The stock market can be a confusing and overwhelming place to try and find the perfect investment for you and your family, but if you know where to look and are equipped with the right tools it can be a very wise financial move. Among all the mutual funds, Fidelity® 500 Index Fund (FXAIX) appears to be one of the most favorable ones for the beginner-level as well as the professional level investors. Accordingly, this article will closely examine the profile of FXAIX, the advantages it offers, its returns, and why you should consider adding it to your investment kitty.
What is FXAIX?
Fidelity® 500 Index; This is an Index mutual fund which is intended to closely track the S&P 500 total return index by investing to stocks of the index. On the sources of data, S&P 500 is a market capitalization weighted index of five hundred large companies listed in the United States markets. Therefore, FXAIX is meant to track the S&P 500 index in terms of returns so that investors can gain access to a diverse set of the US equities market.
Advantages of investing in the FXAIX
1. Diversification
As people diversify their portfolio with FXAIX, they are safeguarded from being affected by one industry’s poor performance. Thus, when you invest in this particular fund, you would actually be investing in approximately 500 separate companies that function in different industries of the economy. This diversification assists with the removal of risk because the fund performs better that is not tied to a specific company or industry.
2. Low Expense Ratio
One additional aspect that can be positively evaluated when it comes to FXAIX is that such investments are relatively cheap. Expense ratios are the charges that the investors incur to cover the administrative cost of running the fund for a year and for the fund management. Source: The above fund information from the fund provider, Fidelity website, as of July- August, 2014 Fidelity Equity Fund which is also referred to as FXAIX has an expense ratio of 0. As mentioned before, this figure is lower than the average for most mutual funds and even some index funds hover around 1. This means that for every £10,000 invested in the index, a lower amount is eaten up by fees, leaving the rest to build value.
3. Historical Performance
FXAIX follows the historical performance line of the S&P 500 index rather closely thus making it a rather good choice for an investment. Historically spoken the long-run return rate of the S&P 500 is approximately 10% per annum. It must be noted that past performance is not necessarily an indicator of future results but based on past numbers, FXAIX would be a good investment for anybody who is thinking long term.
4. Accessibility and Liquidity
It can also be described as accessible and liquid due to the fact that it is easy to buy and sell without needing to drastically affect its component securities. Being a mutual fund, Fidelity Target ETF Retirement is accessible for numerous customers, especially those who have limited financial resources. Furthermore, Mutual Funds such as FXAIX are highly acknowledged as they are also highly liquid and one can able to buy and sell shares with relative ease, as often practiced at the close of business for the trading day.
These are as follows How to Invest in FXAIX
Opening a Fidelity Account
If you want to invest in the FXAIX, you need to acquire a brokerage account with fidelity investment. All of these preparations can be done on the internet through a few easy processes. Getting an account basically means that you can then be able to invest directly in the FXAIX through Fidelity.
Setting Investment Goals
First of all, goals must have to be planned before investing to achieve the expected returns out of the investment. Assess as to where FXAIX belongs in the scheme of things in your investment plan and how much percentage of your overall investment pool should go to this specific fund.
Regular Contributions
They should include envisaging consistent deposits on the FXAIX investment plan. This can also assist in bringing down the overall cost of your shares per time especially when such equals the cost of the share certificates which is referred to as the dollar-cost averaging. This approach could limit the effect of risks like changing trends of the market on the investment.
Performance Analysis of FXAIX
Long-Term Growth
In this case, using the chart below, FXAIX has provided solid returns for approximately 10 years while closely following the performance of the S&P 500. FXAIX has also reflecting overall appreciation of US equities and investors who have invested in the company over the long term have reaped benefits of steadily rising US stock market.
Risk and Volatility
As with most mutual funds, it poses a certain degree of risks such as market risks and volatility in returns. However, since it is spread across 500 companies, it is a lot less dangerous than just putting all your eggs in one basket in terms of investing in shares. There is a figure called beta which represents the fund’s volatility in relation to the market, and it is roughly 1. For instance, its Price/Earnings ratio is just 0, at the same or similar level to the current market situation.
Dividend Reinvestment
Another thing that comes in handy in the management of FXAIX is the availability of the dividend reinvestment option where investors will automatically reinvest all the dividends received back into the fund. This can be a great way how the investment is grown over time using mathematical concept of compounding.
Investing in FXAIX as compared with Other Investment Alternatives
FXAIX vs. Individual Stocks
As with any directly invested financial asset, there are several benefits to investing in FXAIX, beyond those of individual stocks. Although there may be higher return opportunities with pre-selected stocks, stocks as an investment type have a relatively higher risk exposure. FXAIX has less risk because it invests in 500 firms compared to LU0144476045 which has high risks due to the few firms it has invested in.
FXAIX vs. Other Index Funds
While assessing the performance of FXAIX, one would think that it is actually an index fund unlike other similar funds, but it has a low expense ratio and similar performance. Other many index funds have even higher fees, hence the cost will be slightly higher and this will consequently affect the rate of return on investment in the long run. Besides, being an index fund, FXAIX mimics performances of the underlying asset which in this case is the S&P 500 making it suitable for a broad based investment.
FXAIX vs. Exchange-Traded Funds (ETFs)
There are also similar investments, exchange traded funds or ETFs that track the S&P 500 like SPY but they also have differences. This makes an ETF equivalent more transparent to a mutual fund since ETFs can be bought and sold through out the trading day unlike mutual funds like FXAIX which can only be bought and sold at the end of the trading day. If investors are able to hold these products for the long term, flexibility of trading probably is less essential than the expense ratio and the performance of the fund.
FAQs about FXAIX
What is the minimum investment for the FXAIX investment company?
Even though FXAIX is an actively managed fund, each of the stocks that make up the portfolio can be purchased from as little as $0.
How frequently does it issue these payments?
Dividends are issued on the fund every quarter in line with the distribution policy of the fund’s manager, FXAIX. These dividends may be paid in cash or the corporation may reinvest it on behalf of the investors IN purchasing more shares of the fund.
Can I invest in the FXAIX in a retirement account and if so, what are some of the tax benefits?
Yes, FXAIX can be held in different types of retirement plans like conventional, SEP, Traditional, Simplified Employee Pension Personal or Rollover Individual Retirement Accounts and 401 (k).
Can I expect to make good profits from investing in Fidelity Puritan Fund Class A Shares for growth that are mutual funds?
Yes, FXAIX is quite appropriate for beginners because generally it costs less, it is diversified and it is easy to get.
How does FXAIX: Fidelity Advantaged international index fund compare with other actively managed foreign funds?
By pointing out that the expense ratio may be higher in actively managed funds, the case reveals that these types of funds may not always beat the index. Since, FXAIX is an index fund, its objective is to mimic the S&P 500 but with a much lower expense ratio that makes it more affordable and appealing to a wide range of investors.
Conclusion
This electronically managed fund known as the Fidelity® 500 Index Fund (FXAIX) is a noteworthy fund for anyone interested in investing in a low-cost, broad market tracking portfolio. It has a good diversification, good historical record and low expense ratio, which set it apart from other mutual and index funds. For beginners as well as the professional traders, FXAIX is the right and perfect method through which they can invest in the future of the US stock market.
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