These are the best Fidelity funds by performance for your Fidelity 401(k).
Fidelity Investments is a powerhouse in retirement planning. Investors put more into Fidelity 401(k)s than Japan’s $5 trillion gross domestic product. Although stock funds are usually your best bet for high returns, investing entirely in stocks may not be the best retirement strategy, so keep an eye on risk as you evaluate these Fidelity retirement funds. Also consider diversification across sectors and regions. Even though technology funds may dominate the performance charts of late, these could easily fall out of favor. Pay attention to fund costs as well; expense ratios eat into long-term returns. What follows are 10 of the best Fidelity funds for retirement that are available inside and outside of Fidelity 401(k)s, based on their 10-year performance as of Dec. 31. (Note: It is up to your company which funds are available in your 401(k). If you don’t have access to these funds, all of them are available in individual retirement accounts.)
Fidelity OTC Portfolio (ticker: FOCPX)
The Fidelity OTC fund invests at least 80% of its portfolio in stocks trading on the Nasdaq stock exchange or over-the-counter markets. OTC markets have more small- and medium-sized companies, which generally offer more growth opportunities. That explains the high returns of this fund, but it also comes with more risk. Add lower transparency and regulation on OTC markets, and it’s easy to see why FOCPX gets an above-average risk rating from Morningstar. However, it has scaled back its aggressiveness since Christopher Lin took over as lead fund manager in 2018. Investors should also note the fund’s top 10 holdings account for over half of the overall portfolio, which is more than 40% in the information technology sector. Management is committed to investing more than 25% of total assets in the technology sector at all times. Though FOCPX is high-performing, it’s not highly diversified in comparison with other funds on this list. It’s also not cheap at a 0.87% expense ratio.
10-year average annual returns: 19.48%
Net expense ratio: 0.87%
Risk: above average for the U.S. large growth category
Fidelity Blue Chip Growth Fund (FBGRX)
It’s not easy to find blue-chip companies with big growth potential; giants can only grow so much bigger, after all. But this is exactly what the managers of FBGRX aim to do. This growth fund targets blue-chip companies that Fidelity believes to be “well-known, well-established and well-capitalized” and usually are large- or medium-sized. From those criteria, management takes only the companies it feels offer above-average growth potential. Bear in mind, this means the fund is heavily invested in information technology (more than 36% of the total portfolio) and consumer discretionary (more than 31% of the total portfolio, up from 25% in June 2020). It also comes at a not-insignificant price of a 0.79% net expense ratio. Morningstar increased its risk rating from above-average to high relative to the large growth category.
10-year average annual returns: 19.43%
Net expense ratio: 0.79%
Risk: high for the U.S. large growth category
Fidelity Nasdaq Composite Index Fund (FNCMX)
If you favor index funds, the best-performing Fidelity fund for retirement is FNCMX. Unlike FOCPX, which takes its pick from stocks that trade on the Nasdaq exchange or OTC markets, FNCMX tries to track the performance of the Nasdaq Composite Index. This makes FNCMX a more affordable means of investing in the Nasdaq realm, although it’s still pricey for an index fund. FNCMX holds 2,485 of the nearly 3,000 stocks in the benchmark index. Since FNCMX is a passive fund, it can’t make active bets, such as altering sector exposures. As a result, FNCMX is more than 42% weighted toward the tech sector, just like its underlying index. It also carries a lot of its weight in its top 10 holdings (44% of the portfolio), which include familiar names like Microsoft Corp. (MSFT) and Apple (AAPL). So while FNCMX is another high performer, order this one with a side of diversification for a less volatile retirement.
10-year average annual returns: 18.25%
Net expense ratio: 0.3%
Risk: above average for the U.S. large growth category
Fidelity Small Cap Growth Fund (FCPGX)
It’s far easier to grow when you’re starting small. This holds true of companies: Small capitalization companies tend to provide some of the best long-term growth prospects in the stock market. This can make small caps a good addition to a retirement portfolio. Just be warned that small companies also make riskier investments as they’re more likely to go out of business than better established companies, and small players can also have less consistent returns. All of that said, if you’re looking for a Fidelity small-cap fund to add to your retirement, FCPGX is a solid pick. It’s the top-performing small-cap fund offered by Fidelity, but it may not be the best choice for cost-conscious investors (as all investors should be). At a 1.09% expense ratio, there are cheaper small-cap funds out there, such as the Fidelity Small Cap Enhanced Index Fund (FCPEX).
10-year average annual returns: 16.05%
Net expense ratio: 1.09%
Risk: below average versus small growth category
Fidelity Contrafund (FCNTX)
Contrarians and value investors rejoice: FCNTX is a fund after your heart. It invests in companies that management believes to be undervalued by the public. Given that the lead manager, Will Danoff, won Morningstar’s Domestic Stock Fund Manager of the Year in 2007, his beliefs are worth noting. Right now, he’s thinking opportunity lies in familiar tech names like Amazon.com (AMZN), Facebook (FB) and Microsoft, as well as financial conglomerate Berkshire Hathaway (BRK.A), which rounds out the fund’s top four holdings. Contrafund is the largest actively managed fund but has fallen down the rankings by U.S. News & World Report from No. 95 to No. 245 with a score of 5.1 out of 10 overall. Despite this, Morningstar still sees potential in the fund, giving it a silver rating for its seasoned manager and effective approach.
10-year average annual returns: 15.39%
Net expense ratio: 0.85%
Risk: average versus U.S. large growth category
Fidelity 500 Index Fund (FXAIX)
FXAIX is offered by more than half of the 401(k) plans on Fidelity’s platform, according to the company, making it one of the most accessible Fidelity funds for retirement. It also happens to be among the best-performing Fidelity funds for retirement with 10-year annualized returns of 13.87% as of Dec. 31. With a tidy expense ratio of only 0.015%, the Fidelity 500 Index Fund is one of the lowest-cost funds on this list. In fact, it is the single lowest-cost mutual fund tracking the S&P 500 offered anywhere. Morningstar gives it a gold badge. Formerly FUSEX, the fund replicates the S&P 500, making it a nice option for index investors or those looking for large blend exposure.
10-year average annual returns: 13.87%
Net expense ratio: 0.015%
Risk: average versus U.S. large blend category
Fidelity Total Market Index Fund (FSKAX)
The Fidelity Total Market Index Fund provides exposure to a broader swath of the U.S. stock market than S&P 500 funds like FXAIX but for the same price. With around 3,500 holdings, FSKAX reaches far beyond the S&P 500 to replicate the total U.S. stock market. No single company makes up more than about 5% or so of the overall portfolio (a good metric to use when trying to avoid overconcentration). Apple, the largest holding, accounts for 5.16% of the total portfolio. For broad U.S. stock market exposure (you won’t get any international exposure here) at index-fund pricing, FSKAX is definitely one of the best-performing Fidelity funds for retirement.
10-year average annual returns: 13.74%
Net expense ratio: 0.015%
Risk: above average versus U.S. large blend category
Fidelity Extended Market Index Fund (FSMAX)
Another popular fund in Fidelity 401(k) plans is the Fidelity Extended Market Index Fund. This one provides small-cap and midcap exposure, which has been in short supply among the other top-performing Fidelity funds so far. It’s benchmarked to the Dow Jones U.S. Completion Total Stock Market Index, which excludes companies in the S&P 500. This can make FSMAX a nice complement to a large-cap or S&P 500 index fund. FSMAX is also highly diversified among those smaller companies with more than 3,200 holdings, the top 10 of which account for less than 10% of the portfolio, and represents every market sector. What’s more, the fund has dropped its price tag from 0.045% to 0.036%, which never hurts. Morningstar has increased its three-year risk rating from above average to high.
10-year average annual returns: 13.16%
Net expense ratio: 0.036%
Risk: high versus U.S. midcap blend category
Fidelity Worldwide Fund (FWWFX)
Everyone should have some international exposure, and FWWFX is the best-performing Fidelity fund that reaches beyond the U.S. — but just barely. With more than 63% of its portfolio home-based, it’s not the most international of worldwide funds. If your retirement plan offers a purely international ex-U.S. option, that may be better — likewise, any fund that doesn’t cost more than 1% in annual expenses (although the 401(k) version of this fund should be cheaper than that). Now for what FWWFX does well: It gives you exposure to more than 11 countries other than the U.S. It also keeps individual stock weights at less than 4%, and, despite being pricey for an index fund, it is on par with the category average on cost while being above average in performance. Morningstar gives the fund four stars and a bronze rating.
10-year average annual returns: 12.15%
Net expense ratio: 1.05%
Risk: average versus world large stock category
Fidelity Balanced Fund (FBALX)
For a less aggressive approach to retirement investing, consider the Fidelity Balanced Fund. FBALX invests at least 25% of its portfolio in fixed-income securities like bonds and other debt investments. These are primarily investment-grade credit and mortgage pass-through securities. With this more conservative approach to investing comes more conservative returns, however. FBALX finished the 2010s decade with just more than a 10% average 10-year return. So it’s more of a best-performing Fidelity fund for semi-conservative retirement investors, as opposed to best-performing overall. That said, it beats its 60-40 allocation peer, the Fidelity Puritan Fund (FPURX), in annual returns on a 10-, five-, three- and one-year basis. FBALX is also a five-star fund from Morningstar.
10-year average annual returns: 10.82%
Net expense ratio: 0.52%
Risk: above average versus U.S. allocation 50% to 70% equity category
Fidelity zero expense ratio index funds
In 2018, Fidelity debuted a lineup of zero expense ratio, zero minimum index mutual funds: the Fidelity ZERO Large Cap Index Fund (FNILX), the Fidelity ZERO Extended Market Index Fund (FZIPX), the Fidelity ZERO Total Market Index Fund (FZROX) and the Fidelity ZERO International Index Fund (FZILX). Being nascent funds, these don’t have the track record of others on this list. They also aren’t likely to be included in 401(k) plans yet, as most plan sponsors wait for a fund to be at least three years old before adding it to their plan. But with no investment minimum and no expense ratio to contend with, these can be good Fidelity funds for retirement investing outside of your employer-sponsored plan.
The best-performing Fidelity funds for retirement:
— Fidelity OTC Portfolio (FOCPX)
— Fidelity Blue Chip Growth Fund (FBGRX)
— Fidelity Nasdaq Composite Index Fund (FNCMX)
— Fidelity Small Cap Growth Fund (FCPGX)
— Fidelity Contrafund (FCNTX)
— Fidelity 500 Index Fund (FXAIX)
— Fidelity Total Market Index Fund (FSKAX)
— Fidelity Extended Market Index Fund (FSMAX)
— Fidelity Worldwide Fund (FWWFX)
— Fidelity Balanced Fund (FBALX)
— Fidelity zero expense ratio index funds
More from U.S. News
7 Balanced ETFs for Diversification
The Best-Performing Fidelity Funds for Retirement originally appeared on usnews.com
Update 01/22/21: This story was originally published at an earlier date and has been updated with new information.
