VEIRX vs FXAIX (2026): Vanguard Equity Income vs Fidelity 500 Index — Which Wins?

VEIRX vs FXAIX: At a Glance

The Core Tradeoff: Income and Stability vs Maximum Growth

VEIRX and FXAIX are both large-cap U.S. equity funds, but they serve meaningfully different investors. FXAIX buys all 500 companies in the S&P 500 at market-cap weights — a passive, low-cost bet on the U.S. economy. VEIRX actively selects stocks that pay above-average dividends and appear undervalued relative to peers, resulting in a portfolio that leans heavily toward financial services, utilities, healthcare, and consumer staples — sectors known for steady dividends but historically slower growth than tech-heavy indexes.

The practical result: VEIRX tends to lag FXAIX in bull markets when growth stocks surge (as they did in 2023–2025), but VEIRX holds up better when markets decline. In 2022, when rising rates crushed growth stocks, VEIRX's dividend-value orientation softened the blow. That kind of behavior matters enormously to investors who can't stomach watching their portfolio fall 25%.

Performance: FXAIX Leads Across All Time Periods

FXAIX has outperformed VEIRX across every standard time period measured. The gap is largest over 10 years — 15.05% vs 11.75% annualized — a reflection of the sustained outperformance of growth and tech stocks in the S&P 500 versus the value and dividend names VEIRX favors.

VEIRX's 11.75% annualized 10-year return is solid in absolute terms — a $100,000 investment would have grown to roughly $304,000. But the same $100,000 in FXAIX would have grown to approximately $405,000 over the same period. The 3.30% annual gap, compounded over a decade, is a substantial real-money difference. That said: VEIRX achieved this with less volatility (10.35% vs 12.05% standard deviation), which matters to investors for whom drawdowns trigger panic selling.

Income: VEIRX Pays Twice the Yield

VEIRX's dividend mandate produces a 2.19% yield versus FXAIX's 1.09% — exactly double. This isn't an accident: VEIRX's investment mandate requires that it hold stocks paying above-average dividend income. The result is a fund populated with companies like Johnson & Johnson, JPMorgan Chase, Procter & Gamble, and Verizon — consistent dividend payers that are less likely to cut distributions.

For retirees drawing income from their portfolio, the 1.1% yield advantage translates to meaningful real dollars — especially on larger balances. That said, income-focused investors should weigh this against VEIRX's lower total return: FXAIX may produce less current income but more portfolio growth over time, which supports larger future withdrawals.

Cost: FXAIX Costs 12× Less Per Year

FXAIX charges 0.015% annually — among the lowest expense ratios available on any fund anywhere. VEIRX charges 0.19%, which is reasonable for an actively managed fund but more than 12 times FXAIX's cost. On a $100,000 portfolio, that's $15/year versus $190/year — a $175 annual difference that VEIRX must overcome with superior returns to justify its fee.

The cost gap is smaller than it first appears in dollar terms — VEIRX at 0.19% is genuinely cheap relative to most active funds. But when compared to FXAIX, even a modest 0.175% annual drag on a large portfolio compounds significantly over decades.

Risk Profile: VEIRX Is the Calmer Ride

VEIRX has a standard deviation of 10.35% versus FXAIX's 12.05% — a meaningful gap. Lower volatility matters in two concrete ways: smaller portfolio drawdowns in bad markets, and lower behavioral risk (investors who see smaller losses are less likely to panic-sell at the bottom).

The volatility difference is especially visible during market corrections. When growth stocks dominate the S&P 500 — as they have since 2016 — FXAIX's heavy tech weighting amplifies both its gains and its losses. VEIRX's dividend-value orientation provides a natural dampener: companies paying 2%+ dividends tend to be mature businesses with more stable earnings, which don't crater as dramatically when sentiment shifts.

Which Fund Is Right for You?

The Value vs Growth Cycle: When VEIRX Catches Up

VEIRX's underperformance versus FXAIX over the past decade is largely a story of growth dominating value — specifically, large-cap tech stocks like Apple, Microsoft, Nvidia, Amazon, and Meta, which now make up over 30% of the S&P 500 index. FXAIX owns all of them at full weight. VEIRX, focused on dividend payers, owns far less of these companies because most pay little or no dividend.

Historically, value stocks and growth stocks take turns leading the market over multi-year cycles. Value dominated from 2000–2007. Growth dominated from 2009–2021. Value had a brief resurgence in 2022 when rising rates hit high-multiple growth stocks. If interest rates remain elevated or the market rotates away from mega-cap tech, VEIRX's return gap versus FXAIX is likely to narrow.

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