FZROX vs VTI: Comparing Total U.S. Stock Market Index Funds

This article compares FZROX vs VTI — Fidelity’s ZERO Total Market Index Fund to Vanguard’s Total Stock Market ETF (exchange-traded fund).

Both are passively managed stock funds popular in retirement accounts.

Index mutual funds and ETFs track market indexes like the S&P 500. 

FZROX and VTI are much broader than the S&P 500, tracking thousands of stocks each.

VTI covers the total U.S. investable market while FZROX aims to mimic the returns of the total investable market while omitting some micro-cap stocks to reduce costs. 

If you own either fund, you own a tiny portion of most of the public companies in the U.S. 

Bottom Line Upfront (BLUF)

Before I get into the details of FZROX vs VTI, it’s important to keep the following in mind:

• The funds are very similar and will achieve the same investment objective. 
• FZROX is a mutual fund with a zero expense ratio. This is more a marketing tactic than a significant differentiator. 
• VTI is an ETF. This will affect how investors purchase the funds and reinvest dividends compared to the mutual fund. 
• Fidelity customers can own either fund without issue. Non-Fidelity investors should avoid FZROX and choose VTI. Try M1 Finance.

Please note that both funds update their prospectuses regularly. The information referenced in this article will change over time.

The best resources for both funds are the Fidelity and Vanguard websites. 

Here are links to the most updated information at Vanguard. Consider the information on those pages to be the authoritative data source.

• Fidelity ZERO® Total Market Index Fund (FZROX)
• Vanguard Total Stock Market ETF (VTI)

FZROX vs VTI Comparison

Side-by-Side

Here’s a side-by-side comparison of both funds. Scroll right on mobile.

A few noticeable differences comparing VTI vs FZROX:

• FZROX has outperformed VTI over the last five years (see chart below). This is due, in part, to the lower expense ratio (which provides a 0.03% advantage). However, many of the microcap stocks in VTI are not represented in FZROX. Microcap stocks are typically at the end of their business lifecycles, not the beginning. Microcap stocks tend to underperform in the aggregate, which may cause slight underperformance.
• Differences in the expense ratio and returns should not substantially influence investors’ investment decisions. Either fund is fine. Choose based on your need for a mutual fund or ETF. 
• VTI is older, larger, and more liquid. It’s better for non-Fidelity customers and traders. 
• FZROX is suitable for Fidelity customers who prefer not to pay an expense ratio. FSKAX is a closer equivalent to VTI. The zero expense ratio only provides a slight advantage. 

Benchmark Indexes

FZROX is initially indexed to a proprietary Fidelity index called The Fidelity U.S. Total Investable Market Index TR. It is a float-adjusted market capitalization-weighted index designed to perform in line with the U.S. stock market, including small, mid-, and large-cap stocks.

However, Fidelity filters out about 1000 small and microcap stocks to reduce the costs of managing the fund. 

Visit this page for the latest information about the index.

VTI is indexed to the CRSP U.S. Total Market Index. CRSP stands for the Center for Research in Security Prices, an affiliate of the University of Chicago Booth School of Business.

Visit this page for the latest information about the index.

The index has more than 3,700 constituents, making up nearly all equities in U.S. markets. Vanguard uses several CRSP indexes to build its family of low-cost index funds. 

The number of constituents changes frequently, and the holdings do not always perfectly track the index due to frequent modifications. Most modifications involve small holdings and do not impact the overall fund. 

The CRSP U.S. Total Market Index index is market-weighted, meaning the largest holdings comprise a greater percentage of the index and have a greater influence on price fluctuations than smaller companies. 

VTI holdings reflect the market weight of the index. 

Performance Chart

The performance of these two funds have tracked nearly identically.

Here is a daily updated FZROX vs VTI chart tracking each other since FZROX’s inception in 2018. Scroll right on mobile.

The funds will continue to perform closely. Either is suitable for broad U.S. equity exposure in your portfolio.

See the table above for up-to-date one-, three-, and five-year average annual performance records.

Top Ten Holdings

Here are the top ten holdings for each index fund. Visit the links at the beginning of the article for the most updated lists. 

Learn more about VTI’s top 50 holdings. 

Fund Equivalents

Here are the equivalents for both funds. 

The VTI Fidelity equivalent is FSKAX.

The VTI Vanguard equivalent is VTSAX.

FSKAK and FZROX are very close in nature. They will accomplish the same investment objective. 

The VTI iShares equivalent is ITOT. 

• Learn more about FSKAX here
• Learn more about ITOT here

Mutual Funds vs ETFs

Exchange-traded funds (ETFs) trade like stocks. You can buy or sell them during the day on a stock exchange. 

ETFs are easier to own, have lower minimum investments, and the price changes throughout the day. Mutual funds trade once daily after the market closes. 

Active investors typically use ETFs for trading purposes or to buy and hold indexes when they can’t access index mutual funds. 

For example, if you have an investing account with M1 Finance, you’d invest via the VTI ETF instead of FZROX.

Mutual fund companies like Vanguard make it easy to reinvest dividends and capital gains. Set up dividend reinvestment once, and you’ll never have an idle cash balance. 

Conversely, ETFs may need manual dividend reinvestment, depending on your broker’s reinvestment policy. Many online brokers offer free and automated dividend investments.

Here are the dividend reinvestment policies of many of the larger and more popular brokers. 

If your account is with Vanguard, you will benefit from using the index fund FZROX because it makes investing dividends easier. Mutual fund access at non-mutual-fund brokers is often unavailable or involves fees. 

Use the above resources to find the most up-to-date information regarding FSKAX and VTI.

Read more about mutual funds and ETFs.

Best Broker for Owning ETFs if not Fidelity or Vanguard

Vanguard and Fidelity are excellent choices for long-term retirement investors. You’re in good hands if your IRA or employer-sponsored plan is with the broker or if you have individual accounts. 

I recommend another broker for a more modern user experience that can also serve your banking, borrowing, and spending needs. 

Long-term investors may prefer an online broker that’s better for dollar cost averaging and dividend reinvestment. 

I’m a big fan of the online brokerage M1 Finance. M1 Finance is a reliable and robust, no-fee online broker for beginner to intermediate investors. It’s easy to get started.

As your investing skills and portfolio mature, M1 is one of the best platforms to scale.

They also offer an integrated checking account and low borrowing rates. Read my complete M1 Finance review here. 

M1 Finance does not offer mutual funds. However, Vanguard and other ETFs are plentiful. It’s my favorite online broker for everyday investing. 

The platform is more intuitive than old-school brokers because it’s built on a modern technology platform.

You create portfolio “pies” that contain all the stocks and ETFs you want to own and in what percentages. Simply add an ETF to a pie and add funds to your account. 

Learn More about M1 Finance

Conclusion

Deciding between FZROX vs VTI comes down to mutual fund vs ETF. Which do you prefer to own?

The zero-fee aspect of FZROX is a bit gimmicky, giving the fund only a 0.03% advantage over VTI. 

The slight outperformance of FZROX vs. VTI is likely due to the fewer underperforming microcaps. These companies are typically dying, which will bring down the returns of VTI compared to FZROX. 

If you have a long-term investment horizon (more than five years) and want broad U.S. stock market exposure for diversification, you can be comfortable buying FZROX or VTI. 

These are solid low-cost investment options for beginner to expert investors. 

If you already have an account with another broker (not Fidelity) and still want to own a total market, choose VTI instead of a mutual fund. 

ETFs will give you the same coverage, performance, and low cost at any commission-free online broker. 

Please reply with your questions regarding FZROX vs VTI in the comments section below. Include any requests you have about adding more detail to this article. 

Additional Resources

• VOO vs VTI
• VT vs VTI
• SPY vs VTI
• VTSAX vs VTI
• FSKAX vs VTSAX

Disclosure: The author is long FSKAX, FXAIX, and VTI. The opinions expressed are solely those of the authors and do not reflect the views of M1. They are for informational purposes only and are not a recommendation of an investment strategy or to buy or sell any security in any account. They are also not research reports and are not intended to serve as the basis for any investment decision. Prior to making any investment decision, you are encouraged to consult your personal investment, legal, and tax advisors.