Investors on Fidelity’s brokerage platform have a selection of 321 branded funds to choose from, presenting a broad spectrum of investment opportunities.
“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.
But with such a wide array, finding the right fund for long-term, buy-and-hold strategies can easily become overwhelming. However, prioritizing certain metrics can help narrow down the options and identify the most suitable investments.
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First, consider the management style. Fidelity is known for its robust lineup of actively managed mutual funds, including the famous Fidelity Magellan Fund (ticker: FMAGX), once managed by Peter Lynch. Despite this, the general performance of actively managed funds often fails to surpass their index counterparts.
For instance, the S&P Indices Versus Active (SPIVA) scorecard indicates that over the past 15 years, 88% of U.S. large-cap funds underperformed the S&P 500 index. This evidence suggests a shift toward low-cost, passively managed funds tracking an index might be more beneficial for long-term investors.
Additionally, it’s crucial to assess the level of diversification. While there are sector- and industry-specific indexes, choosing a fund that offers broader market coverage — encompassing all 11 sectors and a market-cap-weighted distribution across small-, mid- and large-cap companies — can ensure a well-rounded portfolio.
Lastly, geographical diversification should not be overlooked. Reflect on the 10-year “lost decade” from 1999 to 2009, during which the U.S. stock market underperformed not just bonds but also international stocks. Market leadership rotates, and the U.S. market’s future performance is not guaranteed. Hence, including funds with international exposure could be wise for those planning to invest over the long haul.
Here are six of the best Fidelity mutual funds to buy and hold today:
| Mutual fund | Expense ratio |
| Fidelity 500 Index Fund (FXAIX) | 0.015% |
| Fidelity Total Market Index Fund (FSKAX) | 0.015% |
| Fidelity Zero International Index Fund (FZILX) | 0% |
| Fidelity Large Cap Value Index Fund (FLCOX) | 0.035% |
| Fidelity Real Estate Index Fund (FSRNX) | 0.07% |
| Fidelity Freedom Index 2065 Fund Investor Class (FFIJX) | 0.12% |
Fidelity 500 Index Fund (FXAIX)
“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.” A great example of a long-standing Fidelity fund that ticks all these boxes is FXAIX.
For a very low 0.015% expense ratio, or $1.50 in annual fees for a $10,000 investment, investors can track the S&P 500 index. Since its inception in 1988, FXAIX has delivered an annualized total return of 10.9%. There are no transaction fees on Fidelity’s brokerage platform and FXAIX is also tax-efficient, with an annual portfolio turnover rate of just 2% thanks to its passive indexing methodology.
Fidelity Total Market Index Fund (FSKAX)
“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. A great broad market index fund in Fidelity’s lineup is FSKAX.
This fund tracks the Dow Jones U.S. Total Stock Market Index, which holds 10 times the number of stocks FXAIX does at over 5,000. However, it is still market-cap-weighted, so its overall top holdings resemble those of the S&P 500. This fund also charges a low 0.015% expense ratio and comes with an even more efficient 1% annual turnover, thanks in part to its broad index methodology.
Fidelity Zero International Index Fund (FZILX)
“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. Therefore, it is theoretically possible for a buy-and-hold investor to construct and maintain a portfolio on Fidelity’s platform using its proprietary funds free of charge.
This can be achieved by using Fidelity’s lineup of Zero mutual funds, which include FZILX for international stocks, and also the Fidelity Zero Total Market Index Fund (FZROX) for U.S. stocks. Both funds charge a true 0% expense ratio and track proprietary Fidelity indexes. FZILX in particular removes much of the barriers of international investing, such as high fees and currency conversion costs.
[10 Best Low-Cost Index Funds to Buy]
Fidelity Large Cap Value Index Fund (FLCOX)
Value investing doesn’t have to entail exhaustive fundamental research in individual companies. Instead, buy-and-hold investors can also add a low-cost and accessible value tilt to their portfolios via a fund like FLCOX. This fund tracks the Russell 1000 Value Index, which holds an assortment of market-cap-weighted large- and mid-cap U.S. stocks that demonstrate value characteristics.
Notable top holdings in FLCOX currently include many stalwart blue-chip names, such as Warren Buffett’s Berkshire Hathaway Inc. (BRK.B), JPMorgan Chase & Co. (JPM), Exxon Mobil Corp. (XOM), Procter & Gamble Co. (PG) and Walmart Inc. (WMT). By employing an index over actively picking value stocks, FLCOX also manages to keep expense ratios low at just 0.035%.
Fidelity Real Estate Index Fund (FSRNX)
Similarly, buy-and-hold investors interested in obtaining real estate exposure beyond owning a home or managing a rental property can do so in their brokerage account or retirement plan via FSRNX. This Fidelity fund tracks the MSCI U.S. IMI Real Estate 25/25 Index, which features 160 domestic real estate investment trusts, or REITs, and other real estate operating and financing companies.
FSRNX’s selling point is its high intra-sector diversification. As opposed to buying a single residential property, investors can gain exposure to health care facilities, telecommunication towers, data centers, retail spaces, commercial offices, multi-residential apartments, industrial warehouses and even self-storage properties via FSRNX. The fund charges a reasonable 0.07% expense ratio.
Fidelity Freedom Index 2065 Fund Investor Class (FFIJX)
Buy-and-hold investors looking to stay as hands-off as possible may prefer a Fidelity target-date fund like FFIJX. These mutual funds are designed with a target retirement date in mind. In the case of FFIJX, the fund is intended for investors looking to retire around 2065. These funds are designed to be a one-stop-shop diversified across both geography and asset classes.
Currently, FFIJX’s portfolio features an allocation of roughly 55% in U.S. stocks, 35.6% in international stocks and 9.5% in bonds. However, as time goes on, this allocation will gradually adjust to become more conservative. Generally, this entails lowering the stock allocation and increasing the bond allocation. By 2065, the fund will be tailored to favor income and capital preservation.
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The 6 Best Fidelity Mutual Funds to Buy and Hold originally appeared on usnews.com
Update 04/10/24: This story was previously published at an earlier date and has been updated with new information.
