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My strong belief is that the best investing strategy is to pick a total stock market index fund, setup monthly contributions, and only look at it to increase your regular contributions. Two of the best total stock market funds are Fidelity ZERO Total Market Index Fund (FZROX) and Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX), but how do you choose between the two funds? The good news is that you can’t really make a wrong choice because the differences between the two are small. While both investment firms have made it incredibly easy to invest, there are a number of things to consider when deciding which one is best for you.
Age of Fund and Tax Efficiency — Winner: Vanguard
Vanguard’s VTSAX was established in 1992, while Fidelity’s FZROX was established in 2018. This gives Vanguard an advantage in two ways. First, it means that VTSAX has a nearly 30-year track record of success and steady management. This long history of success is why VTSAX has $1.1 trillion under management. Second, the age of holdings in the VTSAX allows fund managers to balance stocks held within the fund in a tax efficient manner by offsetting gains within the fund by selling losses. When a fund manager earns capital gains within a fund, the investors are given the tax bill. FZROX has performed well over it’s shorter inception, but…
