Fidelity is a strong fund family with solid picks for retirement.
When looking for a retirement fund, investors should first analyze their budget and cash flow needs to understand how much market risk they can afford to take, says Madeline E. Maloon, financial planning executive at California Financial Advisors. Once this due diligence is done and investors are ready to start selecting mutual funds, one excellent place to start is Fidelity. “Fidelity has a few advantages,” says Robby Greengold, strategist at investment research and ratings firm Morningstar, one of which “is the heavy investment that it makes in its own investment capabilities.” To determine Fidelity’s best-performing mutual funds for retirement, investors can look to the specific funds’ average annual returns, then filter by analyst ratings. For example, Morningstar’s star ratings indicate how well a fund has done in the past, and its medal ratings apply to its potential for future performance. By these criteria and other indicators, here are eight of the best-performing Fidelity funds for retirement.
Fidelity Select Health Care Portfolio (ticker: FSPHX)
Although Fidelity Select Health Care has struggled during the market selloff of 2022 and the fund is down about 20% year to date, it’s still historically one of the best-performing funds in Fidelity’s roster. Since its inception more than 40 years ago, the fund has an average annual return of 15.1%, handily beating the S&P 500’s 11.3% average return over the same period. Over the past 10 years, this actively managed fund has beaten its benchmark index, the MSCI IMI Health Care 25/50, by nearly half a percentage point as well. This bodes well for portfolio manager Eddie Yoon’s ability to turn the fund’s prospects around in the months and years to come. Yoon, who has managed the fund since 2008, is an “industry veteran who has navigated multiple periods of market stress,” says Greengold. FSPHX gets four out of five stars from Morningstar, plus a gold-medal rating for future performance potential. It has an expense ratio of 0.68%, on par with the industry average.
Fidelity OTC Portfolio (FOCPX)
Fidelity OTC, which invests about 80% of assets in securities traded on the Nasdaq or over-the-counter markets, has had an abysmal year to date, shedding about 30%. However, the fund has still beaten the average annual return of its benchmark, the Nasdaq composite, on a quarterly basis over the past three, five and 10 years. And even though the fund draws from over-the-counter, or OTC, markets, its top five holdings are household names: Microsoft Corp. (MSFT), Apple Inc. (AAPL), Alphabet Inc. (GOOG, GOOGL), Amazon.com Inc. (AMZN) and Meta Platforms Inc. (META). This actively managed fund has posted good returns since manager Chris Lin came on board in 2017, says Morningstar analyst Paul Ruppe. He adds that since taking charge, Lin has stressed risk management through more careful position sizing, which paid off when the fund held up a bit better than the Nasdaq composite and Russell 1000 Growth Index during the pandemic-induced downturn in early 2020. FOCPX is a Morningstar five-star, bronze-medal fund with an expense ratio of 0.80%.
Fidelity Low-Priced Stock (FLPSX)
True to its name, Fidelity Low-Priced Stock invests at least 80% of its assets in stocks priced at $35 per share or less, or with an earnings yield at or above the median for its benchmark, the Russell 2000 Index. This means the fund invests primarily in small or midsize companies. This strategy has paid off well for the actively managed fund, which has beaten the average annual return of the Russell 2000 Index on a quarterly basis by nearly four percentage points since its inception in 1989. By total return, the Russell 2000 is down about 22% this year as of July 5, while FLPSX has lost 14%, leading Greengold to refer to FLPSX as “a worthwhile strategy.” Its top five holdings are UnitedHealth Group Inc. (UNH); Metro Inc. (MTRAF); AutoZone Inc. (AZO); Elevance Health Inc. (ELV), formerly Anthem; and Next PLC (NXGPY). FLPSX is a Morningstar-rated five-star, bronze-medal fund with an expense ratio of 0.65%.
Fidelity High Dividend ETF (FDVV)
The only exchange-traded fund included in this list, Fidelity High Dividend ETF, has performed in line with the overall market since its inception in September 2016. This means FDVV has a five-year annualized return of about 10% as of early July, but year to date, the fund is down only 9% compared with the S&P 500’s 20% drop. This passively managed fund tracks the Fidelity High Dividend Index, which, according to Fidelity, is “designed to reflect the performance of stocks of large- and mid-capitalization dividend-paying companies that are expected to continue to pay and grow their dividends.” Ryan Jackson, analyst at Morningstar, calls this “a creative but sensible approach to high-yield investing.” FDVV is a Morningstar-rated four-star, silver-medal fund. It has an expense ratio of 0.29%, which is typical for passively managed funds. However, true to its name, the fund pays a 12-month yield of 2.9%.
Fidelity New Millennium (FMILX)
Fidelity New Millennium is looking for early signs of long-term changes in the markets. This means it focuses on innovative companies making technological advances or otherwise ahead of the curve. And although this strategy lends itself to small- and mid-cap investments, the fund’s top five holdings are Exxon Mobil Corp. (XOM), Bristol-Myers Squibb Co. (BMY), General Electric Co. (GE), EQT Corp. (EQT) and Hess Corp. (HES). None of these could be considered small or midsize by any stretch of the imagination. Portfolio manager John Roth’s “wide-ranging and distinctive” approach stands out from the crowd, says Ruppe, but the fund’s strategy, by nature, requires patience. He says it “remains reasonably attractive overall.” This actively managed fund carries a Morningstar four-star rating and a bronze medal for future performance. FMILX has a 0.59% expense ratio.
Fidelity Growth Company (FDGRX)
Fidelity Growth Company’s investment strategy may have suffered in 2022, but veteran fund manager Steve Wymer has seen many turbulent markets during his successful tenure, says Greengold. FDGRX invests in stocks that offer the “potential for above-average growth,” according to Fidelity. This growth can be measured by different factors, including earnings and revenue. Since its inception in 1983, the fund has an average annual return of 13.6%, while its benchmark index, Russell 3000 Growth, has only returned 10.7%. However, the fund is down a whopping 31.4% so far this year as of July 5, while Russell 3000 Growth has lost 26.9%. Greengold says the fund’s recent poor performance is due primarily to “its high-growth posture.” FDGRX is an actively managed fund with an expense ratio of 0.79%. It carries a Morningstar five-star rating and a silver medal for future performance potential.
Fidelity U.S. Sustainability Index (FITLX)
A passively managed fund, Fidelity U.S. Sustainability Index has performed roughly in tandem with its benchmark, MSCI USA ESG Leaders Index, since the fund’s beginning in 2017. In fact, FITLX has an annual average return of 11.8% since that time, and MSCI USA ESG Leaders has returned 11.9%. These historical gains haven’t stopped the fund from losing 20% year to date, which again tracks the benchmark index pretty closely. However, Morningstar associate analyst Lan Anh Tran says FITLX also offers “a broad-market portfolio for socially conscious investors” as consolation. FITLX invests at least 80% of its assets in large- and mid-cap stocks with high environmental, social and governance, or ESG, standards compared with its peers. FITLX is a Morningstar four-star-rated fund with a silver medal and a 0.11% expense ratio.
Fidelity Mid-Cap Stock (FMCSX)
Investing in either mid-cap growth or value stocks, Fidelity Mid-Cap Stock has performed better year to date than some of the other funds included in this list. However, FMCSX is still down 16.8% this year as of July 5. That beats its benchmark index, the S&P MidCap 400, down 19.3%, as well as the S&P 500. Since its start in 1994, FMCSX has an average annual return of 11.2%. The S&P MidCap 400 posted a comparable 11.0% return over the same period. Although FMCSX’s contrarian approach can look out of step at times, Ruppe says, the fund’s “strong analytical resources back its experienced managers.” FMCSX is an actively managed fund with a Morningstar five-star rating and a bronze medal. The fund carries a 0.85% expense ratio.
Try these eight best-performing Fidelity funds for retirement:
— Fidelity Select Health Care Portfolio (FSPHX)
— Fidelity OTC Portfolio (FOCPX)
— Fidelity Low-Priced Stock (FLPSX)
— Fidelity High Dividend ETF (FDVV)
— Fidelity New Millennium (FMILX)
— Fidelity Growth Company (FDGRX)
— Fidelity U.S. Sustainability Index (FITLX)
— Fidelity Mid-Cap Stock (FMCSX)
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Update 07/06/22: This story was published at an earlier date and has been updated with new information.