Investing for the long haul? It’s conventional wisdom to buy securities and hold them indefinitely, leveraging the powerful effect of compound interest. This strategy particularly benefits young investors who start early, potentially giving them a significant advantage as they age.
Yet, investor behavior often diverges dramatically from this ideal. A 2020 Reuters analysis, using data from the New York Stock Exchange, highlighted that the average holding period for U.S. stocks had declined to just five and a half months. Such short holding periods haven’t been seen since just after the 2008 financial crisis, when the average was around six months.
This tendency to frequently trade rather than buy and hold can often be attributed to a “bias for action.” Many investors feel compelled to constantly chase the latest hot fund, attempt to time the market to avoid downturns, or succumb to the allure of new investment opportunities — termed “shiny object syndrome.”
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The rise of commission-free trading, engaging and gamified brokerage platforms, and historically low interest rates have only amplified these tendencies in recent years.
If you’re looking to avoid becoming just another statistic, consider embracing the time-tested approach of passive investing. This strategy involves purchasing broadly diversified, low-cost index funds; consistently dollar-cost averaging your contributions; reinvesting dividends; and maintaining your investment course through market ups and downs.
“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,” says Andrew Latham, a certified financial planner and director of content at SuperMoney.com. “With no sales loads, low fees and no minimum investment requirements, it’s easier to start investing without breaking the bank.”
Here are seven 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 Large Cap Growth Index Fund (FSPGX) | 0.035% |
| Fidelity Large Cap Value Index Fund (FLCOX) | 0.035% |
| Fidelity Real Estate Index Fund (FSRNX) | 0.07% |
Fidelity 500 Index Fund (FXAIX)
“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,” Latham says. A great example of this is FXAIX, which dates back to 1988, with the current share class having an inception date of 2011. Today, FXAIX charges a 0.015% expense ratio, or $1.50 for a $10,000 investment.
FXAIX tracks the well-known S&P 500, a benchmark of 500 U.S. stocks selected by an objective, rules-based methodology and the subjective input of a committee. Eligible stocks are evaluated based on size, liquidity and earnings quality. Over the past 10 years, FXAIX has compounded at an annualized 13% with distributions reinvested. Thanks to its low 3% turnover rate, this fund is also fairly tax efficient.
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. For broad low-cost diversification, FSKAX could be an ideal buy and hold.
This mutual fund dates back to 1997, with the current share class debuting in 2011. Unlike FXAIX, FSKAX tracks the Dow Jones U.S. Total Stock Market Index. While its top holdings are similar to FXAIX, FSKAX is more diversified with over 3,800 holdings, including many small- and mid-cap stocks. It charges the same 0.015% expense ratio as FXAIX does and is also fairly tax efficient, with a low 3% turnover rate.
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. By picking the right funds at Fidelity, investors can potentially eliminate virtually all the sources of friction and drag on their returns, allowing for better compounding.
A notable Fidelity fund to consider for this role is FZIPX. As part of the Fidelity “Zero” lineup, FZIPX charges a true 0% expense ratio. This fund tracks the Fidelity U.S. Extended Investable Market Index, which excludes the largest 500 stocks to target the next 2,500 largest mid- and small-caps. As such, it can be an excellent complement to a large-cap-focused Fidelity fund like FXAIX.
Fidelity Zero International Index Fund (FZILX)
International investing has historically been costly due to the added expenses of currency conversion. Global depositary receipts (GDRs) and American depositary receipts (ADRs) have helped to mitigate these costs by allowing U.S. investors to purchase shares of overseas companies in U.S. dollars. However, these instruments don’t completely eliminate all the barriers associated with international investments.
To completely streamline the process, consider using FZILX, which provides exposure to both developed and emerging international markets for a 0% expense ratio. This fund tracks over 2,200 market-cap-weighted international stocks represented by the Fidelity Global ex U.S. Index and employs securities lending to offset costs. Tax efficiency for this fund is also decent, with a 5% turnover rate.
[READ: 7 Best International Stock Funds to Buy]
Fidelity Large Cap Growth Index Fund (FSPGX)
Over the past decade, companies that have grown their revenues, margins and earnings at a higher pace have been rewarded with relative outperformance versus the broad market. These companies are called growth stocks. If you want to make these stocks a long-term component in your portfolio and bet on continued momentum, the Fidelity fund to buy is FSPGX, which tracks the Russell 1000 Growth Index.
This fund is fairly top-heavy and concentrated in a few sectors. For instance, the top three holdings, Apple Inc. (AAPL), Microsoft Corp. (MSFT) and Nvidia Corp. (NVDA), make up about 34% of FSPGX by weight. Moreover, the technology sector dominates FSPGX, at around 49% of its portfolio. Still, this concentration has paid off over the past five years, with FSPGX returning an annualized 19%.
Fidelity Large Cap Value Index Fund (FLCOX)
If you prefer a contrarian tilt for your buy-and-hold strategy, consider a value investing strategy. This approach focuses on identifying stocks trading under their intrinsic value based on metrics like price-to-earnings, price-to-book and price-to-free-cash-flow. To systematically automate a value investing strategy in play, consider using a mutual fund like FLCOX, which tracks the Russell 1000 Value Index.
FLCOX’s portfolio represents America’s “old economy,” dominated by many long-standing blue-chip stocks from traditional sectors like financials, industrials, health care and consumer staples. Top holdings currently include Berkshire Hathaway Inc. (BRK.B), JPMorgan Chase & Co. (JPM), Exxon Mobil Corp. (XOM) and Johnson & Johnson (JNJ). FLCOX charges a 0.035% expense ratio.
Fidelity Real Estate Index Fund (FSRNX)
The real estate sector, although present in broad market indices like the S&P 500, is often underrepresented in proportion to its significance in the economy. For investors aiming to capture the full potential of the real estate market, integrating a dedicated allocation into a long-term buy-and-hold portfolio could be a strategic move in lieu of a rental property. For this role, Fidelity offers FSRNX.
This fund tracks the MSCI U.S. IMI Real Estate 25/25 Index. It includes many real estate investment trusts (REITs) from different sub-sectors, such as office, warehouse, residential, self-storage, cell tower, data center, health care, retail, hospitality and entertainment. It charges a reasonable 0.07% expense ratio and, like most Fidelity funds, has no initial required minimum investment.
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The 7 Best Fidelity Mutual Funds to Buy and Hold originally appeared on usnews.com
Update 11/12/24: This story was previously published at an earlier date and has been updated with new information.
