Reduce stress, maximize returns with a long-term approach.
As one of the “Big 5” investment asset managers alongside Vanguard, BlackRock, State Street and Invesco, Fidelity is one of the most popular choices when it comes to mutual funds. The fund manager is known for an award-winning online brokerage platform and selection of low-cost, no-frills funds. Compared to other fund providers, Fidelity funds are often passively managed, and charge no transaction costs, loads or sales commissions. Investors looking to construct a long-term investment portfolio can mix and match a variety of Fidelity funds to create a diversified set of holdings. The firm also offers an extensive suite of investor education and research resources, so you can make informed choices when it comes to investment strategy and fund selection. Here are the seven best Fidelity mutual funds to buy and hold in 2022.
Fidelity Zero Total Market Index Fund (ticker: FZROX)
Fidelity distinguished its product lineup from the competition with its Zero series of funds, which charge no expense ratios. That’s right, these funds are free to buy and hold. Normally, mutual funds will charge a management fee and incur turnover costs from managing the fund. Together, these form the fund’s annual expense ratio. FZROX charges a 0% expense ratio and has no transaction fees for buying on Fidelity’s brokerage platform. FZROX also does not charge a sales load. The fund itself is highly diversified, tracking the Fidelity U.S. Total Investable Market Index, which holds over 2,900 large-, mid- and small-cap domestic stocks weighted toward large caps. Since its inception in 2018, the fund has returned an annualized 8.7% before taxes.
Expense ratio: 0%
Fidelity Zero Large Cap Index Fund (FNILX)
Investors who prefer holding large-cap blue-chip stocks can opt for FNILX in lieu of FZROX. Like the latter, FNILX also charges a 0% expense ratio with no transaction fees or sales loads. However, the fund is less diversified, concentrating its holdings in 515 large-cap domestic stocks. FNILX doesn’t track the S&P 500 index. Rather, it tracks the Fidelity U.S. Large Cap Index. Despite this difference, the two indexes have a high overlap in holdings. Another benefit of FNILX is its lack of a minimum required investment. Investors of all account sizes can buy into FNILX and enjoy its low fees. With dividends reinvested, FNILX has returned an annualized 8.9% since inception, before taxes.
Expense ratio: 0%
Fidelity Zero International Index Fund (FZILX)
Most American investors overweight U.S. equities in their portfolios or hold exclusively U.S. stocks. This is called a “home-country bias.” While some degree of home-country bias is beneficial for reducing currency risk and improving tax efficiency, having too much can hamper diversification. Holding international stocks from developed and emerging markets can hedge against the possibility of the U.S. market stagnating for prolonged periods. This occurred between 2000 and 2009, known as the “lost decade” for U.S. stocks. A great fund to buy here is FZILX, which holds 2,461 large-, mid- and small-cap stocks from Europe, Japan, Canada, France, Australia, the U.K., Germany, Taiwan and elsewhere. Like the other Zero funds, FZILX costs a 0% expense ratio and charges no transaction fees or sales loads.
Expense ratio: 0%
Fidelity 500 Index Fund (FXAIX)
Investors who want the name-brand recognition of the S&P 500 can pick FXAIX over FNILX. The S&P 500, a market-cap-weighted index of large-cap U.S. stocks, has endured since 1957 thanks to the expertise of the S&P Global indexing team responsible for its maintenance. It’s seen as a benchmark for professional and retail investors alike to beat and is often cited as a standard for U.S. market performance. FXAIX is one of Fidelity’s longest-tenured funds, having been around since 1988. Since inception, FXAIX has returned an annualized 10.3%. Although it may not have a 0% expense ratio, the fund is still extremely cheap. Right now, FXAIX has an expense ratio of just 0.015%. For a $10,000 investment, this means around $1.50 in annual fees.
Expense ratio: 0.015%
Fidelity Large Cap Value Index Fund (FLCOX)
Value investors attempt to target stocks that appear to be trading at share prices below what their fundamentals suggest. The goal of value investors is to buy up underpriced stocks before Mr. Market “wakes up” and values them correctly at their higher intrinsic value. When it comes to stock picking, value investors often look for metrics like low price-to-sales, price-to-book and price-to-earnings ratios. An alternative to picking value stocks is investing in a value index fund like FLCOX. This fund tracks the Russell 1000 Value Index, which employs several passive screeners to select large-cap U.S. value stocks like Berkshire Hathaway Inc. (BRK.A, BRK.B), Johnson & Johnson (JNJ) and Exxon Mobil Corp. (XOM). FLCOX costs an expense ratio of 0.035%.
Expense ratio: 0.035%
Fidelity Large Cap Growth Index Fund (FSPGX)
Growth investors don’t focus solely about finding undervalued stocks. Their focus is on companies exhibiting a higher-than-average rate of historical and projected growth. Often, these companies will trade at valuations above what their fundamentals suggest is fair. This is to reflect the market’s expectations for continued growth. Metrics to watch here include past or projected revenue growth, profit margins, return on equity and earnings-per-share growth. A great way to buy a portfolio of growth stocks in a passive manner is via FSPGX. This fund tracks the Russell 1000 Growth Index, which holds 524 large-cap U.S. growth stocks with a 44% tilt toward the technology sector. FSPGX costs an expense ratio of 0.035%.
Expense ratio: 0.035%
Fidelity Small Cap Index Fund (FSSNX)
Small-cap stocks are those with market capitalizations of $300 million to $2 billion. As an investment, small-cap stocks are generally riskier, with higher volatility and deeper drawdowns during market crashes. However, research from Nobel Prize winners Eugene Fama and Kenneth French suggests that small-cap stocks have strongly outperformed the overall market historically. The higher risk of small-cap stocks might compensate brave investors with better returns over the long term. Investors who choose to overweight small-cap stocks in their portfolios can use FSSNX for a low-cost passive pick. This fund tracks the Russell 2000, a well-known small-cap stock index. FSSNX costs an expense ratio of 0.025%.
Expense ratio: 0.025%
7 best Fidelity mutual funds to buy and hold:
— Fidelity Zero Total Market Index Fund (FZROX)
— Fidelity Zero Large Cap Index Fund (FNILX)
— Fidelity Zero International Index Fund (FZILX)
— Fidelity 500 Index Fund (FXAIX)
— Fidelity Large Cap Value Index Fund (FLCOX)
— Fidelity Large Cap Growth Index Fund (FSPGX)
— Fidelity Small Cap Index Fund (FSSNX)
More from U.S. News
Update 09/15/22: This story was previously published at an earlier date and has been updated with new information.