Fidelity 500 Index Fund looks like the cheaper way into the S&P 500 on paper, with a 0.015% expense ratio that undercuts VOO's 0.03%. But for taxable investors, the fund's annual capital gains distributions can turn that small sticker-edge into a recurring tax bill.
The reason people are looking at it now is not hard to find. One long-running buy-and-hold example started in March 2020 and kept going every month for six years, with $5,000 added each time. That put $360,000 of principal to work in FXAIX, a fund that had returned 149.67% on a total-return basis in the data used and closed at $269.44 on August 12, 2026.
Against that backdrop, the fee gap looks almost too small to matter. A $100,000 balance in FXAIX works out to just $15 a year in gross expenses, while VOO, the ETF comparison, carries a 0.03% expense ratio and uses in-kind creation and redemption to help avoid taxable events for holders. IVV offers the same ETF tax efficiency at the same 0.03% fee, while FNILX removes fees entirely but keeps investors inside a Fidelity-only proprietary index.
The problem for brokerage investors is that FXAIX is a mutual fund, and mutual funds can pass capital gains through to shareholders. FXAIX pays distributions quarterly, and the December payment consistently runs highest because that is when net capital gains get pushed out. The most recent four payouts were $0.654, $0.672, $0.725 and $0.668, with the December 19, 2025 distribution of $0.725 the largest of the year. At today's price, the trailing 12-month payout of $2.065 a share implies an income yield near 0.77%.
That distribution stream is where the tax drag shows up. Qualified dividends are taxed at long-term capital gains rates, but any short-term capital gains portion of the year-end payout is taxed as ordinary income. VOO has historically avoided the year-end capital gains distributions that mutual funds pass through, so the after-tax math can narrow or even erase FXAIX's lower fee advantage over time, especially in a taxable account where every distribution is taxable in the year it is received.
FXAIX remains enormous, with roughly $832 billion in net assets as of its May 31, 2026 filing, and its total-return figure of 149.67% was only fractionally behind VOO's 150.03% over the same window. That is the real lesson for investors comparing the two: the cheaper headline fee does not settle the bill. In a taxable brokerage account, the next FXAIX distribution is the one that matters most, because that is where the fund's low cost can stop looking low.
