When investors talk about “the market” trending upward over time, they’re typically referencing a broad market benchmark, like the S&P 500 index. But it’s important to recognize that significant variation still exists within this index.
Historically there have been periods where large-cap and small-cap stocks alternately outperformed one another. Similar patterns have appeared between growth and value stocks, as well as across the 11 different market sectors.
This variation underscores that outperformance can be time-dependent and should not be relied upon to predict future results. For example, over the past decade, large-cap tech stocks have significantly contributed to market growth.
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However, their current high valuations raise concerns similar to those seen during the dot-com bubble of the late 1990s. Overpaying for even the most innovative companies can lead to years of stagnant returns as prices and investor expectations adjust to more reasonable levels.
“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,” says Allen Mueller, director of financial planning at investment advisory firm 7 Saturdays Financial.
With that in mind, here’s a look at the top eight Fidelity mutual funds out of a total 321 options, ranked in ascending order by their trailing 10-year annualized returns as of April 20:
| Fidelity Fund | 10-Year Annualized Return |
| Fidelity Select Construction and Housing Portfolio (ticker: FSHOX) | 15.2% |
| Fidelity Nasdaq Composite Index Fund (FNCMX) | 15.4% |
| Fidelity Growth Discovery Fund (FDSVX) | 15.6% |
| Fidelity Blue Chip Growth Fund (FBGRX) | 17.1% |
| Fidelity Select Software and IT Services Portfolio (FSCSX) | 17.2% |
| Fidelity OTC Portfolio (FOCPX) | 17.2% |
| Fidelity Select Technology Portfolio (FSPTX) | 19.7% |
| Fidelity Select Semiconductors Portfolio (FSELX) | 26.9% |
Fidelity Select Construction and Housing Portfolio (FSHOX)
Despite setbacks in recent years such as COVID-19 and 2022’s rising interest rate and inflationary environment, economic activity has remained robust. After hitting a $19.9 trillion trough in the second quarter of 2020, U.S. gross domestic product, or GDP, has steadily climbed to $28.3 trillion by the first quarter of 2024. Unsurprisingly, cyclical industries like construction and homebuilding have benefited.
This trend can be observed in the 10-year track record of FSHOX, which achieved an annualized 15.2% total return (with dividends reinvested). This mutual fund tracks companies like Home Depot Inc. (HD), Lowe’s Cos Inc. (LOW), PulteGroup Inc. (PHM) and Builders FirstSource Inc. (BLDR). FSHOX currently charges a 0.71% expense ratio and has a long history dating back to 1986.
Fidelity Nasdaq Composite Index Fund (FNCMX)
The Nasdaq-100 index is a benchmark that holds 100 of the largest non-financial companies listed on the Nasdaq. Over the past decade, funds tracking the Nasdaq-100 have performed strongly due to the presence of many large technology, consumer discretionary and communications companies. Examples include Microsoft Corp. (MSFT), Amazon.com Inc. (AMZN) and Alphabet Inc. (GOOG, GOOGL).
Another way investors can access these stocks is via the broader Nasdaq composite index, which basically combines the Nasdaq-100 stocks with over 3,000 more mid- and small-caps.To track it, Fidelity offers FNCMX for a 0.29% net expense ratio. Over the trailing 10-year period, FNCNX has returned an annualized 15.4%. It is also very tax-efficient, with a 5% turnover rate and low capital gains distributions.
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.”
FDSVX currently holds a portfolio of 149 actively managed growth stocks. The fund does not replicate an index. Notable top holdings include Microsoft, Nvidia Corp. (NVDA), Amazon, Alphabet, Apple Inc. (AAPL) and Uber Technologies Inc. (UBER). Over the past 10 years, FDSVX has an annualized return of 15.6%, outperforming its benchmark, the Russell 3000 Growth Index.
Fidelity Blue Chip Growth Fund (FBGRX)
For a cheaper and older alternative to FDSVX, investors can opt for FBGRX. Dating back to 1987, this actively managed fund now charges a 0.48% expense ratio, making it competitively priced among its peer categories. The current 360 holdings have a large-cap growth focus, with names such as Nvidia, Microsoft, Amazon, Apple, Alphabet and Meta Platforms Inc. (META) ranking in the top.
Over the past 10 years, this fund has managed to beat the Russell 1000 Growth Index, with an annualized return of 17.1% versus 15.5% for the latter. However, prospective investors should be aware of two drawbacks. FBGRX’s composition is quite top heavy, with the top 10 holdings accounting for 59% of its total portfolio. In addition, the higher 17% turnover rate can lead to higher capital gains distributions.
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. Today, software providers like Microsoft, Adobe Inc. (ADBE) and Salesforce Inc. (CRM) are seeing a resurgence due to ongoing artificial intelligence, or AI, development.
To track all three of these companies and 50 more, Fidelity offers FSCSX. The top holdings of this mutual fund also include cybersecurity providers like Palo Alto Networks Inc. (PANW), database developers like Oracle Corp. (ORCL) and workforce management companies like Workday Inc. (WDAY). FSCSX charges a 0.64% expense ratio and has returned an annualized 17.2% over the last 10 years.
Fidelity OTC Portfolio (FOCPX)
While the term “over-the-counter,” or “OTC,” may conjure images of volatile penny stocks for most investors, it’s not entirely accurate. In reality, some large and established foreign companies actually choose to trade on the OTC markets versus listing on the New York Stock Exchange or Nasdaq. This is usually done to avoid the higher regulatory and compliance costs associated with major U.S. exchanges.
To capture these reputable OTC stocks, Fidelity offers FOCPX. This fund is capable of either targeting Nasdaq-listed or OTC stocks and will also maintain a 25% or more tilt toward the technology sector. The fund targets companies with above-average growth potential and sustainable business models. FOCPX has returned 17.2% annualized over the past 10 years.
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.” The sector-specific, top performing Fidelity fund that benefitted here was FSPTX, which returned an annualized 19.7% over the past decade.
FSPTX shares many software companies with FSCSX, but it also includes many hardware manufacturers, predominantly in the semiconductor industry. It is very top-heavy, with 74% of the fund’s total weight concentrated in the 10 largest holdings. Nvidia and Microsoft each account for 18.6% and 17.3%, respectively, of this fund’s weight at present. It charges a 0.64% expense ratio and has a high 29% turnover.
Fidelity Select Semiconductors Portfolio (FSELX)
According to Fidelity’s fund screener, the best performing fund over the past 10 years was FSELX, which returned an annualized 26.9%. This industry-specific fund currently holds a concentrated portfolio of just 44 holdings, with Nvidia sitting at the top with a 25.9% weight. Other names include ON Semiconductor Corp. (ON), Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) and ASML Holdings N.V. (ASML).
Multiple secular tailwinds have propelled the companies within FSELX to new heights, including the rising demand for Internet of Things (IoT) devices, the expansion of cryptocurrency mining, increased video gaming demand during COVID-19, re-shoring of manufacturing and ongoing developments in AI. However, this fund is expensive, with a 0.65% expense ratio and a high 32% turnover rate.
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Update 05/22/24: This story was previously published at an earlier date and has been updated with new information.
