Investors with a buy-and-hold strategy often have a distinctive set of criteria when selecting funds, diverging significantly from the priorities of active traders.
Traders typically value features such as low bid-ask spreads, which minimize transaction costs, options chains for hedging and speculation, and high trading volumes to ensure efficient order execution. These priorities often lead them toward exchange-traded funds, or ETFs, which cater to their need for liquidity.
On the other hand, buy-and-hold investors, who focus on long-term growth and stability, may find mutual funds more appealing for several reasons.
[Sign up for stock news with our Invested newsletter.]
Mutual funds offer the convenience of purchasing shares at a single price at the end of the trading day, allowing investors to avoid the intraday price fluctuations common in ETFs. This feature simplifies the investment process, making it more predictable.
Furthermore, mutual funds enable the automation of purchases, such as setting up regular contributions from a bank account, eliminating the need for manual trades. They also allow investors to make contributions in nearly any amount, facilitating consistent investment practices regardless of budget.
The attractiveness of mutual funds for buy-and-hold investors increases significantly when these funds come with no minimum investment requirements, no transaction fees, no sales loads and low expense ratios. These characteristics make mutual funds accessible and cost-effective for long-term investors.
Fidelity Investments, a major player in the asset management industry, offers a broad range of 324 mutual funds that embody these attributes.
“Personally, I like Fidelity mutual funds because they offer a variety of investment options, have low fees and are backed by a reputable company with a long history of success in the industry,” says Andrew Latham, a certified financial planner and director of content at SuperMoney.com.
Among Fidelity’s offerings, a substantial number are designed with the buy-and-hold investor in mind, combining strong historical performance, low fees and broad diversification to serve as core portfolio building blocks.
“Savvy investors understand the importance of keeping your costs low and your options open, and Fidelity funds have become popular because they offer just that,” Latham says. “With no sales loads, low fees and no minimum investment requirements, it’s easier to start investing without breaking the bank.”
Here are six of the best Fidelity mutual funds to buy and hold today:
| Fund | Expense ratio |
| Fidelity 500 Index Fund (ticker: FXAIX) | 0.015% |
| Fidelity Total Market Index Fund (FSKAX) | 0.015% |
| Fidelity Zero Extended Market Index Fund (FZIPX) | 0% |
| Fidelity Zero International Index Fund (FZILX) | 0% |
| Fidelity U.S. Bond Index Fund (FXNAX) | 0.025% |
| Fidelity Real Estate Index Fund (FSRNX) | 0.07% |
Fidelity 500 Index Fund (FXAIX)
“While it truly depends on each individual investor’s specific goals and objectives, I typically advocate for the index funds in the accumulation phase, as these give great broad market exposure with lower fees than actively managed funds,” says Wes Moss, managing partner and chief investment strategist at Capital Investment Advisors. One of Fidelity’s longest-standing funds in this category is FXAIX.
This fund tracks the S&P 500, a popular benchmark of 500 large- and mid-cap U.S. stocks selected by an index methodology and the input of a committee. It’s meant to serve as a benchmark of overall U.S. market performance and has outperformed 88% of all U.S. large-cap funds over the past 15 years as of Dec. 31. FXAIX provides exposure to the S&P 500 Index for a very low 0.015% expense ratio.
Fidelity Total Market Index Fund (FSKAX)
Contrary to popular belief, the S&P 500 does not encapsulate the total U.S. stock market. Because it has restrictions on profitability, liquidity and size, it excludes thousands of other mid- and small-cap stocks that fail to meet its screener. For exposure to these stocks, investors can buy a total stock market index fund like FSKAX, which tracks the Dow Jones U.S. Total Stock Market Index.
This mutual fund currently holds over 3,800 stocks weighted by market capitalization, which means that larger stocks have a higher weighting and make up more of its top holdings, similar to the S&P 500. Thanks to its very broad nature, investors can expect a low turnover rate of just 1% as the fund rarely has to add or drop constituents. Like FXAIX, FSKAX charges a low 0.015% expense ratio.
Fidelity Zero Extended Market Index Fund (FZIPX)
“Fidelity introduced zero-expense-ratio index mutual funds and also offered zero-minimum-investment mutual funds, no minimums to open an account and no account fees for retail brokerage accounts,” Moss says. An investor on Fidelity’s platform can therefore invest virtually free of charge in a select handful of funds, with a prominent example being FZIPX.
This fund tracks the Fidelity U.S. Extended Investable Market Index, which holds 2,500 mid- and small-cap stocks trailing behind the 500 largest companies. By using a proprietary index, Fidelity delivers FZIPX and the rest of its Zero mutual fund lineup at a 0% expense ratio. However, be aware that this fund has a slightly higher turnover rate of 7% and is more volatile due to the higher concentration of small-cap stocks.
[10 Best Low-Cost Index Funds to Buy]
Fidelity Zero International Index Fund (FZILX)
Investing internationally via single stocks usually means higher costs for investors, whether from currency conversion fees, higher spreads or withholding tax on dividends. To simplify and make international investing more accessible, Fidelity offers FZILX, which as a Zero mutual fund charges a 0% expense ratio. This fund tracks the Fidelity Global ex U.S. Index and has been around since 2018.
The fund is designed to complement a core U.S. holding like FXAIX or FSKAX by offering exposure to both international developed and emerging market countries. Notable examples of the former include Japan, France, the U.K. and Canada, whereas the latter include China, India, Taiwan and Brazil.
Fidelity U.S. Bond Index Fund (FXNAX)
Not every buy-and-hold investor has the risk tolerance for a 100% equity portfolio. While a higher allocation to stocks has historically produced the best overall returns, it has also resulted in periods of greater volatility and prolonged drawdowns. Therefore, investors mindful of a severe market downturn like the dot-com bubble or the 2008 financial crisis may wish to consider an allocation to bonds.
For affordable and accessible exposure to thousands of bonds, investors can buy FXNAX. This mutual fund samples the Bloomberg U.S. Aggregate Bond Index, which gives it exposure to Treasury bonds, mortgage-backed securities and investment-grade corporate bonds of various maturities. FXNAX currently charges a 0.025% expense ratio and pays a 4.4% 30-day SEC yield.
Fidelity Real Estate Index Fund (FSRNX)
Alongside stocks and bonds, buy-and-hold investors can also diversify a portfolio further via a tilt toward real assets, such as property. An example that can be held in most brokerage accounts is FSRNX, which tracks the MSCI U.S. IMI Real Estate 25/25 Index. This benchmark features a high allocation to real estate investment trusts, or REITs, known for their steady, above-average income potential.
Currently, FSRNX’s portfolio holds 160 REITs, diversified across data centers, apartments, health care facilities, self-storage depots, shopping centers, commercial offices and warehouses. The fund is also very accessible, with a 0.07% expense ratio. However, FSRNX is best suited for a tax-advantaged account like a Roth IRA due to its high quarterly distributions and 13% portfolio turnover rate.
More from U.S. News
7 of the Best Growth Funds to Buy and Hold
7 Best Vanguard Funds to Buy and Hold
8 Top-Performing Fidelity Funds for Retirement
The 6 Best Fidelity Mutual Funds to Buy and Hold originally appeared on usnews.com
Update 03/12/24: This story was previously published at an earlier date and has been updated with new information.
