Fidelity's Zero-Fee ETF Is Quietly Keeping Pace With the S&P 500 And Costs Absolutely Nothing

Expense ratios are small numbers that compound into large differences over decades. A fund charging nothing costs exactly that. FZROX, Fidelity’s Zero Total Market Index Fund, has charged investors 0.00% since its August 2018 launch, and after nearly eight years, the performance record is worth examining seriously.

FZROX is a broad U.S. equity fund designed to own essentially the entire American stock market, from mega-cap technology giants down through small and micro-cap companies. It tracks Fidelity’s proprietary U.S. Total Investable Market Index, a benchmark Fidelity created specifically to avoid licensing fees from index providers like CRSP or S&P Dow Jones. That is how the zero expense ratio becomes possible.

The return engine is straightforward: you own a slice of American corporate earnings growth. The fund carries no options overlay, no leverage, and no income-enhancement strategy. Information Technology represents 31.8% of holdings, with the top three positions being Apple, Nvidia, and Microsoft. The fund’s dividend yield sits at approximately 1.08%, providing a modest income component alongside capital appreciation.

One structural constraint matters: FZROX is available exclusively through Fidelity accounts and has no ETF share class. You cannot hold it at Schwab, Vanguard, or in a brokerage IRA elsewhere. For investors already inside the Fidelity ecosystem, this is a non-issue. For anyone considering switching custodians, FZROX shares cannot transfer in-kind and would need to be liquidated first, a potential taxable event in non-retirement accounts.

The numbers tell a competitive story. Over the past year, FZROX returned 18.48%, compared to 17.69% for SPY and 17.67% for VTI. Over five years, FZROX returned 81.75%, modestly ahead of VTI’s 65.3% and SPY’s 75.69%. The five-year comparison uses different start dates, so the gap should be read directionally. What the data confirms is that FZROX has not sacrificed returns to achieve its zero-cost structure.

1. Custodian lock-in: Holding FZROX ties your broad market exposure to staying at Fidelity. Reasonable for most long-term investors, but a real constraint if your financial life moves elsewhere.
2. Proprietary index risk: FZROX tracks a Fidelity-owned index, not an independent benchmark. Fidelity controls the methodology. In practice this has not mattered, but it is a structural difference from funds tracking CRSP or S&P indices.
3. Tech concentration: With Information Technology at 31.8% of the portfolio, FZROX’s returns are heavily influenced by a handful of mega-cap names. Investors should not mistake diversification across 1,000+ holdings for protection against a large-cap tech drawdown.

FZROX belongs in the core of a long-term Fidelity account holder’s portfolio as a cost-free foundation for U.S. equity exposure. Anyone who values custodian flexibility or index independence should weigh the lock-in before making it a permanent anchor.