In 2018 Fidelity released an interesting ETF to the public investor, the FNILX ETF.
This ETF seeks to mimic the returns of the SPY by following the same index, the S&P 500.
The S&P 500 is the largest Index fund in the United States that seeks to track the top 500 companies in the U.S stock market by market cap. The SPY is the ETF that follows this Index.
Since 2003 the SPY has been the main ETF that investors used to gauge the health and strength of the U.S market. It is no wonder why as the U.S economy grows that the SPY sees increasingly more and more volume.
As we can see the SPY has increased year over year bringing in massive profit for the shareholders. Everyone should have some exposure to the U.S general market and the SPY is the best way to do that.
Problem: Expense Ratios
The only problem with holding the SPY is that the expense ratio of 0.095% adds up over time.
This means that an investment of $10,000 after 20 years on the SPY will have spent close to $7,000 in expenses just for sitting there. Now this normally is not an issue because that investment would be worth close to $70,000.
That being said however we are here to save money when we can. The FNILX ETF has a 0% expense ratio and follows the same index fund as the SPY, the S&P 500.
Simply by investing in the FNILX you are going to save around $350 a year. That could be used for further investments and or to pay for other life expense.
What SPY has over FNILX
So what are you giving up by investing in FNILX over the SPY and is it worth it?
For starters the main thing you are giving up is liquidity. FNILX is mainly traded through Fidelity so you have to sign up through them to trade the ETF.
That being said you can also sometimes get a couple shares on other markets but this is rare.
The main thing is the fact that the volume is significantly less then the SPY. The average daily volume on the SPY is between 200-400 million shares traded a day. Because of this liquidity is not an issue on the SPY.
Investing in the FNILX is a long term play because you will need to hold the asset for several years and be comfortable with the low liquidity on the ETF. In the future FNILX is expected to grow in volume, but as it stands right now I wouldn’t put much into it.
I hold FNILX as a portion of my overall U.S equities market portfolio. The goal here is to hold a position that has no expense fees that is small so that I can benefit from lowering the overall expense ratio.
Its a very easy to to squeeze a little bit more alpha out of the market without doing much extra research. So long as FNILX offers a zero expense ratio then you can return slightly above market average. If FNILX ever increases this expense ratio then I will get out and go to one of the many vanguard funds such as VTI.
Is FNILX better then the SPY?
What’s the final decision on the ETF battle between FNILX and the SPY?
For now the SPY wins, hands down. That being said by combining both of these ETF’s you will be able to obtain a higher market return then just investing the SPY. This is because of the 0% expense ratio on FNILX that you can really milk to obtain more returns.
Initially this will only be a couple of dollars a year, but over time this will add up to a sizable portion. Start now and reap the benefits later.
For now FNILX should be invested in but only with a small portion. Say 5-10% of what your overall U.S S&P holdings. The main benefit for this is to lower your overall expense ratio on ETF’s that track the S&P.
For now the SPY stays king in this sector because of the massive liquidity that is provided. Who knows what the future can bring but maybe we will see another ETF dethrone SPY in the future, it has not happened yet but who knows it might.
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