Frequently Asked Questions About Scribner Fidelity Index Fund Selection Framework
21 answers covering everything from basics to advanced usage.
// Basics
What does FXAIX invest in?
FXAIX is the Fidelity 500 Index Fund, tracking the S&P 500—roughly 500 of the largest publicly traded US companies. It has a 0.015% expense ratio and is the fund most investors start with. Because it's market value weighted, larger companies (mostly big tech) receive proportionally more of your money, with about 39% of each dollar flowing into the top 10 holdings.
What is the difference between an index fund and an actively managed fund?
An index fund passively tracks a benchmark like the S&P 500 with low fees, while an actively managed fund has a manager picking holdings to try to beat the market, usually at higher cost. In this framework, FXAIX, FSKAX, FSPSX, and FXNAX are passive index funds, while FSPTX is actively managed with a much higher 0.61% expense ratio and greater concentration risk.
What does market value weighting mean for my portfolio?
Market value weighting means larger companies receive a proportionally larger share of each dollar you invest, causing top-heavy concentration. In an S&P 500 fund, about 39% of invested dollars flow into just the top 10 holdings—all tech companies—with roughly 15 cents of every dollar in Nvidia and Apple alone. This is why even a broad US fund carries heavy tech exposure.
What are Fidelity Zero Funds and should I use them?
Fidelity Zero Funds are a separate class of index funds with 0% expense ratios. They're worth investigating if cost minimization is your top priority, but they weren't the focus of this framework because they were less popular at the time of recording. Don't make them a decision blocker—the standard funds covered here (0.015%–0.035%) are already highly cost-competitive.
// How To
How do I set up a 3-fund portfolio using Fidelity funds?
Combine a domestic equity fund (FXAIX or FSKAX), the FSPSX international fund, and the FXNAX bond fund. Use the 120 Rule to set your bond percentage, then split the remaining equity sleeve applying JP Morgan's 25–30% international benchmark. For a 30-year-old: 10% FXNAX bonds, and the 90% equity split into ~67.5% domestic and 22.5% international.
How do I recalibrate my allocation as I get older?
Recalculate the 120 Rule every five years by subtracting your new age from 120 to get your updated stock percentage. As you age, this gradually shifts money from equities into FXNAX bonds, moving your portfolio from growth-oriented to stability-oriented. For example, at 30 you hold 90% stocks, at 45 you hold 75%, and at 60 you hold 60%.
How do I add a small tech satellite position without overexposing myself?
Allocate FSPTX as a small slice—often under 10% of your total portfolio—while keeping FXAIX or FSKAX as your core. For an aggressive 32-year-old bullish on AI, a sample split is 80% FXAIX core, 8% FSPTX satellite, and 12% FXNAX bonds. Remember FSPTX is actively managed, 68% concentrated in 10 names, and can underperform sharply if tech falls out of favor.
How do I decide how much international exposure to add?
Use JP Morgan's benchmark of 25–30% of your total equity allocation going into developed non-US equities as a starting reference. Apply that percentage to your equity sleeve, not your whole portfolio. For a 45-year-old with 75% equities, roughly 19% of the portfolio goes to FSPSX and ~56% stays in FXAIX, with 25% in FXNAX bonds.
// Troubleshooting
Why didn't my Fidelity index fund trade execute immediately?
Fidelity index mutual funds don't execute in real time—all orders settle at end-of-day NAV (net asset value) pricing. This means the confirmed price won't be visible until after market close, even though you placed the order during the day. This is normal for mutual funds and different from ETFs or individual stocks, which trade intraday.
Why did my index fund return slightly differ from the S&P 500?
That small gap is called tracking error—the difference between a fund's actual return and its benchmark index. For example, FXAIX returned 29.76% versus the S&P 500 benchmark of 29.78%, a minimal deviation caused by fees and fund mechanics. It's normal, tiny, and not a reason to switch funds.
My portfolio lost money this year—did I do something wrong?
Not necessarily—negative years are a normal and expected part of investing. The historical average annual return of an index fund does not appear every year; most years are significantly higher or lower than the average. Don't expect the market to simply keep going up. A down year isn't a signal to abandon your allocation if your time horizon is long.
Is my portfolio too concentrated in tech even though I only bought index funds?
Possibly—because FXAIX is market value weighted, roughly 38–39% of it sits in tech-related mega-caps despite being a broad index fund. If you want to reduce this, add FSPSX (only ~10% tech, with Financials and Industrials as its largest sectors). If you're comfortable with the concentration, you can leave it as is—it reflects the actual makeup of the US market.
// Comparisons
How does FXAIX compare to FSKAX in practice?
FXAIX tracks the ~500 largest US companies (the biggest players), while FSKAX tracks the entire US market of 3,700+ companies including small and mid caps (the entire league). Both have identical 0.015% expense ratios, and because large companies drive most returns, the two have become increasingly correlated. The practical difference is now marginal—don't over-engineer this choice.
How does FSPSX compare to a US total market fund?
FSPSX tracks developed markets outside the US (Japan, UK, Switzerland, Germany, France, Australia) with Financials (~24%) and Industrials (~20%) as its largest sectors and only ~10% tech. A US total market fund like FSKAX is heavily tech-weighted. FSPSX exists to reduce single-country and single-sector concentration, not to beat the S&P 500, and carries a slightly higher 0.035% expense ratio.
How does this framework compare to a robo-advisor?
This framework puts you in direct control with the lowest possible fees (mostly 0.015%–0.035%), while a robo-advisor charges an advisory fee on top of fund costs to automate selection and rebalancing. The framework requires manual recalibration every five years using the 120 Rule. Choose this if you value low cost and transparency; choose a robo-advisor if you want fully hands-off management.
Is the 120 Rule better than the older 100 Rule?
The 120 Rule assigns a higher stock allocation than the older 100 Rule to reflect longer life expectancies and lower bond yields historically. Subtracting from 120 keeps you more growth-oriented for longer, which suits many investors with long time horizons. Neither is objectively correct—the right rule depends on your risk tolerance and how much volatility you can stomach near retirement.
// Advanced
Should I hold both FXAIX and FSKAX at the same time?
No—holding both is redundant because they overlap heavily and have become highly correlated. Pick one as your core US equity holding and stay consistent. Holding both adds complexity without meaningful diversification benefit. If you want broader exposure beyond the US, add FSPSX international rather than doubling up on domestic funds.
How does FXNAX generate returns if it's not for growth?
FXNAX generates returns primarily through its 30-day yield (~4.4%), which represents the average annualized income from its bond holdings, rather than capital appreciation. Its portfolio is roughly 45% US Treasuries, 26% corporate bonds, and 23% mortgage-backed securities. It's designed to protect your portfolio and produce income, with its role growing in importance as you approach retirement.
What are the risks of using FSPTX as a satellite position?
FSPTX carries meaningful risks even as a small position: it's actively managed with a high 0.61% expense ratio, over 68% concentrated in just 10 holdings, and roughly 22.5% in Nvidia alone. It can significantly outperform or underperform the broader market depending on tech sentiment. Only use it if you're explicitly bullish on AI, semiconductors, and cloud, and keep it small.
How should I adjust the framework if I have a short time horizon?
If you'll need the money soon, weight more heavily toward FXNAX bonds and less toward equities than the 120 Rule alone suggests, since equities can drop sharply in the short term. The 120 Rule assumes a long horizon; a shorter horizon means preserving value matters more than growth. Treat time horizon as a modifier on top of the age-based allocation.
Can I apply this framework to a Roth IRA or 401(k) at Fidelity?
Yes—all five funds are available on the Fidelity Investments platform and can be held inside a Roth IRA, traditional IRA, or Fidelity 401(k), as well as a taxable brokerage account. The selection and allocation logic (120 Rule, 5 Funds, 2-fund vs 3-fund models) works identically across account types; only the tax treatment of the account differs.