Index funds offer a simple way to invest in broad market segments with low fees and strong diversification. As a finance expert, I’ve analyzed Fidelity’s lineup to identify the best index funds for long-term investors. Below, I break down seven top-performing Fidelity index funds, their benefits, risks, and how they fit into a diversified portfolio.
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Why Choose Fidelity Index Funds?
Fidelity stands out for its low expense ratios, strong historical performance, and investor-friendly features. Unlike actively managed funds, index funds track a market benchmark, reducing costs and improving tax efficiency. Fidelity’s zero-fee funds add extra appeal.
Key Advantages:
- Low Costs: Expense ratios as low as 0.00%.
- Diversification: Exposure to thousands of stocks or bonds in a single fund.
- Tax Efficiency: Lower turnover than active funds.
- Performance: Historically, most active funds underperform their benchmarks.
The 7 Best Fidelity Index Funds
1. Fidelity 500 Index Fund (FXAIX)
Overview: Tracks the S&P 500, covering 500 large-cap U.S. stocks.
Expense Ratio: 0.015%
10-Year Annualized Return: 12.34% (as of 2023)
Why Invest?
FXAIX provides broad exposure to U.S. blue-chip companies like Apple, Microsoft, and Amazon. Its ultra-low fee makes it a core holding for passive investors.
Example Calculation:
If you invest $10,000 with an annual return of 10%, compounded over 20 years:
2. Fidelity Total Market Index Fund (FSKAX)
Overview: Covers the entire U.S. equity market (large, mid, and small caps).
Expense Ratio: 0.015%
10-Year Annualized Return: 11.98%
Why Invest?
FSKAX includes small and mid-cap stocks, offering more diversification than FXAIX.
3. Fidelity Zero Total Market Index Fund (FZROX)
Overview: Zero-fee fund tracking the total U.S. stock market.
Expense Ratio: 0.00%
5-Year Annualized Return: 11.52%
Why Invest?
FZROX eliminates fees entirely, making it ideal for cost-conscious investors. However, it’s only available at Fidelity.
4. Fidelity International Index Fund (FSPSX)
Overview: Tracks developed international markets (ex-U.S.).
Expense Ratio: 0.035%
10-Year Annualized Return: 4.87%
Why Invest?
International diversification reduces reliance on U.S. markets.
5. Fidelity U.S. Bond Index Fund (FXNAX)
Overview: Tracks the Bloomberg U.S. Aggregate Bond Index.
Expense Ratio: 0.025%
10-Year Annualized Return: 3.21%
Why Invest?
Bonds reduce portfolio volatility. FXNAX provides broad exposure to U.S. investment-grade bonds.
6. Fidelity Zero International Index Fund (FZILX)
Overview: Zero-fee international equity fund.
Expense Ratio: 0.00%
5-Year Annualized Return: 4.12%
Why Invest?
Another zero-cost option for global diversification.
7. Fidelity Real Estate Index Fund (FSRNX)
Overview: Tracks real estate investment trusts (REITs).
Expense Ratio: 0.07%
10-Year Annualized Return: 9.45%
Why Invest?
Real estate provides inflation protection and income via dividends.
Comparison Table: Performance & Fees
| Fund Name | Ticker | Expense Ratio | 10-Yr Return |
|---|---|---|---|
| Fidelity 500 Index | FXAIX | 0.015% | 12.34% |
| Fidelity Total Market | FSKAX | 0.015% | 11.98% |
| Fidelity Zero Total Market | FZROX | 0.00% | 11.52%* |
| Fidelity International | FSPSX | 0.035% | 4.87% |
| Fidelity U.S. Bond | FXNAX | 0.025% | 3.21% |
| Fidelity Zero International | FZILX | 0.00% | 4.12%* |
| Fidelity Real Estate | FSRNX | 0.07% | 9.45% |
*5-year return (fund launched in 2018).
How to Build a Portfolio with Fidelity Index Funds
A balanced portfolio includes U.S. stocks, international stocks, and bonds. Here’s a sample allocation:
- 60% U.S. Stocks (FXAIX or FSKAX)
- 20% International Stocks (FSPSX or FZILX)
- 20% Bonds (FXNAX)
Rebalancing Example:
If stocks outperform and shift to 70% of your portfolio, sell some stocks and buy bonds to return to 60/20/20.
Risks to Consider
- Market Risk: Index funds follow the market—down years will happen.
- Currency Risk (International Funds): Exchange rates affect returns.
- Interest Rate Risk (Bonds): Rising rates lower bond prices.
Final Thoughts
Fidelity’s index funds offer low-cost, diversified exposure to key asset classes. Whether you prefer zero-fee funds (FZROX, FZILX) or traditional options (FXAIX, FSPSX), these funds provide a solid foundation for long-term growth.
