These Fidelity funds have standout long-term returns.
Investing for retirement doesn’t always mean swinging for the fences. Often, keeping expense ratios low, holdings diversified and staying the course can play a much larger role when it comes to the success of your portfolio. It’s exceedingly difficult to pick which investment assets will outperform over the long term, so choosing low-cost index funds is often a good idea. Assessing a fund’s historical performance should not be a key factor when it comes to fund selection. As the saying goes, “past performance does not predict future performance.” Nonetheless, a fund’s historical performance can often tell investors a lot about its construction, risks and volatility. Investors can use historical returns to assess how a fund performed during particular market events or conditions. Here are eight of the historically best-performing Fidelity mutual funds on a 10-year annualized return basis.
Fidelity Freedom Index 2055 Fund Investor Class (ticker: FDEWX)
FDEWX is a target-date fund, a one-size-fit-all investment vehicle intended for investors targeting a particular retirement date. In this case, that means investors who are planning to retire in 2055 might find FDEWX a suitable holding. The fund currently holds a 90/10 allocation of equities and fixed-income assets. On the equities side, there is a mix of U.S. stocks, at 54%, and international stocks, at 36%. As the years pass, FDEWX will automatically adjust its asset allocation on a “glidepath” to become less conservative. Generally, this means decreasing its equity holdings and increasing its bond holdings. For example, going from 90/10 to 80/20 to 70/30 to 60/40, etc. The fund costs a low expense ratio of 0.12% and has returned 7.1% annualized over the trailing 10 years.
Fidelity Multi-Asset Index Fund (FFNOX)
FFNOX is an asset allocation fund. This is an all-in-one fund that is constructed using numerous other underlying funds in a “wrapper” or “fund of funds” structure. Currently, 51.1% of FFNOX is held in U.S. equity funds, 23.6% in international developed equity funds, 10.2% in international emerging equity funds, and the remaining 15% in U.S. investment grade bonds, long-term Treasurys and international bond funds. FFNOX therefore has 85/15 stock/bond asset allocation, which is considered fairly aggressive. Unlike FDEWX, FFNOX targets a constant 70% to 85% equity allocation and will not reduce it overtime on a glidepath. The fund costs an expense ratio of 0.11% and has returned 7.7% over the trailing 10 years.
Fidelity Small Cap Index Fund (FSSNX)
Investors looking for higher potential growth at the cost of greater volatility can consider FSSNX, which targets the Russell 2000 index. This exchange-traded fund, or ETF, comprises small-cap U.S. equities with a tilt toward small-cap growth stocks. Targeting small-cap stocks is a strategy that has historically provided stronger returns but with much greater risk. So far, FSSNX has managed to outperform its benchmark index by a few tenths of a percent over various trailing periods — likely due to the extra income it generates from securities lending. For a small-cap stock tilt, FSSNX is one of the best choices due to its rock-bottom fees: The fund only charges an expense ratio of 0.025% with no transaction fees or loads. FSSNX has returned 8.7% annualized over a trailing 10-year period.
Fidelity Extended Market Index Fund (FSMAX)
U.S. investors often use broad market indexes like the S&P 500 for their domestic equity allocation. While generally sound, this approach does have some weaknesses. Namely, it can exclude some mid- and small-cap stocks not tracked by the S&P 500. To remedy this, investors can buy funds like FSMAX, which tracks the Dow Jones U.S. Completion Total Stock Market Index. This tracks the other 3,674 mid- and small-cap U.S. stocks not included in major stock market indexes. Therefore, it can be a great way for investors to “buy the haystack” and invest in the total U.S. stock market. The fund costs a low expense ratio of 0.035% and recorded a 9.4% annualized return over the last 10 years.
Fidelity Mid Cap Index Fund (FSMDX)
Investors often neglect mid-cap stocks, which are those with a market capitalization of $2 billion to $10 billion. Most investors either solely focus on large-cap stocks or take a “barbell” approach by only holding large-cap and small-cap stocks. This can result in missing out on the returns of many mid-cap stocks, a historically strong performing segment of the U.S. stock market. Case in point: FSMDX has returned an annualized 10.3% over the trailing 10 years as its 830 mid-cap stocks outperformed. Like its small-cap cousin, FSSNX, FSMDX also costs a low expense ratio of 0.025%.
Fidelity Total Market Index Fund (FSKAX)
Investors who don’t want to fiddle with their small-, mid- and large-cap fund allocations can buy FSKAX and let the market do the work for them. The fund is market-capitalization weighted, meaning that large-cap stocks are held in greater proportions compared to mid- and small-caps. The fund achieves this by tracking the Dow Jones U.S. Total Stock Market Index, which holds 3,966 domestic equities from all 11 market sectors. For investors bullish on the U.S. market and not looking for a bond holding, FSKAX is a great “set-it-and-forget-it” index fund to use. It has an extremely low expense ratio of just 0.015%. Over the trailing 10 years, FSKAX has returned an annualized 11.3%.
Fidelity 500 Index Fund (FXAIX)
Some investors prefer the name-brand recognition of the S&P 500 over the total U.S. stock market. In fact, famous investors like Warren Buffett actually endorse this approach. Buffett in particular directed his estate to be invested in a 90/10 mixture of a S&P 500 index fund plus short-term Treasury bills. Even over long historical periods, the S&P 500 index has performed very similarly to the total U.S. stock market, as its 500 companies dominate the later by market-cap weight. A great way to invest in the S&P 500 at a low cost is with FXAIX, which charges a low expense ratio of 0.015%. This fund has returned 11.7% annualized over the trailing 10 years. A potential use for FXAIX is as a tax-loss harvesting partner for FSKAX.
Fidelity NASDAQ Composite Index Fund (FNCMX)
FNCMX tracks companies listed on the Nasdaq stock exchange, which is known for its top-heavy roster of leading technology companies like Microsoft Corp. (MSFT), Apple Inc. (AAPL), Tesla Inc. (TSLA) and Nvidia Corp. (NVDA). Investors looking to buy nearly all of the Nasdaq-listed stocks can use FNCMX, which tracks the Nasdaq Composite Index. This index comprises 3,533 Nasdaq-listed holdings but is still dominated by large-cap stocks. Compared to the previous funds, FNCMX is heavily tilted toward the technology sector at 43.8%. Thanks to the strong tech bull run of the last decade, FNCMX has returned 14% annualized over a 10-year-trailing period. However, the fund is volatile and is down more than 30% this year due to rising interest rates and inflation. FNCMX costs a higher expense ratio of 0.29%.
8 best-performing Fidelity funds for retirement:
— Fidelity Freedom Index 2055 Fund Investor Class (FDEWX)
— Fidelity Multi-Asset Index Fund (FFNOX)
— Fidelity Small Cap Index Fund (FSSNX)
— Fidelity Extended Market Index Fund (FSMAX)
— Fidelity Mid Cap Index Fund (FSMDX)
— Fidelity Total Market Index Fund (FSKAX)
— Fidelity 500 Index Fund (FXAIX)
— Fidelity NASDAQ Composite Index Fund (FNCMX)
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Update 10/10/22: This story was previously published at an earlier date and has been updated with new information.