Yes, FXAIX is a mutual fund — specifically, a low-cost index fund run by Fidelity

FXAIX stands for Fidelity U.S. Stock Index Fund. It pools money from many investors and uses that money to buy a basket of U.S. company stocks. The fund tracks the S&P 500, which means it holds shares in roughly 500 large U.S. companies in the same proportions as that index. When you buy FXAIX, you own a small piece of all those companies through one fund share.

The main thing that makes FXAIX different from many other mutual funds is its cost. Fidelity charges an expense ratio — an annual fee expressed as a percentage of what you have invested — of 0.03%. That means if you have $10,000 in FXAIX, you pay about $3 per year in fees. Most actively managed mutual funds charge between 0.5% and 1.5%, so FXAIX is significantly cheaper.

You can buy FXAIX through a Fidelity brokerage account, a 401(k) plan that offers it, or an IRA. The fund itself does not require a minimum investment, though your brokerage account might.

Key Takeaways

  • FXAIX is a mutual fund that holds shares in the 500 companies in the S&P 500 index in the same proportions as the index itself.
  • The expense ratio is 0.03% annually, which is much lower than the typical actively managed mutual fund.
  • You buy and sell FXAIX through a brokerage account, and the price changes daily based on the value of the stocks it holds.
  • Because FXAIX tracks an index rather than trying to beat it, it is called a passive or index fund.

How FXAIX differs from actively managed mutual funds

Most mutual funds employ a manager or team whose job is to pick individual stocks they believe will outperform the market. They research companies, make buy and sell decisions, and charge higher fees to cover that work. FXAIX does not do that. Instead, it straightforward holds the same stocks as the S&P 500 in the same weights, and it rebalances only when the index itself changes.

This approach — called passive indexing — means FXAIX will perform roughly in line with the S&P 500 itself, minus the 0.03% annual fee. An actively managed fund might beat the index in a given year, or it might lag behind. Over long periods, most actively managed funds underperform their index benchmarks after fees, which is why many investors choose index funds like FXAIX instead.

What happens when you own FXAIX shares

When you buy FXAIX, you receive shares of the mutual fund itself, not direct ownership of the 500 stocks. The fund holds the actual stocks, and you own a proportional piece of the fund. If the fund holds 1 million shares total and you own 100 shares, you own roughly 0.01% of the fund and therefore 0.01% of each of the 500 stocks it holds.

The price of one FXAIX share changes every trading day based on the total value of all the stocks in the fund. If the S&P 500 goes up 2% on a given day, FXAIX shares will also go up roughly 2% (minus a tiny bit for the daily portion of the 0.03% fee). You can sell your shares whenever the market is open, and you will receive the current market price.

Some FXAIX shareholders receive dividends. When the companies in the fund pay dividends to shareholders, Fidelity collects those payments and distributes them to FXAIX investors, usually once per quarter. You can choose to reinvest those dividends automatically or receive them as cash.

FXAIX versus similar index funds

FXAIX is not the only S&P 500 index fund available. Vanguard offers VFIAX, which tracks the same index and charges 0.04% annually. Schwab offers SWTSX at 0.03%. iShares offers an exchange-traded fund (ETF) called IVV that also tracks the S&P 500 and charges 0.03%. The differences in cost are small, and all of these funds will perform nearly identically over time.

The main practical difference is where you hold the account. If you already have a Fidelity brokerage account, FXAIX is straightforward to buy. If you use Vanguard, VFIAX may be easier. If you prefer an ETF structure (which trades like a stock rather than settling at day's end), IVV or similar ETFs might suit you better. But for long-term buy-and-hold investing, the choice between these funds matters far less than the choice to invest in a low-cost index fund rather than a high-fee actively managed fund.

Tax treatment of FXAIX in different account types

How FXAIX is taxed depends on where you hold it. In a regular taxable brokerage account, you owe capital gains tax when you sell shares at a profit, and you owe income tax on any dividends the fund distributes. In a traditional IRA or 401(k), you do not pay tax on gains or dividends while the money is in the account — you pay tax only when you withdraw. In a Roth IRA, you pay no tax on gains or dividends ever, as long as you follow the withdrawal rules.

Because FXAIX is a passive index fund with low turnover (meaning Fidelity does not buy and sell stocks within the fund very often), it tends to generate fewer taxable events than actively managed funds. This makes it particularly tax-efficient in taxable accounts.

How to buy FXAIX

To buy FXAIX, you need a brokerage account with Fidelity or another broker that offers Fidelity mutual funds. Open the account online, link a bank account for funding, and search for FXAIX by its ticker symbol. You can buy a specific dollar amount (for example, $500) or a specific number of shares. The order will execute at the fund's closing price at the end of that trading day.

If FXAIX is offered in your employer's 401(k) plan, you can buy it directly through payroll deductions. The same applies if you have a Fidelity IRA. In all cases, you can hold FXAIX for as long as you want and sell it whenever you need the money.

Frequently Asked Questions

Is FXAIX safe?

FXAIX is as safe as the S&P 500 itself. It holds shares in 500 large, established U.S. companies, so it is less volatile than owning a single stock. The fund itself is not at risk of going out of business — Fidelity is a major financial institution. Your risk is market risk: the value of the stocks in the fund can go down, and so can the value of your investment.

Can I lose money in FXAIX?

Yes. If the S&P 500 declines, FXAIX will also decline by roughly the same amount. Over short periods, the fund can lose 10%, 20%, or more. Over long periods (10+ years), the S&P 500 has historically recovered from downturns and reached new highs, but past performance does not may provide future results.

What is the minimum investment for FXAIX?

Fidelity does not set a minimum investment for FXAIX itself. However, your brokerage account may require a minimum deposit to open, and some retirement accounts have minimums. Check with Fidelity directly for current account minimums.

Does FXAIX pay dividends?

Yes. The companies in the S&P 500 pay dividends, and Fidelity distributes those to FXAIX shareholders. The dividend yield (the annual dividend as a percentage of the share price) varies but is typically between 1% and 2%. You can reinvest dividends automatically or take them as cash.

Should I buy FXAIX or an S&P 500 ETF instead?

Both are low-cost ways to own the S&P 500. FXAIX is a mutual fund that settles at the end of the trading day. ETFs like IVV trade throughout the day like stocks. For most long-term investors, the difference is negligible. Choose based on which account type and broker you already use.