Fidelity Investments is a renowned name in the asset management industry, offering a wide array of mutual funds to suit different investment objectives and risk profiles. With over 300 options, choosing the best Fidelity mutual fund can be a daunting task. However, several funds stand out based on their historical performance, low fees, and broad diversification.
Fidelity 500 Index Fund (FXAIX)
This is one of Fidelity’s longest-standing and most popular funds. It tracks the S&P 500 index, which comprises 500 large- and mid-cap U.S. stocks selected by an index methodology and a committee. FXAIX provides investors with exposure to the overall U.S. market performance. Over the past 15 years as of Dec. 31, it has outperformed 88% of all U.S. large-cap funds, demonstrating its strong historical performance. With an expense ratio of just 0.015%, it is also highly cost-effective, allowing investors to keep more of their returns. Additionally, it has a low portfolio turnover rate of 3%, which further reduces costs and tax implications.
Fidelity Total Market Index Fund (FSKAX)
While the S&P 500 is widely followed, it does not represent the entire U.S. stock market. FSKAX tracks the Dow Jones U.S. Total Stock Market Index, providing exposure to over 3,800 stocks, including mid- and small-cap stocks that are excluded from the S&P 500. This broader diversification can help reduce risk and potentially increase returns. Like FXAIX, FSKAX has a low expense ratio of 0.015% and a low turnover rate of 1%, making it an attractive option for long-term investors seeking broad market exposure with minimal costs.
Fidelity Zero Extended Market Index Fund (FZIPX)
Fidelity’s zero-expense-ratio index funds have gained significant popularity, and FZIPX is one of them. It tracks the Fidelity U.S. Extended Investable Market Index, which holds 2,500 mid- and small-cap stocks trailing behind the 500 largest companies. The absence of an expense ratio means investors can enjoy the full returns of the fund’s underlying assets, minus any other minimal costs. However, it’s important to note that this fund has a slightly higher turnover rate of 7% and may be more volatile due to its higher concentration of small-cap stocks.
Fidelity Zero International Index Fund (FZILX)
For investors looking to diversify globally, FZILX offers an attractive option. This fund passively tracks the Fidelity Global ex U.S. Index, which includes stocks from international developed and emerging markets. By investing in FZILX, investors can gain exposure to economies outside the United States, potentially reducing portfolio risk through diversification. Moreover, with a zero expense ratio, it provides a cost-efficient way to access international markets.
Fidelity U.S. Bond Index Fund (FXNAX)
Bonds play an important role in a diversified portfolio, providing stability and income. FXNAX tracks an index of U.S. bonds, offering investors exposure to the fixed income market. With an expense ratio of 0.025%, it is relatively inexpensive compared to many actively managed bond funds. The fund’s performance is closely tied to the interest rate environment and the credit quality of the underlying bonds. It can be a suitable choice for investors seeking a more conservative investment option or looking to balance the risk of their equity holdings.
Fidelity Freedom Index 2055 Fund Investor Class (FDEWX)
This fund is designed for investors with a long-term investment horizon, particularly those planning for retirement in or around 2055. FDEWX follows a target-date strategy, gradually adjusting its asset allocation over time to become more conservative as the target date approaches. It invests in a mix of equity and fixed income funds, providing a diversified portfolio in a single fund. With an expense ratio of 0.12%, it is slightly more expensive than some of the other index funds mentioned earlier but still relatively reasonable considering its actively managed nature and the convenience it offers for retirement planning.
Considerations for Choosing the Best Fund
When determining the best Fidelity mutual fund to invest in, several factors should be considered. Firstly, an investor’s risk tolerance is crucial. Those with a higher risk tolerance may prefer equity funds like FXAIX, FSKAX, or FZIPX for their potential for higher returns, while more risk-averse investors may lean towards bond funds like FXNAX or target-date funds like FDEWX. Secondly, investment goals and time horizon play a significant role. Investors with a longer time horizon can afford to take more risks and may benefit from the growth potential of equity funds, while those nearing retirement may prioritize capital preservation and income generation. Additionally, an investor’s existing portfolio composition should be taken into account to ensure proper diversification across different asset classes and sectors.
Conclusion
In conclusion, there is no one-size-fits-all answer to the question of the best Fidelity mutual fund to invest in. The choice depends on an individual’s unique financial situation, investment goals, risk tolerance, and time horizon. By carefully considering these factors and conducting thorough research, investors can select the Fidelity mutual fund(s) that best align with their needs and help them achieve their long-term financial objectives.
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