIX and IVV track the same index and cover the same basket of stocks. There may be slight differences due to how their prices are determined. 

For instance, the prices of the ETF may fluctuate throughout the trading day, whereas mutual funds are priced just once at the end of the trading day.

Volatility and Risk Assessment

The S&P 500 index is generally viewed as a good indicator of the broader stock market. 

It consists of 500 stocks from the largest US companies and is weighted by market capitalization. 

The returns of FXAIX and IVV are likely to mirror that of the broader market, although the exact returns will depend on the performance of the underlying stocks

Generally, over the long-term, the performance of the S&P 500 index has been impressive, delivering an average annualized return of around 9.8% since 1926.


Tracking the Benchmark

One of the crucial factors worth considering when picking an investment option is how well it tracks the benchmark. 

It’s important to keep in mind that FXAIX and IVV invest in the same S&P 500 index. 

When comparing them, it would be helpful to evaluate their effectiveness in replicating the index and tracking errors and deviations from the index.

Benchmark Comparison of FXAIX and IVV

Both FXAIX and IVV track the S&P 500 index. They both track the same index and have similar investment objectives. 

FXAIX is a conventional mutual fund, while IVV is an ETF. Both the funds hold the same securities, and returns are supposed to be identical. 

However, there may be slight differences due to components such as trading and transaction costs. Still, the funds maintain portfolios that have prices closely correlated with the benchmark.

Tracking Errors and Deviation

Deviation is the difference between the returns on the fund and the returns generated by the benchmark they are tracking. 

Tracking errors tend to be higher with mutual funds than with ETFs. This difference is primarily due to ETFs’ tradable nature. 

However, tracking errors tend to be relatively minor, and most investors may choose either fund without significant exposure to benchmark deviation.

Fees and Expenses

Fees are a significant consideration when selecting between mutual funds and ETFs. Fees have a significant impact on long-term returns, and it’s important to find an option with low fees. 

Expense ratios are a usual measure of how much a mutual fund or ETF costs you relative to your investment. 

FXAIX, being a mutual fund, has relatively higher fees than ETFs. Per Fidelity, the current expense ratio of FXAIX is 0.0150%, while IVV’s is roughly 0.03%. 

The expense ratio of the ETF is lower because it doesn’t have the high operational costs that mutual funds incur.

Other Fees Associated with FXAIX and IVV

In addition to the expense ratio, there may be other fees associated with investing in either mutual funds or ETFs. 

Mutual funds, for instance, may charge upfront sales fees, also called loads, exit fees, or purchase fees. 

Conversely, ETFs might incur brokerage fees or ETF-specific fees that may increase long-term costs.

Impact of Fees on Long-Term Returns

Although fees might seem petty on a short-term level, in the long run, they can significantly impact your returns. 

Compounded over the long term, even a small difference in fees can lead to a substantial difference in your returns. 

As such, when choosing between mutual funds and ETFs, ensure that you compare fee structures to make an informed decision.


Liquidity and Trading

Trading structures and liquidity are significant considerations when choosing between mutual funds and ETFs

Liquidity refers to how quickly investors can convert their investment into cash or the speed of how fast investors can buy or sell shares. 

Mutual funds like FXAIX are structured differently from ETFs and are generally traded differently. Mutual funds are priced just once per day, while ETFs trade throughout the day and fluctuate based on market demand and supply. 

This structure provides an advantage for ETFs like IVV in terms of transparency.

Ease of Buying and Selling Shares

Investors can buy or sell shares of mutual funds without significant limitations. 

ETFs may require a brokerage account to buy or sell, and brokerage commissions may be charged, which can make investing in small amounts unattractive.

Market Hours and Bid/Ask Spreads

The market hours differ for mutual funds and ETFs. Mutual funds trade at the close of market hours while ETFs can trade throughout the day. 

In times of market volatility, bid-ask spreads might significantly increase, causing investors to pay higher prices for ETFs or receive lower prices when selling them.

Tax Efficiency

The tax efficiency of mutual funds and ETFs is an essential consideration when choosing between these two investment options. 

While they both offer excellent benefits, they have different tax implications, and investors need to look at them closely to ensure the best outcome.

Investors holding mutual funds (FXAIX) may experience tax consequences, such as paying taxes on realized gains or dividends, even if they didn’t sell the fund. 

ETFs like IVV, on the other hand, tend to be more tax-efficient due to their structure. Investors in ETFs only pay taxes on realized gains when they sell the ETF shares.

Understanding Capital Gains Distributions

Capital gains occur when securities held in the portfolio are sold at a higher price than what they were purchased for. 

When mutual funds sell securities that have appreciated in value, the gains become taxable. 

Capital gains distributions are paid out to the mutual fund shareholders, reducing the share price by the same amount.

ETFs are more tax-efficient this way, as investors only pay capital gains taxes on shares that were sold. 

The shares that the ETF holds and appreciates or depreciates while the investor owns them and aren’t sold don’t generate taxes.

Investment Strategies and Flexibility

Ultimately, the choice between mutual funds and ETFs comes down to aligning with financial goals and investment objectives

Each of these investment products has strengths and weaknesses that investors should understand before making a final choice.

Flexibility of Mutual Funds

Mutual funds offer a great deal of flexibility to investors. They offer various investment options, such as stock funds, bond funds, index funds, and diversified portfolio funds. 

The investor can also switch between funds whenever necessary or buy fractional shares. This flexibility is particularly useful for investors who like to research and analyze a wide range of investment options before settling on any asset.

investment goals

Flexibility of ETFs

ETFs also offer a good deal of flexibility. They are traded on an exchange, and investors can buy and sell shares throughout the day.

This structure provides an advantage in terms of share prices, trading fees, and liquidity. ETFs may own ETFs to create customized portfolios that address investors’ specific needs.

Suitability for Different Investment Goals

The choice between mutual funds and ETFs mainly depends on your investment goals. Investors often prioritize things like tax efficiency, expenses, liquidity, trading flexibility, and transparency when choosing between these two investment products.

Choosing the Right Option

While there is no right answer to the question of whether to invest in FXAIX or IVV, investors should evaluate the options and carefully weigh the pros and cons.

Factors to Consider before Making a Decision

When picking between FXAIX and IVV, consider factors such as the investor’s goals, investment strategies, risk tolerance, and long-term expectations. 

The choice will also depend on the fees and other underlying expenses.

Aligning with Investment Objectives and Risk Tolerance

Investors sometimes choose between mutual funds and ETFs based on their goals and risk tolerance levels. 

A high-risk strategy may not be appropriate for investors who are not willing to take risks.

Personal Preferences and Convenience

Investors can also choose between mutual funds and ETFs based on their personal preferences and convenience. 

Some investors prefer to invest in mutual funds because they are relatively simpler, while others prefer ETFs because of their trading mechanisms.


The choice between FXAIX and IVV, mutual funds, and ETFs similarly depends primarily on an investor’s investment strategy and objectives. 

While both investment products offer convenience, transparency, liquidity, and tax efficiency, they also have their unique advantages and disadvantages. 

As such, when picking between the two, investors should compare their fees and expenses, performance, liquidity, tax implications, trading mechanisms, and alignment with their risk tolerance level. 

It’s also recommended that investors consult with a financial advisor, in order to receive personalized investment selections that provide the best chance of meeting long-term investment targets.