Fidelity is one of the most well-known and respected names in the investment world, offering a wide range of mutual funds to suit different investment goals and risk tolerances. With so many options available, it can be challenging to determine which Fidelity mutual funds are the best to buy now. In this article, we will explore some of the top Fidelity mutual funds that investors may consider based on various factors such as performance, fees, and investment objectives.
Index Funds
Fidelity 500 Index Fund (FXAIX)
Overview: The Fidelity 500 Index Fund is one of the most popular and longest-standing funds in Fidelity’s lineup. It has been around since February 17, 1988, and is benchmarked to the S&P 500 index, which tracks 500 large-cap U.S. companies selected by the S&P committee to represent the overall U.S. market performance.
Performance: Historically, it has provided solid returns and has outperformed 88% of all U.S. large-cap funds over the past 15 years as of December 31. In 2024, it has shown a year-to-date return of around 15% as of August 17.
Fees: With an extremely low expense ratio of just 0.015%, it is highly cost-effective. For every $10,000 invested, investors can expect to pay only about $1.50 in annual fees.
Suitability: This fund is suitable for investors who want broad exposure to the U.S. large-cap market with a passive investment approach. It is an excellent choice for those seeking long-term growth and diversification at a low cost, making it a core holding for many portfolios.
Fidelity Total Market Index Fund (FSKAX)
Overview: The FSKAX tracks the Dow Jones U.S. Total Stock Market Index, which combines the large-cap stocks of the S&P 500 with thousands of other mid- and small-cap stocks. This provides investors with exposure to the overall performance of the broad U.S. market, not just a specific segment.
Performance: It has a consistent track record of closely mirroring the performance of the U.S. total stock market. As of August 17, 2024, it had a year-to-date return of 14.3%.
Fees: Similar to the Fidelity 500 Index Fund, FSKAX also has a low expense ratio of 0.015%, making it an affordable option for investors looking to gain broad market exposure.
Suitability: Ideal for investors who want a more comprehensive view of the U.S. stock market, including mid- and small-cap stocks, in addition to large caps. It offers diversification across different market capitalizations and can be a good long-term investment for those with a moderate to high risk tolerance and a buy-and-hold strategy.
Fidelity Zero Total Market Index Fund (FZROX)
Overview: This fund is part of Fidelity’s zero-expense-ratio index funds, making it an attractive option for cost-conscious investors. It tracks the Fidelity U.S. Total Investable Market Index, providing broad diversification across thousands of large-, mid-, and small-cap stocks from all 11 stock market sectors.
Performance: It has shown a year-to-date return of 14.4% as of August 17, 2024, performing in line with the broader market trends.
Fees: As the name suggests, it has an expense ratio of 0%, which means investors can enjoy the benefits of market exposure without incurring any management fees. Additionally, there are no minimum investment amounts and zero transaction fees on Fidelity’s platform.
Suitability: Great for investors who prioritize minimizing costs and want to build a diversified equity portfolio over the long term. It is especially suitable for those in the accumulation phase of their investment journey, such as young investors or those with a long time horizon until retirement.
Bond Funds
Fidelity U.S. Bond Index Fund (FXNAX)
Overview: The Fidelity U.S. Bond Index Fund provides exposure to the U.S. bond market by tracking an index of U.S. government, corporate, and mortgage-backed securities. It aims to provide investors with a relatively stable income stream and capital preservation.
Performance: In 2024, it had a year-to-date return of -1% as of August 17, which is in line with the general trend of the bond market during that period due to rising interest rates. However, over the long term, it has provided consistent returns with lower volatility compared to equity funds.
Fees: It has an expense ratio of 0.025%, which is relatively low compared to many actively managed bond funds.
Suitability: This fund is suitable for conservative investors who are looking for a more stable investment option with a focus on income generation and capital preservation. It can be used as a diversification tool within a portfolio to reduce overall risk and provide stability during market downturns.
International Funds
Fidelity Zero International Index Fund (FZILX)
Overview: FZILX passively tracks the Fidelity Global ex U.S. Index, which holds stocks from international developed and emerging markets. This allows investors to diversify their portfolios globally and gain exposure to companies outside the United States.
Performance: As of August 17, 2024, it had a year-to-date return of 7%. The performance of international funds can be more volatile compared to domestic funds due to factors such as currency fluctuations and geopolitical risks, but they also offer the potential for higher returns and diversification benefits.
Fees: With an expense ratio of 0%, it is a cost-effective way to invest in international markets without incurring additional fees for management.
Suitability: Geared towards investors who want to diversify their portfolios internationally and have a long-term investment horizon. It can be a good addition for those who believe in the growth potential of international markets and want to reduce their reliance on the U.S. economy for investment returns.
Target-Date Funds
Fidelity Freedom Index 2055 Fund Investor Class (FDEWX)
Overview: The Fidelity Freedom Index 2055 Fund is a target-date fund designed for investors planning to retire around the year 2055. It automatically adjusts its asset allocation over time, gradually reducing exposure to equities and increasing exposure to fixed-income securities as the target date approaches.
Performance: It had a year-to-date return of 9.8% as of August 17, 2024. The performance of target-date funds can vary depending on the market conditions and the stage of the fund’s glide path.
Fees: It has an expense ratio of 0.12%, which is relatively reasonable compared to other target-date funds in the market.
Suitability: Ideal for investors who want a hands-off approach to retirement planning and prefer a fund that adjusts its asset allocation based on their expected retirement date. It provides a diversified portfolio that becomes more conservative as the target date nears, helping to manage risk during the accumulation and decumulation phases of retirement savings.
Actively Managed Funds
Fidelity Contrafund (FCNTX)
Overview: The Fidelity Contrafund is an actively managed fund that invests in securities of companies whose value is not fully recognized by the market, which may include growth or value stocks. The fund managers use in-depth research and analysis to identify undervalued companies with the potential for long-term growth.
Performance: It has a solid track record, with a 2024 year-to-date performance of 34.1% and a 5-year annualized return of 18.8%. However, it’s important to note that actively managed funds can be more volatile compared to index funds due to their concentrated holdings and active management strategies.
Fees: The expense ratio is 0.39%, which is relatively reasonable compared to other actively managed funds.
Suitability: Suitable for investors who believe in the fund manager’s ability to identify undervalued stocks and are willing to take on slightly higher risks for potentially higher returns. It can be a good addition to a growth-oriented portfolio for those with a moderate to high risk tolerance and a long-term investment horizon.
Fidelity Select Technology Portfolio (FSPTX)
Overview: This sector-specific fund focuses on the technology sector, which has been one of the fastest-growing and most innovative sectors in the market. It invests in companies involved in various aspects of technology, such as software, hardware, semiconductors, and telecommunications.
Performance: Given the rapid pace of technological advancements, the Fidelity Select Technology Portfolio has the potential for significant returns. However, it also comes with higher volatility due to its concentrated exposure to the technology sector. In recent years, it has shown strong performance, with double-digit returns in some years, but it has also experienced significant drawdowns during market corrections related to the technology sector.
Fees: The expense ratio for this fund is 0.71%. While it is higher than some of the index funds mentioned earlier, it is in line with other actively managed sector funds.
Suitability: Geared towards investors who have a high risk tolerance and a positive outlook on the technology sector. It can be a suitable choice for those who want to gain exposure to the growth potential of leading technology companies and are willing to accept the associated risks. This fund may be more appropriate for investors with a long-term investment horizon and a belief in the continued expansion and innovation within the technology industry.
Considerations for Choosing Fidelity Mutual Funds
Investment Goals: Your investment goals should be the primary factor in determining which Fidelity mutual funds to buy. If you are saving for retirement, a target-date fund like FDEWX may be suitable. For long-term growth, equity index funds such as FXAIX, FSKAX, or FZROX can be considered. If you are looking for income and stability, bond funds like FXNAX may be more appropriate.
Risk Tolerance: Assess your risk tolerance before investing in any mutual fund. Equity funds generally carry higher risks but offer the potential for greater returns, while bond funds are relatively more stable but may provide lower returns. If you have a low risk tolerance, you may prefer a more conservative allocation with a higher proportion of bond funds. On the other hand, if you have a high risk tolerance and a long investment horizon, you may be more comfortable with a larger allocation to equity funds, including actively managed growth funds or sector-specific funds.
Time Horizon: The length of your investment time horizon is also crucial. Longer time horizons allow you to ride out market fluctuations and potentially benefit from the compounding effect of returns. For long-term investors, equity funds can be a good choice as they have historically provided higher returns over extended periods. Shorter time horizons may require a more conservative approach with a greater emphasis on capital preservation and liquidity.
Diversification: Diversifying your portfolio across different asset classes, sectors, and regions can help reduce risk. Consider combining different types of Fidelity mutual funds, such as index funds, bond funds, and international funds, to achieve a well-diversified portfolio. This can help protect your investments from the impact of any single market event or sector downturn.
Fees and Expenses: Pay close attention to the expense ratios and other fees associated with each fund. Lower fees can have a significant impact on your long-term returns, especially over an extended investment period. Index funds generally have lower expense ratios compared to actively managed funds, but some actively managed funds may justify their higher fees with the potential for outperformance. Evaluate whether the fund’s historical performance and investment strategy justify the fees charged.
Conclusion
In conclusion, the choice of which Fidelity mutual funds to buy now depends on your individual investment goals, risk tolerance, time horizon, and other personal circumstances. The funds discussed in this article represent some of the top options available within Fidelity’s extensive mutual fund lineup, each offering unique characteristics and potential benefits. By carefully considering these factors and conducting further research, you can make an informed decision and select the Fidelity mutual funds that best align with your financial objectives and help you achieve your long-term investment goals. Remember to regularly review and rebalance your portfolio to ensure it remains in line with your changing needs and market conditions.
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