The history of the Fidelity Magellan Fund (ticker: FMAGX) serves as a cautionary tale about the dangers of relying solely on past performance when selecting funds.
Under the leadership of Peter Lynch from 1977 to 1990, this actively managed mutual fund achieved an impressive annualized return of 29%. Lynch, who championed the “buy what you know” philosophy and “growth at a reasonable price” (GARP) strategy, led Magellan to become the top-performing mutual fund during his tenure.
However, the subsequent management period tells a different story. Starting in 1996, under Robert Stansky’s direction, until 2005, Magellan mimicked its benchmark too closely, functioning much like a “closet index” fund but with significantly higher fees — a strategy that proved detrimental as it failed to justify its cost with superior performance.
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“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 317 options, ranked in ascending order by their trailing 10-year annualized returns as of Aug. 31:
| Fund | 10-year annualized return |
| Fidelity Trend Fund (FTRNX) | 15.4% |
| Fidelity Nasdaq Composite Index Fund (FNCMX) | 15.5% |
| Fidelity Growth Discovery Fund (FDSVX) | 15.9% |
| Fidelity Select Software and IT Services Portfolio (FSCSX) | 16.8% |
| Fidelity OTC Portfolio (FOCPX) | 17.0% |
| Fidelity Blue Chip Growth Fund (FBGRX) | 17.2% |
| Fidelity Select Technology Portfolio (FSPTX) | 20.4% |
| Fidelity Select Semiconductors Portfolio (FSELX) | 26.5% |
Fidelity Trend Fund (FTRNX)
A trend-following strategy in investing capitalizes on the momentum of asset prices, betting that stocks that are moving upward or downward will continue in that direction for some time. This strategy exists because markets often exhibit trends due to investor behavior, economic cycles or persistent market sentiment, potentially allowing traders to profit from these movements in a systematic manner.
FTRNX provides investors with an actively managed trend-following strategy with a focus on large-cap U.S. growth stocks. However, the nature of this strategy results in fairly high turnover at 65% and potentially large capital gains distributions, making it less tax efficient. In recent years, Fidelity has made this fund more accessible with a lower 0.49% expense ratio and no minimum required investment.
10-year annualized return: 15.4%
Fidelity Nasdaq Composite Index Fund (FNCMX)
The Nasdaq composite index tracks a broad portfolio of companies that chose to list on the Nasdaq exchange. It’s basically the more diversified counterpart to the Nasdaq-100. Whereas the Nasdaq-100 restricts itself to the largest 100 Nasdaq-listed companies, the Nasdaq composite holds more than 3,000 companies, giving it significantly higher representation of small- and mid-cap stocks.
Still, FNCMX’s top holdings resemble that of the Nasdaq-100, as both are market-cap-weighted, which assigns higher allocations to larger companies. This fund holds all the “Magnificent Seven” stocks — Microsoft Corp. (MSFT), Apple Inc. (AAPL), Nvidia Corp. (NVDA), Amazon.com Inc. (AMZN), Meta Platforms Inc. (META), Alphabet Inc. (GOOG, GOOGL) and Tesla Inc. (TSLA).
10-year annualized return: 15.5%
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.”
One of the beneficiaries of the growth stock boom was FDSVX. Over multiple time periods, this actively managed fund has strongly outperformed its benchmark, the Russell 3000 Growth Index, and also its Morningstar peer category average. The fund has seasoned stock-pickers overseeing it, with portfolio managers Jason Weiner and Asher Anolic having tenures dating back to 2007 and 2017, respectively.
10-year annualized return: 15.9%
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. Unsurprisingly, one of Fidelity’s top performing mutual funds is FSCSX, which unlike the previous funds has a sector-specific focus and concentrated portfolio of just 50 stocks.
This mutual fund focuses exclusively on the software and IT services industry in the tech sector. Top holdings include Microsoft, Adobe Inc. (ADBE), Salesforce Inc. (CRM), Oracle Corp. (ORCL) and Palo Alto Networks Inc. (PANW). While a top performer, prospective investors should note that this fund is fairly pricey, with a 0.64% expense ratio, and is also less tax-efficient, with a 31% portfolio turnover rate.
10-year annualized return: 16.8%
Fidelity OTC Portfolio (FOCPX)
Don’t let the name fool you — while FOCPX does hold “over the counter” (OTC) stocks, it’s not a penny-stock fund by any means. Instead, this fund is able to hold foreign companies that have chosen to trade OTC instead of listing with the major stock exchanges like the New York Stock Exchange or the Nasdaq. Often, this is done by foreign issuers to avoid higher listing costs and compliance requirements.
However, the OTC component of FOCPX isn’t its main focus. The bulk of FOCPX’s portfolio targets Nasdaq-listed stocks, with an emphasis on the technology sector. In the top holdings, investors can find all the Magnificent Seven stocks (minus Tesla) and also Taiwan Semiconductor Manufacturing Co. Ltd. (TSM). FOCPX charges a 0.7% expense ratio and has a portfolio turnover rate of 21%.
10-year annualized return: 17%
Fidelity Blue Chip Growth Fund (FBGRX)
Not all actively managed Fidelity funds have suffered the same reversal of fortunes as Fidelity Magellan did. A standout example is FBGRX, which since its inception in 1987 and over one-, five- and 10-year trailing periods has outperformed its benchmark, the Russell 1000 Growth Index. Its current portfolio manager, Sonu Kalra, has been overseeing the fund since 2009 to great effect.
FBGRX’s actively managed strategy involves targeting blue-chip stocks, which Fidelity defines as “well-known, well-established and well-capitalized.” Then the fund applies a proprietary bottom-up fundamental analysis process to select companies with above-average earnings growth potential. FBGRX is also one of Fidelity’s cheaper actively managed funds, with a 0.48% 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, Microsoft and Nvidia were rewarded with market-leading returns.” All three of these stocks sit in the top holdings of FSPTX, where collectively they make up around 53% of the fund’s portfolio by weight.
This mutual fund is essentially FSCSX but without the narrow focus on just software and IT services companies. As a result, FSPTX also includes many semiconductor companies. However, it lacks exposure to Alphabet, Meta Platforms, Amazon and Tesla because these stocks actually belong to the communications and consumer discretionary sectors. FSPTX charges a 0.64% expense ratio.
10-year annualized return: 20.4%
Fidelity Select Semiconductors Portfolio (FSELX)
A secular bull market is a prolonged period during which stock prices generally rise, often driven by strong macroeconomic factors and sustained investor optimism. This extended upward trend can help economically sensitive sectors or industries, like technology or semiconductors, to outperform due to consistent demand, high earnings growth and multiple expansion.
In particular, the semiconductor industry has thrived over the past two decades, bolstered by advances and growing needs in areas such as video games, cryptocurrency mining and artificial intelligence. Unsurprisingly, Fidelity’s single top-performing mutual fund over the past decade is FSELX, which holds a concentrated portfolio of 40 semiconductor stocks led by the likes of Nvidia and TSM.
10-year annualized return: 26.5%
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8 Top-Performing Fidelity Funds for Retirement originally appeared on usnews.com
Update 09/23/24: This story was previously published at an earlier date and has been updated with new information.
