The investment landscape of the past two years has served as a reminder to investors of the fickle nature of market sentiment and the challenges inherent in predicting the best-performing themes or individual stock picks.
In 2022, amid rising interest rates and a bearish bond market, durable dividend-paying value stocks, especially from sectors like consumer staples and utilities, emerged as relative out-performers.
These sectors showed resilience in the face of market volatility, ending the year with minimal losses. This trend underscored the appeal of defensive, income-generating stocks during uncertain economic times.
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However, 2023 marked a dramatic shift in market leadership. Despite ongoing geopolitical tensions, mega-cap tech growth stocks reclaimed their position at the forefront of the market.
The “Magnificent 7” — Meta Platforms Inc. (ticker: META), Alphabet Inc. (GOOG, GOOGL), Apple Inc. (AAPL), Microsoft Corp. (MSFT), Amazon.com Inc. (AMZN), Nvidia Corp. (NVDA) and Tesla Inc. (TSLA) — led the charge, demonstrating the U.S. tech sector’s enduring allure and growth potential.
However, it’s crucial for investors to approach these results with caution. The contrast between 2022 and 2023 serves as a reminder that past performance is not a reliable indicator of future results. Winners often rotate, and what succeeds in one year may not necessarily do so in the next.
“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.”
The key lesson for investors is not to chase past performance but to focus on broad diversification and maintaining a consistent, long-term investment strategy. This approach helps in navigating the unpredictability of markets and capitalizing on a range of investment opportunities over time.
With that in mind, here’s a look at the top eight Fidelity mutual funds, ranked in ascending order by their trailing one-year returns as of Dec. 31:
| Fund | Trailing one-year return as of Dec. 31 |
| Fidelity Large Cap Growth Index Fund (FSPGX) | 42.8% |
| Fidelity Trend Fund (FTRNX) | 44.4% |
| Fidelity Nasdaq Composite Index Fund (FNCMX) | 45.1% |
| Fidelity Select Software and IT Services Portfolio (FSCSX) | 51.6% |
| Fidelity Blue Chip Growth Fund (FBGRX) | 55.6% |
| Fidelity Select Communication Services Portfolio (FBMPX) | 56.9% |
| Fidelity Select Technology Portfolio (FSPTX) | 59.8% |
| Fidelity Select Semiconductors Portfolio (FSELX) | 78.1% |
Fidelity Large Cap Growth Index Fund (FSPGX)
“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 ultra-low interest rates and a relatively stable domestic economy, aligned well for growth stocks.”
By tracking the broadly diversified Russell 1000 Growth Index, FSPGX was able to capture the bulk of last year’s market returns. This ETF holds all of the Magnificent 7 stocks in its top holdings, with Apple and Microsoft sitting at around 12.3% each. Thanks to its indexing methodology, the fund also manages to keep expense ratios low at just 0.035%, with no minimum investment requirements.
Trailing one-year return as of Dec. 31: 42.8%
Fidelity Trend Fund (FTRNX)
In the investment world, “trends” refer to the observable, systematic patterns or directions in which markets, sectors or individual stocks move over a period of time. For active investors, identifying and capitalizing on these trends can be a vital strategy, whether for going long or short. For instance, a trend that drove 2023 was the continued momentum of mega-cap growth stocks from the tech sector.
Unsurprisingly, FTRNX’s current portfolio embodies this trend, with a 49% weight to the technology sector and a 16% weight to consumer discretionary stocks. As an actively managed fund, FTRNX is able to pivot its portfolio based on the portfolio manager’s assessment, so it does not track the holdings of an underlying index. The fund charges a higher 0.58% expense ratio.
Trailing one-year return as of Dec. 31: 44.4%
Fidelity Nasdaq Composite Index Fund (FNCMX)
Most investors are familiar with the Nasdaq-100 Index, which tracks a market-cap-weighted portfolio of 100 non-financial stocks primarily listed on the Nasdaq exchange. A broader alternative to this index that has performed well throughout 2023 is the Nasdaq Composite Index. This index essentially takes the Nasdaq-100 and adds financial stocks, along with hundreds more small and mid-caps.
Still, due to its market-cap-weighted methodology, the top holdings in the Nasdaq Composite are the same as those in the Nasdaq-100. This includes all of the Magnificent 7 stocks, but also names like Broadcom Inc. (AVGO) and Adobe Inc. (ADBE). Fidelity’s fund to track this index is FNCMX, which currently charges a 0.3% net expense ratio and has a very low 3% portfolio turnover rate.
Trailing one-year return as of Dec. 31: 45.1%
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. This uptrend continued in 2023 thanks to ongoing advances in artificial intelligence, or AI, which sparked renewed interest in the software and IT services industry.
Technology investors interested in diversifying away from the top-heavy and concentrated nature of the Magnificent 7 may like FSCSX. While Microsoft and Alphabet are still found in this ETF’s top holdings, investors also gain exposure to additional software companies like Palo Alto Networks Inc. (PANW), Salesforce Inc. (CRM), Adobe and Oracle Corp. (ORCL) for a 0.69% expense ratio.
Trailing one-year return as of Dec. 31: 51.6%
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Fidelity Blue Chip Growth Fund (FBGRX)
“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, Alphabet, Microsoft and Nvidia were rewarded with market-leading returns.” While a passive fund that tracks the Russell 1000 Growth Index could work for exposure, investors can also opt for active management.
With this strategy, the fund is able to select and weigh stocks according to the manager’s discretion and proprietary research. This usually results in higher expenses and turnover but can lead to outperformance. A great example is FBGRX, which has historically beaten its benchmark, the Russell 1000 Growth Index, despite headwinds from a high 0.69% expense ratio.
Trailing one-year return as of Dec. 31: 55.6%
Fidelity Select Communication Services Portfolio (FBMPX)
Novice investors often make the mistake of lumping stocks like Meta, Alphabet and Netflix Inc. (NFLX) into the technology sector. However, they are actually classified as communication sector stocks, alongside more traditional stalwarts like AT&T Inc. (T), T-Mobile US Inc. (TMUS) and Verizon Communications Inc. (VZ). To capture the broad diversity present in the communications sector, Fidelity offers FBMPX.
That being said, FBMPX also has some unusual additions to its portfolio, primarily in the form of non-communication-sector stocks like Uber Technologies Inc. (UBER) and Amazon, both of which technically belong to the consumer discretionary sector. Therefore, investors should carefully scrutinize the fund’s holdings to ensure they’re getting the desired exposure. FBMPX charges a 0.8% expense ratio.
Trailing one-year return as of Dec. 31: 56.9%
Fidelity Select Technology Portfolio (FSPTX)
The resurgence of the U.S. technology sector in 2023 saw funds like FSPTX record high-double-digit returns as investors piled into their underlying holdings. This particular fund holds three of the Magnificent 7 stocks in its top holdings — Microsoft, Apple and Nvidia. Together, these three stocks currently account for around 50% of the fund’s total holdings.
The rest of the fund has a pure-play technology sector focus, with industries represented ranging from semiconductors, software, internet services and hardware. This fund is best suited for investors looking to obtain broad technology sector exposure, without a tilt toward a particular sub-industry. FSPTX charges a 0.7% expense ratio and also requires no minimum initial investment.
Trailing one-year return as of Dec. 31: 59.8%
Fidelity Select Semiconductors Portfolio (FSELX)
Leading Fidelity’s lineup in terms of overall performance in 2023 was FSELX. This fund drills down into the semiconductor industry for highly concentrated exposure. Right now, Nvidia accounts for approximately 26% of the fund’s total holdings, with companies like ON Semiconductor Corp. (ON), Broadcom and Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) trailing behind.
The underlying companies in FSELX were buoyed by several significant industry trends. A major driver was the resurgence of the cryptocurrency bull market, which spiked the demand for high-powered GPUs used in mining, benefiting manufacturers like Nvidia. Simultaneously, the rapid advancement in artificial intelligence technology fueled an AI arms race, creating a surge in demand for sophisticated chips.
One-year performance as of Dec. 31: 78.1%
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8 Top-Performing Fidelity Funds for Retirement originally appeared on usnews.com
Update 01/02/24: This story was previously published at an earlier date and has been updated with new information.
