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. As fund managers go, Fidelity is 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, as he points out, was one of the first fund managers to introduce market index funds with a zero expense ratio. Apart from that, in terms of performance, Fidelity funds have shown that they’re able to hold their own against funds from competitors such as Vanguard and Charles 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 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.” Throughout the life of the fund, FBCGX has vastly outperformed the Russell 1000 Growth Index, a weighted index of growth-oriented U.S. stocks.
One-year average annual returns: 58.4%
Expense ratio: 0.45%
Fidelity Mid Cap Value Fund (FSMVX)
This midcap fund invests in companies with medium market capitalizations. As a value fund, its assets are more affordable and may have a slower growth projection than other midsize companies. A majority of the fund’s assets are allocated toward industrials, followed by financials and consumer discretionary. Fund managers believe these companies are undervalued or trading lower compared to their fundamentals. Among the fund’s top holdings are diversified metal solutions provider Reliance Steel & Aluminum Co. (RS), commercial real estate firm CBRE Group (CBRE) and consumer financial services company Synchrony Financial (SYF), stocks with bullish market sentiment that appear to be undervalued.
One-year average annual returns: 57.9%
Expense ratio: 0.44%
Fidelity Total Market Index Fund (FSKAX)
The Fidelity Total Market Index Fund is for passive investors looking to match the return of the overall market. FSKAX is a good “anchor” for an investor’s portfolio, says Robert Johnson, finance professor at Creighton University. The fund’s objective is to provide investment returns that correspond to that of a broad range of U.S. stocks. Top holdings include Big Tech names like Apple, Microsoft, Facebook and Alphabet (GOOG, GOOGL), while representing other major sectors like health care, consumer discretionary, financials and more. Johnson says FSKAX is “the most broadly diversified fund, as it is an index fund that mirrors the performance of the entire U.S. stock market universe — large, mid and small caps, as well as value and growth stocks.” This Fidelity fund also has a very low expense ratio, which could be a great option if you’re looking for a low-fee investment.
One-year average annual returns: 43.9%
Expense ratio: 0.015%
Fidelity Intermediate Municipal Income Fund (FLTMX)
FLTMX offers a diversified national municipal bond strategy, investing mainly in intermediate maturity, general obligation and revenue-backed securities. This fund is for fixed-income investors seeking capital preservation and a high level of tax-exempt income. A majority of the portfolio is diversely weighted toward revenue bonds, followed by general obligation bonds. Since the fund’s inception in 1977, it has delivered consistent average annual returns of about 5.3%. FLTMX has zero minimum to start investing and has a low turnover rate of 18%. Investing in a mutual fund with low turnover means lower costs for investors. The fund’s portfolio managers select securities from a number of sectors including health care, transportation, corporate-backed securities and several others, which contributes to overall performance.
One-year average annual returns: 4.98%
Expense ratio: 0.34%
Fidelity Small Cap Growth Fund (FCPGX)
Investors seeking to diversify into companies with smaller market caps that have a fast growth projection may want to consider FCPGX. Investing in small-cap growth stocks gives you the opportunity to have exposure to higher-than-average growth potential not usually seen in larger companies. Even though small-cap stocks tend to be more volatile, this fund seeks high-quality companies that are competitive in their markets and have higher long-term earnings growth potential. Among the fund’s holdings that have proved to be top performers are tech company SiTime Corp. (SITM), up nearly 200% over the last year, and retailers American Eagle Outfitters (AEO) and Williams-Sonoma (WSM), which are both up about 165% and 100%, respectively, in the same period.
One-year average annual returns: 50.5%
Expense ratio: 1.09%
Fidelity Select Technology Portfolio (FSPTX)
This actively managed fund invests in global technology companies whose future earnings power is yet to be considered in their current valuations. The information technology sector is where a lot of innovation is happening these days, and despite the volatility in stocks and the competitive nature in this space, being invested in a fund like FSPTX may offer some potential upside. While the turnover rate is elevated, at more than 100% — which may be a damper for those looking to cut costs wherever possible — the fund has outperformed the S&P 500 since its inception in 1981. If you’re comfortable with volatility and like the long-term growth opportunity in technology trends, FSPTX may be a viable option for you.
One-year average annual returns: 53.2%
Expense ratio: 0.69%
Fidelity International Growth Fund (FIGFX)
Having international exposure in your portfolio can offer higher returns compared to domestic equity markets. Non-U.S. securities can be volatile, but they are also known for having high growth potential. This may be appealing for fixed-income investors seeking more yield in the current low interest rate environment. FIGFX offers regional diversification with allocations toward Europe, Japan, emerging markets, Asia-Pacific and the U.S. across many major market sectors. Some of the portfolio’s individual stock winners in 2021 so far include Dutch tech company ASML Holding (ASML), which has gained 37% year to date, U.S.-based Lam Research Corp. (LRCX), up 36%, and Swedish company Assa Abloy (ASAZY), up 27%. As the U.S. economy works toward reopening and the global economy continues to expand, corporate earnings could increase and push international equities higher. As a result, funds like FIGFX could stand to benefit.
One-year average annual returns: 35.4%
Expense ratio: 1.01%
Fidelity mutual funds to buy and hold:
— Fidelity Blue Chip Growth Fund (FBGRX)
— Fidelity Mid Cap Value Fund (FSMVX)
— Fidelity Total Market Index Fund (FSKAX)
— Fidelity Intermediate Municipal Income Fund (FLTMX)
— Fidelity Small Cap Growth Fund (FCPGX)
— Fidelity Select Technology Portfolio (FSPTX)
— Fidelity International Growth Fund (FIGFX)
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Update 06/02/21: This story was published at an earlier date and has been updated with new information.