Confused on how to select the best fund for your retirement portfolio? While online fund screeners are widely available, figuring out which metrics to look at can be tricky. With a variety of different metrics such as historical returns, expense ratios, sustainability characteristics and Morningstar ratings available, it can be difficult to determine which one to prioritize.
A common mistake many novice investors make is sorting funds by their historical returns. This is an example of the “hot hand fallacy,” where investors mistakenly believe that a historical hot streak of outperformance will continue into the future. However, the opposite is true, as past performance is rarely a predictor of future performance.
“It’s important to remember that choosing winning sectors of the past is easy, but it’s much harder to know the future,” says Allen Mueller, director of financial planning at investment advisory firm 7 Saturdays Financial. “Dumping money into the winners of the last decade means you’re deliberately buying what is now expensive compared to the rest of the market, which bodes poorly for expected returns.”
While stellar past performance can indicate that a particular fund benefited from historical market conditions or had a solid strategy, it can also be entirely random or based on luck. As such, focusing on more controllable factors that have a direct impact on future returns may be more advisable. This includes ensuring low fees and sufficient diversification.
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Still, investors can learn a lot about a particular fund, its strategy and holdings by examining its performance and volatility over historical periods. Understanding why a fund beat its index benchmark or peers in the past can help investors better visualize the risks and rewards of different equity sectors, styles, market-cap sizes and geographies.
Here’s an overview of the eight best-performing Fidelity mutual funds currently based on their trailing 10-year annualized returns through June 30, out of a total of 330 funds:
| Fidelity Fund | 10-Year Annualized Return (as of 6/30/23) |
| Fidelity Growth Discovery Fund (ticker: FDSVX) | 15.7% |
| Fidelity Select Medical Technology and Devices Portfolio (FSMEX) | 15.9% |
| Fidelity NASDAQ Composite Index Fund (FNCMX) | 16.1% |
| Fidelity Blue Chip Growth Fund (FBGRX) | 16.9% |
| Fidelity OTC Portfolio (FOCPX) | 17.6% |
| Fidelity Select Software and IT Services Portfolio (FSCSX) | 18.3% |
| Fidelity Select Technology Portfolio (FSPTX) | 20.1% |
| Fidelity Select Semiconductors Portfolio (FSELX) | 26.8% |
Fidelity Growth Discovery Fund (FDSVX)
“Growth stocks are those that are growing or are expected to grow earnings at an above-average rate, for which investors are willing to pay a premium,” says Daniel Dusina, director of investments at wealth management firm Blue Chip Partners Inc. “The last 10 years, which consisted of ultralow interest rates and a relatively stable domestic economy, aligned well for growth stocks.”
Unsurprisingly, one of the top Fidelity funds on this list is FDSVX, which targets a portfolio of growth stocks. Unlike some growth funds, FDSVX is actively managed, meaning that it does not track an index. Instead, the fund selects a portfolio of stocks it believes will outperform the Russell 3000 Growth Index. FDSVX charges a 0.77% expense ratio, which works out to $77 annually on a $10,000 investment.
10-year trailing return: 15.7%
Fidelity Select Medical Technology and Devices Portfolio (FSMEX)
Another top-performing Fidelity fund is FSMEX, which offers a unique blend of exposure to both health care and technology companies via a focus on medical technology and devices companies. For a 0.7% expense ratio, investors receive exposure to stocks such as Thermo Fisher Scientific Inc. (TMO), Danaher Corp. (DHR) and Boston Scientific Corp. (BSX), the fund’s top three holdings.
“The two best-performing sectors of the U.S. equity market over the last 10 years were information technology and health care,” Dusina says. “FSMEX is focused on the medical devices industry within the health care sector, and therefore received tailwinds in the same vein as technology.” Historically, FSMEX has outperformed the S&P 500 dating back to 2014.
10-year trailing return: 15.9%
Fidelity NASDAQ Composite Index Fund (FNCMX)
Indexes tracking stocks listed on the Nasdaq exchange have outperformed over the last decade thanks to a higher degree of large-cap, U.S. tech sector growth exposure. Examples include the Nasdaq-100 index and its broader cousin the Nasdaq composite. A passively managed Fidelity fund that tracks the latter is FNCMX, which charges a lower 0.3% expense ratio.
“Overall, growth and information technology have come to dominate the U.S. market over the trailing 10-year period,” Dusina says. “Funds with high exposure to tech heavyweights such as Apple Inc. (AAPL), Alphabet Inc. (GOOG, GOOGL), Microsoft Corp. (MSFT) and Nvidia Inc. (NVDA) were rewarded with market-leading returns.” The top holdings in FNCMX include all of these names, and more.
10-year trailing return: 16.1%
[READ: 7 Best Long-Term ETFs to Buy and Hold]
Fidelity Blue Chip Growth Fund (FBGRX)
Growth stocks can be found in all sectors and market-cap sizes, but over the last decade they have largely been concentrated in large-cap
technology sector stocks. The most mature companies in this space can also be classified as “blue chip,” thanks to a combination of solid fundamentals and stable growth. To access these companies, investors can buy FBGRX for a 0.76% expense ratio.
This actively managed fund only holds companies deemed by Fidelity as “well known, well established and well capitalized.” Top holdings in FBGRX currently include Apple, Nvidia, Microsoft, Amazon, Alphabet and Meta Platforms Inc. (META). “This growth fund has significant exposure to technology, as that is the sector in which earnings have generally grown the fastest over the last 10 years,” Dusina says.
10-year trailing return: 16.9%
Fidelity OTC Portfolio (FOCPX)
FOCPX is a unique Fidelity fund that also targets over-the-counter, or OTC, stocks not traded on an exchange. This gives the fund greater exposure to small- and mid-cap stocks, along with a greater allocation to foreign equities from emerging markets like Taiwan, India and China. For example, the eighth-largest holding in FOCPX is currently Taiwan Semiconductor Manufacturing Co. Ltd. (TSM), at 2.6% of the fund.
However, FOCPX isn’t entirely focused on OTC stocks. The majority of FOCPX is still composed of Nasdaq-traded stocks. As a result, its top holdings are Apple, Microsoft, Amazon and Alphabet currently, with Apple and Microsoft accounting for just over 25% of the fund’s total weight. This makes it similar to FNCMX, with some international exposure added. FOCPX charges a 0.81% expense ratio.
10-year trailing return: 17.6%
Fidelity Select Software and IT Services Portfolio (FSCSX)
“Along with growth stocks outperforming value stocks over the last decade, we also saw a lot of tech sector development that fueled the rise in valuations,” says Anessa Custovic, chief investment officer at Cardinal Retirement Planning Inc. “For example, demand for cloud computing services skyrocketed, with a number of firms significantly benefiting from this opportunity.”
A fund that provides exposure to cloud computing and other related software companies is FSCSX. The fund’s top holdings include Visa Inc. (V), Mastercard Inc. (MA), Adobe Inc. (ADBE) and Salesforce Inc. (CRM), all of which are significant players in the financial technology, or fintech, and software sales industries. The fund charges a 0.69% expense ratio.
10-year trailing return: 18.3%
Fidelity Select Technology Portfolio (FSPTX)
A broader alternative to FSCSX is FSPTX, which goes beyond the software industry to also encompass stocks from other tech sector industries, including semiconductors, hardware and fintech. The stocks in this portfolio are selected based on the fund manager’s expectations that they will either provide or benefit from significant technological advancements. FSPTX charges a 0.7% expense ratio.
“The top holdings in this fund are names we all recognize, such as Microsoft and Apple,” Custovic says. “They are all solid companies that are well capitalized and have high demand.”
Apple and Microsoft occupy the first- and second-place spots with 18.2% and 16.4% allocations, respectively. In third place is Nvidia, which sits at an 11.7% weight thanks to its recent run-up due to the hype around artificial intelligence, or AI.
10-year trailing return: 20.1%
Fidelity Select Semiconductors Portfolio (FSELX)
The rapid pace of development in the AI field led to a renewed recent interest in chipmakers and other semiconductor industry stocks. As AI and other fields like big data, cloud computing and robotics require increased processing power, semiconductor companies may be positioned well to capitalize on above-average demand for their products and services. This could lead to good growth potential in the future.
The top-performing fund on this list is FSELX, which targets a semiconductor-focused portfolio of stocks such as Nvidia, Taiwan Semiconductor Manufacturing, Broadcom Inc. (AVGO) and ON Semiconductor Corp. (ON). So far, this fund has managed to beat its benchmark, the MSCI US IMI Semiconductors & Semiconductor Equipment 25/50 index. FSELX charges a 0.69% expense ratio.
10-year trailing return: 26.8%
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8 Top-Performing Fidelity Funds for Retirement originally appeared on usnews.com
Update 07/06/23: This story was published at an earlier date and has been updated with new information.
