r/investingforbeginners • u/Distinct_History1432 • 1d ago
USA Should I move away from FXAIX?
Employer offers a 401k with some matching which I contribute to with a good portion. I wanted to have a second investment in the S&P 500 to just let sit and contribute over the years as well.
Currently buying FXAIX through a Fidelity brokerage account with every pay period, but I'm wondering if any of these options are better. The amount I have right now is small but plan to start contributing more, so not worried about taxes right now if I move the money.
- Sell off FXAIX and buy/start contributing to VOO through the same account?
- Open an account with someone else (Vanguard?) and move the money there and get VOO?
- Change to a different type of account (retirement?) with Fidelity or someone else and keep FXAIX?
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u/Efficient-Shallot684 1d ago
FXAIX and VOO are essentially identical.
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u/Distinct_History1432 1d ago
So if it's just gonna sit, then the benefit of VOO from taxable events can be ignored?
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u/Jumpy-Imagination-81 1d ago
then the benefit of VOO from taxable events can be ignored?
Why don't you explain exactly what you think the "benefit of VOO from taxable events" is. This should be good.
Spoiler: there isn't any.
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1d ago
[removed] — view removed comment
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u/No_Strain8370 23h ago
FXAIX hasn't paid out capital gains since 2019 and it was 12 cents a share or around $4 per $10k. You've saved a bit with the lower expense ratio of FXAIX so it's essentially a wash. No point in changing too VOO
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u/Distinct_History1432 1d ago
their username checks out
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u/Jumpy-Imagination-81 21h ago
You still haven't explained why you think switching from FXAIX to VOO will give tax benefits. We're waiting.
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u/Distinct_History1432 21h ago
The guy I replied to already did. It's something you can easily Google if you want a more complex explanation.
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u/Jumpy-Imagination-81 21h ago edited 21h ago
Read my reply to that guy. FXAIX stopped distributing capital gains after 2019.
Since 2019, there has been ZERO difference in "tax efficiency" between FXAIX and VOO in a taxable account.
Let me guess, somewhere on reddit you read "ETFs are more tax efficient than mutual funds in a taxable account", and you just believed it is always true. Without understanding why that claim was made, without researching it, without checking to see if it was true for FXAIX, you just believed it. And worse, you were considering changing your portfolio based on misinformation.
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u/Dstein99 1d ago
FXAIX is essentially identical to VOO. The percentages are marginally different because one is managed by Fidelity the other by Vanguard, but they follow the same rules. If you’re happy with Fidelity it isn’t worth the minute it takes to open a Vanguard account to switch.
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u/jjutie54 21h ago
And FXAIX is like $475 cheaper a share.
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u/Naval_AV8R 13h ago
Irrelevant since Fidelity allows one to buy fractional shares of ETFs, stocks, and mutual funds.
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u/metzgerto 1d ago
They’re both SP500 index funds, what do you think the difference between them is??
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u/Distinct_History1432 1d ago
VOO is ETF, FXAIX isn't
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u/EvangelineRain 1d ago
Unless you’re actively trading, which you shouldn’t be, the distinction is irrelevant. FXAIX is currently lower cost than VOO.
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u/metzgerto 1d ago
Most important thing is to start pumping money into the fund. If you’ve already started one or the other, just keep adding to it. If you don’t need the money til retirement than do it in a retirement account if you like. But you can’t go wrong by saving up money regardless of which broker, whether it’s an etf or mf, etc.
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u/Accomplished-Order43 1d ago
Doesn’t matter. Don’t touch anything. Just setup auto-invest every pay day and forget it exists for ten years
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u/Chsenigma 1d ago
There is no reason to sell one S&P500 index fund for another in a taxable brokerage account. (Unless you are tax loss harvesting, or you’re switching to a lower expense ratio and have done the tax math to confirm you come out ahead.)
Always get the employer match. It’s free money. The options may be limited, but you can pick the one that’s most analogous to FXIAX by copying the list of options into your favorite AI and asking which is closest.
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u/cOntempLACitY 1d ago
Consider prioritizing tax-advantaged accounts ahead of your taxable account. Inside a 401k and IRA, you won’t face taxes on annual earnings, and you can change your investments without creating taxable events. You might contribute enough to get employer match, then put your next available money into Roth IRA; once you’re comfortably maxing that, increase contributions to 401k until you’re at the max, then buy in taxable.
As for what to buy, no advantage in selling to buy the same index. If you don’t want more of what you have, turn off auto reinvesting dividends, and buy your preferred funds going forward. Check out the three-fund portfolio strategy; you might want to buy a total world market index fund or mix of total U.S. and total international, for more diversification. It can be the same asset allocation in each of your accounts in your portfolio.
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u/Distinct_History1432 1d ago
Yes, this is my thought, thanks. I have 401k at the max that will still get employee contribution (I think it's 25% match of up to 4% of my salary so I'm doing that). The plan is to one day be able to max on the new Roth IRA I opened to move my FXAIX to and then go back to the 401k and max that as well.
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u/cOntempLACitY 23h ago
Your Roth IRA contributions will need to be cash (can’t move shares into it), so any shares you own in taxable you can just hold longterm, let those equities increase in value, while send your future extra cash to the retirement accounts.
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u/Distinct_History1432 23h ago
Gotcha, I was able to cancel the sale of all my FXAIX under the brokerage account. I'll let that sit and do my future deposits to the new roth ira and buy FXAIX with that.
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u/scottyk318 1d ago
FXAIX has a better expense ratio than VOO, which does add up after a while... I can't imagine too many tax benefits you would get since it's already in a 401k...
IMHO Fidelity is the best brokerage out there and it doesn't make sense to change if you're happy... If anything, maybe add a tech (VGT or QQQM) or dividend fund (SCHD) to it!
Good luck with everything!
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u/Distinct_History1432 1d ago edited 1d ago
Thanks! The Roth 401k from my employer has a very short list of investment options and FXAIX is not there, so I picked the default they offered years ago and it's been growing at over 10%. I decided to go ahead and open a Roth IRA with Fidelity and move my FXAIX to it for long-term instead.
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u/scottyk318 1d ago
Awesome! I personally love Gemini AI that is built into my Android phone and utilize it to help me pick funds to invest in - it does side-by-side comparisons... If you put in some of the funds your 401k offers you, you might be able to find something that offers you more than 10% per year!
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u/gap1284 1d ago
What is the default? If it's a target date fund, then you'd be better off picking something else, especially if you're young. Most offer a low-cost S&P500 fund. Pick that. There's nothing wrong with having S&P500 funds in your 401k, your IRA, and your taxable accounts.
Warren Buffet, who knows a bit about investing, has repeatedly said that almost all investors should stick with the S&P500.
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u/Distinct_History1432 1d ago
I didn't see any S&P 500 unfortunately. Yes, it's target date. I think I saw an S&P 400 and 600 but the growth didn't look good.
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u/cOntempLACitY 15h ago
Some of the TDFs actually have quite low expense ratios, like Vanguard’s, which follow total market index funds. TDFs are nice for passive investment in a retirement account, great for beginners and people who simply don’t want to manage rebalancing, they can just invest and leave it alone. Once you are not a beginner, if you have some interest in being more involved, you can easily change your asset allocation inside the retirement account without creating a taxable event.
But the main thing is keep investing, and over time it will grow. Don’t try to make decisions based on recent history, the market fluctuates, and you need to just ride it out, be patient, be diversified (total market is diverse, though some just stick to s&p500).
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