The recent update to the S&P Indices Versus Active, or SPIVA, report casts a revealing light on the performance of investment funds when benchmarked against a variety of passive indexes.
The data over the last decade paints a challenging picture for actively managed funds, particularly in the U.S. large-cap space. According to the report, 87.4% of all U.S. large-cap funds have underperformed the S&P 500 over the last 10 years.
This statistic underscores the difficulty of beating the market, a task that remains elusive for the vast majority of fund managers. However, within the minority of funds that have outperformed, a clear pattern emerges when it comes to their styles and holdings.
Approximately 12.6% of funds have managed to surpass their benchmarks over the last decade, often through a strategic focus on growth stocks, particularly those in the technology sector.
Companies like Apple Inc. (ticker: AAPL) and Microsoft Corp. (MSFT), along with tech-adjacent stocks from sectors such as communications and consumer discretionary — including giants like Alphabet Inc. (GOOG, GOOGL) and Amazon.com Inc. (AMZN) — have been instrumental in driving success.
Fidelity Investments, a leading financial services company, has several funds that align with these successful strategies. A closer examination of Fidelity’s top-performing funds over the last decade reveals a consistent emphasis on overweighting in these equity sectors and styles.
However, investors should consider other variables besides past performance when selecting from Fidelity’s lineup. While these funds may have been top performers over the last decade, there is no guarantee that their strategies or holdings will continue to beat the market in the future.
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“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.”
With that in mind, here’s a look at the top eight Fidelity mutual funds, ranked in ascending order by their trailing 10-year annualized returns as of Feb. 29, 2024:
| Fidelity Fund | 10-year Annualized Return |
| Fidelity Trend Fund (FTRNX) | 14.9% |
| Fidelity Growth Discovery Fund (FDSVX) | 15.2% |
| Fidelity Nasdaq Composite Index Fund (FNCMX) | 15.2% |
| Fidelity OTC Portfolio (FOCPX) | 16.2% |
| Fidelity Blue Chip Growth Fund (FBGRX) | 16.6% |
| Fidelity Select Software and IT Services Portfolio (FSCSX) | 17.2% |
| Fidelity Select Technology Portfolio (FSPTX) | 19.2% |
| Fidelity Select Semiconductors Portfolio (FSELX) | 26.9% |
Fidelity Trend Fund (FTRNX)
Funds like FTRNX employ a trend-following strategy which can be summed up best as “buy high, sell higher.” This strategy involves capitalizing on stocks exhibiting momentum, which is the tendency for outperforming stocks to continue outperforming in future short- and medium-term periods. It is an actively managed fund, meaning that it does not attempt to passively track an index.
Currently, the fund’s top holdings include a heavy overweight to tech giants such as Microsoft, Nvidia Corp. (NVDA), Amazon, Meta Platforms Inc. (META) and Apple. However, the trend-following strategy employed by FTRNX does result in a high portfolio turnover rate of 38%, as the fund is constantly buying and selling stocks. The expense ratio sits at 0.49%, which is reasonable for active management.
10-year annualized return: 14.9%
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, chief investment officer 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,” Dusina says.
Despite facing headwinds from a high 0.67% expense ratio, FDSVX has managed to keep pace with the Russell 3000 Growth Index over its lifetime and has beaten the majority of peer funds in the large-cap growth category. As expected, this fund features a high allocation to large-cap tech stocks, including a 13% allocation to Microsoft. Again, investors should be wary of the 30% portfolio turnover rate.
10-year annualized return: 15.2%
Fidelity Nasdaq Composite Index Fund (FNCMX)
Not all of Fidelity’s current top-performing funds are actively managed. A standout example is FNCMX, which tracks the Nasdaq composite index. This benchmark is basically the Nasdaq-100, which tracks the 100 largest non-financial stocks listed on the Nasdaq Stock Market, plus around 3,000 mid-cap and small-cap stocks. It’s a convenient way of gaining exposure to the entire Nasdaq-listed ecosystem.
The Nasdaq is still a market-capitalization-weighted index, however, which means that larger stocks are assigned a bigger weight. Thus, the top holdings are dominated by the usual tech growth stocks like Microsoft, Nvidia, Apple, Amazon, Meta Platforms and Alphabet. Due to its passive indexing strategy, FNCMX keeps turnover and expense ratios low, at 5% and 0.29%, respectively.
10-year annualized return: 15.2%
[SEE: 7 Best Vanguard Funds to Buy and Hold]
Fidelity OTC Portfolio (FOCPX)
FOCPX’s strategy is to invest at least 80% of its portfolio in Nasdaq-listed stocks or those that trade over the counter, or OTC. While the OTC markets are commonly associated with penny stocks, they’re also host to a variety of high-quality foreign companies and American depositary receipts that choose to avoid the main exchanges as a cost-saving measure. Thus, FOCPX includes some international exposure.
Overall, the focus of FOCPX is still on U.S.-listed stocks, with a minimum of 25% of its portfolio required to be allocated to the technology sector. Its top holdings resemble that of FNCMX and FDSVX, but it also holds numerous foreign stocks such as Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) and ASML Holdings NV (ASML). The fund charges a 0.7% expense ratio and has a 15% portfolio turnover rate.
10-year annualized return: 16.2%
Fidelity Blue Chip Growth Fund (FBGRX)
One of Fidelity’s top-performing funds, FBGRX is also one of its oldest. Dating back to 1987, FBGRX has managed to outperform the Russell 1000 Growth Index since inception, returning an annualized 12.9% versus 11.5%. This outperformance was net of FBGRX’s 0.48% expense ratio and 19% turnover rate, making it one of the few actively managed funds to beat an index consistently.
FBGRX’s strategy focuses on blue-chip stocks, which Fidelity defines as companies that are “well known, well established and well capitalized.” The fund managers do fundamental research to discern which of these blue-chip stocks hold above-average growth potential and weight the portfolio accordingly. A variant of this fund is also offered in exchange-traded fund form as the Fidelity Blue Chip Growth ETF (FBCG).
10-year annualized return: 16.6%
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. Over the last decade, software themes such as cloud computing, big data and cybersecurity outperformed, while artificial intelligence, or AI, is now in the spotlight.
For exposure to these software-industry-specific niches, Fidelity offers FSCSX. Familiar names in its top holdings include Microsoft, Salesforce Inc. (CRM), Adobe Inc. (ADBE), Alphabet, Palo Alto Networks Inc. (PANW) and Oracle Corp. (ORCL). However, investors should be wary of concentration risk as this fund targets a specific industry within the tech sector. FSCSX charges a 0.64% expense ratio.
10-year annualized return: 17.2%
Fidelity Select Technology Portfolio (FSPTX)
“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.” For a broader focus on the entire tech sector, which includes software but also hardware companies, consider FSPTX.
This fund holds most of the software stocks found in FSCSX, but also includes networking companies like Cisco Systems Inc. (CSCO) and chipmakers like Nvidia and ON Semiconductor Corp. (ON). It is one of the oldest sector funds, with an inception date of 1981. However, the use of active management again results in higher-than-average expense ratios and turnover rates of 0.64% and 27%, respectively.
10-year annualized return: 19.2%
Fidelity Select Semiconductors Portfolio (FSELX)
The single top-performing Fidelity fund of the last decade was FSELX, which targets the semiconductor industry. This fund holds companies that design or sell semiconductors, components, or the tools and machinery needed to manufacture them. Over the last decade, this fund has benefited from tailwinds like cryptocurrency mining, and more recently, demand from AI applications.
The top holdings in this fund encompass a wide range of both domestic and international semiconductor firms. The former includes Nvidia, ON, Micron Technology Inc. (MU) and Broadcom Inc. (AVGO), whereas the latter includes Taiwan Semiconductor Manufacturing and ASML. The fund charges the same 0.64% expense ratio as FSPTX and FSCSX, but has a much higher 50% portfolio turnover rate.
10-year annualized return: 26.9%
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8 Top-Performing Fidelity Funds for Retirement originally appeared on usnews.com
Update 03/20/24: This story was previously published at an earlier date and has been updated with new information.
