Invest in these funds for the long haul.
Buy-and-hold investing is a long-term play. So choosing the right mutual funds to include in your portfolio matters. Fidelity funds can be a good option, particularly if you’re focused on balancing costs against returns. “If your strategy is to buy and hold, the importance of a transparent and low-cost basis cannot be understated,” says Scott San Emeterio, founder and CEO of BallStreet Trading. Fidelity, he points out, was one of the first fund managers to introduce market index funds with a zero expense ratio. Apart from that, Fidelity funds have shown that, in terms of performance, they’re able to hold their own against funds from competitors such as Vanguard and Schwab. If you’re looking for new additions to a buy-and-hold portfolio, here are seven of the best Fidelity mutual funds to consider.
Fidelity Blue Chip Growth K6 Fund (ticker: FBCGX)
Blue-chip stocks could be attractive for a buy-and-hold strategy if you’re interested in companies with outstanding growth potential. FBCGX may be one of the best Fidelity funds to own over the long term because of its heavy allocation to the tech and consumer discretionary sectors. “When you look at the recovery off the March 2020 lows, it was focused on a couple of select names, which all play a major role in this fund’s allocation,” San Emeterio says. Those names include Amazon.com (AMZN), Apple (AAPL), Microsoft Corp. (MSFT) and Facebook (FB). “Coupled with an expense ratio of 0.45%, this is a fund that should continue to get a lot of attention, given the performance it has consistently delivered.”
Fidelity ZERO Large Cap Index Fund (FNILX)
High expense ratios add up to lower returns over time, says Michal Strahilevitz, behavioral economist and professor of business administration at St. Mary’s College of California. Funds like FNILX, which has a net expense ratio of 0%, eliminate concerns about cost for long-term investors. The Fidelity ZERO Large Cap Index Fund aims to mimic the performance of the total return of large-cap U.S. companies. Top holdings include four of the five FAANG companies — excluding Netflix (NFLX) — and companies such as Johnson & Johnson (JNJ) and Visa (V) also make an appearance. Another key feature is a 3% holdings turnover ratio, which can suit a buy-and-hold strategy if you’re looking to invest for the long haul.
Fidelity ZERO International Index Fund (FZILX)
If you want to branch out beyond U.S. companies as a buy-and-hold investor, FZILX is one of the top Fidelity mutual funds for exploring foreign markets. “If you live in the U.S., having some international exposure adds to your overall diversity,” Strahilevitz says. The Fidelity ZERO International Index Fund is another fund with a 0% expense ratio, and its objective is mirroring the total return of foreign and emerging markets. For instance, some of the fund’s holdings include Nestlé SA (NSRGY), Tencent Holdings (TCEHY) and Alibaba Group Holding (BABA). This fund hasn’t been around for very long, but it has already shown itself to be a Fidelity fund to watch.
Fidelity Freedom Blend 2050 Fund (FHAPX)
If you’re just getting started with investing, FHAPX is one of the top Fidelity mutual funds to consider owning for the long term. This is a target-date retirement fund with an asset allocation focused on both growth and income, and high current income as its primary goal. The Fidelity Freedom Blend 2050 Fund is composed of other Fidelity funds, including the Fidelity Large Cap Value Index Fund, the Fidelity International Growth Fund and the Fidelity Investment Grade Bond Fund. Stocks account for nearly 90% of the fund’s current makeup, although with target-date funds the allocation automatically grows more conservative over time. This fund has a net expense ratio of 0.55% and a current yield of 1.79%.
Fidelity Total Market Index Fund (FSKAX)
When investing with a buy-and-hold bent, less can sometimes be more. “For most buy-and-hold investors, I recommend simple portfolios that consist of anywhere from two to five funds,” says Connor Brown, a personal finance expert and the founder of After School Finance. For example, you might build a portfolio that’s split between the total stock market and total bond market. FSKAX could be a good fit if you need a total stock market index fund. This is a large blend fund that invests in top-performing common stocks such as Amazon and Alphabet (GOOG, GOOGL). The Fidelity Total Market Index Fund offers a low expense ratio of 0.01% and on a 10-year average basis has returned 13.68% to investors.
Fidelity Capital & Income Fund (FAGIX)
If you’re investing for the long term, you may be interested in adding a fund or two to your portfolio for income. FAGIX is one of the best Fidelity funds for dividends, with a 4.11% yield and a 10-year average return of 7.07%. This fund seeks both income and capital growth through investments in equity and debt securities. The Fidelity Capital & Income Fund holds a diverse mix of debt from companies like Ally Financial (ALLY) and PG&E Corp. (PCG). Since this fund invests in lower-quality debt securities, it’s worth noting that it earned a five-star risk rating from Morningstar. FAGIX also carries a slightly higher expense ratio of 0.67%, but that’s still below industry averages.
Fidelity Flex U.S. Bond Index Fund (FIBUX)
If you need a bond fund to round out your buy-and-hold portfolio, you may consider the Fidelity Flex U.S. Bond Index Fund. This fund seeks to provide returns that correlate to the aggregate price and interest rate performance of the Bloomberg Barclays U.S. Aggregate Bond Index. For instance, underlying holdings include U.S. Treasury notes and bonds. This is a newer Fidelity mutual fund that has so far produced a three-year return of 5.38% and a yield of 2.45%, which looks promising. FIBUX also comes with an expense ratio of 0% — but it does have an 85% holdings turnover ratio, which is something to keep in mind as you shape your buy-and-hold strategy.
Fidelity mutual funds to buy and hold:
— Fidelity Blue Chip Growth K6 Fund (FBCGX)
— Fidelity ZERO Large Cap Index Fund (FNILX)
— Fidelity ZERO International Index Fund (FZILX)
— Fidelity Freedom Blend 2050 Fund (FHAPX)
— Fidelity Total Market Index Fund (FSKAX)
— Fidelity Capital & Income Fund (FAGIX)
— Fidelity Flex U.S. Bond Index Fund (FIBUX)
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