When choosing a specific sector ETF, investors often gravitate towards the oldest or most advertised fund. For the Communication Services sector (home to tech giants like Alphabet and Meta), **XLC (Communication Services Select Sector SPDR Fund)** is the most widely known.
However, a direct comparison reveals that its competitor, **FCOM (Fidelity MSCI Communication Services ETF)**, offers the exact same exposure for a slightly lower cost. This manual is a definitive guide to which low-cost fund should be in your portfolio.
The Index Is The Same: S&P 500 Communication Services
The most crucial fact is that both XLC and FCOM track the same segment of the market: the Communication Services companies within the S&P 500.
1. XLC (SPDR)
XLC tracks the **Communication Services Select Sector Index**. It is highly concentrated, with its top holdings dominating the fund. It is widely used by institutional investors for trading.
2. FCOM (Fidelity)
FCOM tracks a very similar, near-identical index, the **MSCI USA IMI Communication Services Index**. The key difference is the provider's commitment to keeping the cost aggressively low.
Comparison Matrix (XLC vs FCOM)
When the holdings are identical, the lowest fee wins.
| Feature | XLC (SPDR) | FCOM (Fidelity) |
|---|---|---|
| Number of Holdings | ~25 | ~100 (Broader market IMI) |
| Expense Ratio | 0.10% | 0.08% (Lower Cost) |
| Index Tracked | S&P Select Sector Index | MSCI IMI Sector Index |
| Verdict | The Popular Choice | The Cheapest Choice |
The Verdict: FCOM Wins on Cost
The Cost Advantage is All That Matters
When two ETFs track essentially the same sector, the fund with the lowest expense ratio is mathematically superior over the long run. **FCOM's 0.08%** fee beats XLC's 0.10% fee. While the difference is small, it's a difference that compounds in your favor.
A Note on Holdings
FCOM often tracks the IMI (Investable Market Index), which includes small- and mid-cap companies, giving it a larger number of holdings (~100) compared to XLC (~25, which focuses only on the S&P 500). This slight increase in diversification is another minor point in FCOM's favor.
Conclusion: Choose FCOM and Save
Unless you are an active trader who needs XLC's specific volume or liquidity, **FCOM** is the clear choice for buy-and-hold investors in the Communication Services sector.
