Index Fund to Buy That May Beat the S&P 500

As investors seek to maximize their returns, the search for index funds that can outperform the S&P 500 continues. One fund that stands out in this regard is the Fidelity ZERO Large Cap Index Fund (FNILX). With its low expense ratio and broad market exposure, FNILX offers an attractive option for investors looking to beat the market.

The Fidelity ZERO Large Cap Index Fund tracks the Fidelity U.S. Large Cap Index, which is highly correlated with the S&P 500. This means that the fund's performance is closely aligned with the benchmark, providing investors with broad market exposure. However, the fund's low expense ratio of 0% allows investors to keep more of their returns, potentially leading to outperformance over time.

One of the key factors contributing to the fund's potential to beat the S&P 500 is its low turnover rate. With a turnover rate of 2.2% (as of May 1, 2024), the fund holds its investments for an extended period, reducing transaction costs and enhancing tax efficiency. This strategy aligns with the fund's long-term investment philosophy, making it a strong contender for outperforming the S&P 500 over time.

The fund's portfolio composition is similar to the S&P 500, with a focus on technology, healthcare, and consumer discretionary sectors. However, FNILX has a higher allocation to financials and a lower allocation to energy compared to the benchmark. This sector allocation may provide some diversification benefits and potentially enhance performance, as the financial sector has been strong in recent years.

Historically, the Fidelity ZERO Large Cap Index Fund has performed well compared to its benchmark index and other index funds in its category. As of mid-May 2024, the fund was up about 12% year-to-date, almost identical to the S&P 500 index's gains. Additionally, the fund has no minimum investment, making it accessible for beginning investors.

In conclusion, the Fidelity ZERO Large Cap Index Fund (FNILX) is an attractive option for investors seeking an index fund that may beat the S&P 500. With its low expense ratio, broad market exposure, and low turnover rate, the fund offers a compelling combination of factors that could contribute to outperformance over time. While past performance is not indicative of future results, the fund's historical track record and low-cost structure make it a strong contender for investors looking to beat the market.