Fidelity funds are a go-to choice for set-it-and-forget-it investors.
For DIY investors, mutual funds can be an excellent way to create a diversified, low-cost portfolio of stocks and bonds. When it comes to mutual fund offerings, few asset management firms can rival the breadth or quality of Fidelity Investments’ lineup. With more than 300 funds currently available, Fidelity has options for investors of all risk tolerances, time horizons and objectives. Many of Fidelity’s funds have no loads, transaction fees, minimum investment requirements or sales commissions, and they have low expense ratios. Investors can easily screen, purchase and manage these funds on the Fidelity brokerage platform, and take advantage of Fidelity’s industry-leading research and educational resources. Here are the seven best Fidelity mutual funds to buy and hold now.
Fidelity 500 Index Fund (ticker: FXAIX)
A straightforward and popular option for many investors is FXAIX, which tracks the S&P 500 index. FXAIX provides investors with exposure to a market-capitalization-weighted index of 500 U.S. stocks that represents the broad performance of the overall U.S. market. As a benchmark, the S&P 500 is extremely difficult for even professional investors to beat, and many expensive actively managed mutual funds have failed to perform as well over long periods. FXAIX has been around since 1988 and has returned an annualized 10.46% with dividends reinvested. In terms of fees, the fund costs an expense ratio of 0.015%, or just $1.50 annually for every $10,000 invested.
Expense ratio: 0.015%.
Fidelity Total Market Index Fund (FSKAX)
While FXAIX is a solid core holding, it does lack some mid- and small-cap stocks that represent the remainder of the U.S. stock market outside of the S&P 500. For investors trying to track the investable U.S. stock market as closely as possible, FSKAX is the better option. This fund replicates the performance of the Dow Jones U.S. Total Stock Market Index, which provides more complete exposure to the overall market’s performance. Still, the fund is largely dominated by the large-cap stocks seen in the S&P 500, so its overall performance is similar. Thus, FSKAX could be a great tax-loss harvesting partner for FXAIX.
Expense ratio: 0.015%.
Fidelity U.S. Bond Index Fund (FXNAX)
An allocation to high-quality bonds makes sense for all but the youngest, most risk-tolerant investors. Holding some percentage of your portfolio in bonds can help lower volatility and reduce the pain of stock market crashes. A great all-in-one bond fund to use is FXNAX, which tracks the Bloomberg U.S. Aggregate Bond Index. The fund holds a highly diversified portfolio of bonds, including government Treasurys, investment-grade corporate bonds, agency bonds and mortgage-backed securities. A large portion of the fund, 42%, is composed of U.S. Treasurys, which have the highest credit quality. With a duration of 6.05 years, FXNAX can be expected to lose 6.05% in value if interest rates rise by 1%, all else being equal. Conversely, if rates fall by 1%, FXNAX can be expected to gain 6.05%.
Expense ratio: 0.025%.
Fidelity International Index Fund (FSPSX)
U.S. markets might have outperformed significantly over the last decade, but that wasn’t always the case. From 2000 to 2009, U.S. markets performed horribly, suffering from three consecutive years of losses following the dot-com bubble and then a brutal crash during the financial crisis of 2007-2009. For a fully diversified portfolio, it’s a good idea for investors to consider an allocation to international equities. A good pick here is FSPSX, which tracks stocks from developed markets like Japan, the U.K., France, Switzerland, Australia, Germany, Sweden and many more countries. For a 0.035% expense ratio, FSPSX is a very affordable and accessible way of indexing international stocks.
Expense ratio: 0.035%.
Fidelity Growth Allocation Fund (FRGAX)
A complete “three-fund portfolio” consists of U.S. stocks, international stocks and U.S. bonds. While investors can construct this on their own with the previously mentioned funds, there is an easier approach. Fidelity offers numerous allocation funds that provide a complete three-fund portfolio in a single ticker. In this case, FRGAX represents the growth-oriented option, featuring a 70% to 85% allocation to stocks, with the rest held in bonds. Currently, U.S. stocks account for 51% of the fund, with international stocks coming in at 21% and U.S. investment-grade bonds making up the remaining 28%. FRGAX is essentially a “fund of funds,” which offers investors greater simplicity.
Expense ratio: 0.02%.
Fidelity Balanced Allocation Fund (FRYBX)
Older investors with a lower risk tolerance might find the allocation to stocks in FRGAX too high for their liking. For these investors, a greater allocation to bonds might be desirable given their objectives are often capital preservation, income and modest growth. An alternative to FRGAX is FRYBX, which targets a lower 50% to 70% allocation to stocks. Currently, FRYBX is 37% U.S. stocks, 15% international stocks and 48% U.S. bonds, which is a very balanced allocation. Like FRGAX, FRYBX also has an expense ratio of 0.02%, making it a very low-cost option.
Expense ratio: 0.02%.
Fidelity Real Estate Index Fund (FSRNX)
Some investment professionals, notably Rick Ferri, advocate for the inclusion of real estate investment trusts, or REITs, as a core holding in a portfolio. As an investment, REITs have historically provided strong returns while posting lower correlations with stocks. They can also be resistant to inflation given that rents and property values tend to increase under inflationary conditions. Thus, they can potentially provide diversification benefits when added to a portfolio. A good Fidelity fund to buy here is FSRNX, which tracks the MSCI US IMI Real Estate 25/25 Index. This index holds REITs from logistics, health care, residential, office, retail and other industries, which gives it broad exposure to the entire real estate sector.
Expense ratio: 0.07%.
7 best Fidelity mutual funds to buy and hold:
— Fidelity 500 Index Fund (FXAIX)
— Fidelity Total Market Index Fund (FSKAX)
— Fidelity U.S. Bond Index Fund (FXNAX)
— Fidelity International Index Fund (FSPSX)
— Fidelity Growth Allocation Fund (FRGAX)
— Fidelity Balanced Allocation Fund (FRYBX)
— Fidelity Real Estate Index Fund (FSRNX)
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7 Best Fidelity Mutual Funds to Buy and Hold originally appeared on usnews.com
Update 12/09/22: This story was previously published at an earlier date and has been updated with new information.
