Quick Read
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Fidelity 500 Index Fund (FXAIX) charges 1.5 basis points and has no bid-ask spread or NAV premium, making it the lowest total-cost path to S&P 500 exposure for buy-and-hold investors despite SPDR S&P 500 ETF (SPY) being the market standard; NVIDIA (NVDA), Apple (AAPL), and Microsoft (MSFT) comprise the three largest holdings in both funds at roughly 8%, 7%, and 5% respectively.
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For long-term set-it-and-forget-it investors, FXAIX’s daily NAV pricing and full-dollar investing eliminate the cumulative friction of bid-ask spreads and fractional shares that compound over decades of recurring contributions, though the mutual fund structure generates more capital gains distributions in taxable accounts and cannot be traded intraday like SPY.
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Every conversation about the cheapest way to own the S&P 500 lands on the same few tickers from the major ETF sponsors. Rock-bottom expense ratios, deep liquidity, trades like a stock all day. Sitting outside that crowd is Fidelity 500 Index Fund (NASDAQ:FXAIX), a mutual fund rather than an ETF. For a particular kind of buyer, that structural difference is the whole reason to care about FXAIX.
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The structure nobody talks about
FXAIX prices once per day at net asset value. SPDR S&P 500 ETF (NYSEARCA:SPY) trades all day on an exchange. For a day trader, SPY’s structure wins easily. For someone funneling $500 into the index every other Friday for the next 30 years, the math flips.
Every SPY purchase crosses a bid-ask spread. Small, sure. SPY’s spread is usually a penny or two on a share trading near $759. Every buy and every sell pays it, and across decades of recurring contributions the friction compounds against you. Cheaper SPDR siblings have wider spreads because of lower volume. FXAIX has no spread. Buyers and sellers transact at the same NAV print at 4 p.m.
ETFs can also trade at a brief premium or discount to their underlying basket. Usually trivial for SPY, never literally zero. FXAIX cannot drift from NAV by structure.
Mutual funds also let you invest exactly $250, not 0.329 shares of an ETF with leftover cash sitting idle. Inside a 401(k) auto-contribution or a recurring IRA buy, full dollars get fully invested. Vanguard’s 2024 data shows the average participant routes 75-80% of contributions to equities, mostly on autopilot. Friction at the margin matters when the strategy is repetition.