The S&P 500 index surged to new highs during 2024’s bull market, but a closer examination reveals that this performance lacked breadth.
According to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, the index’s returns were heavily concentrated among a select group of “Magnificent Seven” companies.
While Nvidia Corp. (ticker: NVDA) contributed the most, Apple Inc. (AAPL), Amazon.com Inc. (AMZN) and Meta Platforms Inc. (META) also led to the group’s 40.8% of the S&P 500’s total return in 2024.
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These standout stocks predominantly belong to the technology sector, as well as the adjacent communication services and consumer discretionary sectors.
They also share a common trait: They are all classified as growth stocks. These companies are known for expanding their revenue, earnings and profit margins at rates significantly higher than their peers and the broader market.
As you’ll soon see, many of Fidelity’s top-performing mutual funds over the past decade have been heavily weighted toward these types of stocks. Funds that leaned into technology, growth or mega-cap names have been handsomely rewarded with market-beating returns.
However, experts caution that piling into these hot stocks and sectors may not be a sensible long-term investment strategy.
“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 313 options, ranked in ascending order by their trailing 10-year annualized returns as of Dec. 31:
Fund | Expense ratio | 10-year annualized return |
Fidelity Nasdaq Composite Index Fund (FNCMX) | 0.29% | 16.1% |
Fidelity Trend Fund (FTRNX) | 0.49% | 16.4% |
Fidelity Growth Discovery Fund (FDSVX) | 0.66% | 16.4% |
Fidelity Select Software and IT Services Portfolio (FSCSX) | 0.64% | 17.3% |
Fidelity OTC Portfolio (FOCPX) | 0.73% | 17.7% |
Fidelity Blue Chip Growth Fund (FBGRX) | 0.47% | 18.1% |
Fidelity Select Technology Portfolio (FSPTX) | 0.64% | 21.1% |
Fidelity Select Semiconductors Portfolio (FSELX) | 0.65% | 26.0% |
Fidelity Nasdaq Composite Index Fund (FNCMX)
Most investors are familiar with the Nasdaq-100 index, a market-cap weighted benchmark of the 100 largest Nasdaq-listed companies, excluding financials. Over the past decade, this index has strongly outperformed the S&P 500 thanks to its concentration in technology stocks, including all of the Magnificent Seven. However, it actually has a broader counterpart in the Nasdaq Composite index.
The Nasdaq Composite index shares similar top holdings with the Nasdaq-100. However, it is arguably more diversified given that it also holds around 3,000 additional small- and mid-cap companies listed on the Nasdaq. To track this index, Fidelity offers FNCMX at a 0.29% expense ratio. This fund is fairly tax efficient, with a low 1% portfolio turnover rate, and also has no minimum required investment.
Fidelity Trend Fund (FTRNX)
The sustained outperformance of growth, tech and mega-cap stocks over the past decade can be best described as a “trend.” In investing, this refers to the tendency for certain asset classes, sectors or styles to move upward or downward for a sustained period of time. This phenomenon gives rise to trend-following funds like FTRNX, which attempt to systematically capitalize on these movements.
As expected, FTRNX’s current portfolio includes all of the Magnificent Seven stocks described earlier in addition to Tesla Inc. (TSLA), Microsoft Corp. (MSFT) and Alphabet Inc. (GOOGL). That being said, the trend-following strategy isn’t very tax efficient. With a high 65% portfolio turnover rate, FTRNX has historically paid high and frequent capital gains distributions. The fund charges a 0.49% expense ratio.
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 Fidelity’s best-performing growth funds was FDSVX. This actively managed fund currently owns a fairly concentrated portfolio of just 144 holdings, with Nvidia and Apple taking up 12.5% and 11.5%, respectively. But despite a high 41% turnover rate and a pricey 0.66% expense ratio, FDSVX has actually managed to outperform the Russell 3000 Growth index over 10-, five- and three-year trailing periods.
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. In particular, software companies involved in cybersecurity, cloud computing, artificial intelligence and customer relationship management excelled.
These types of tech companies are the focus for FSCSX. The top holdings include a 24.8% allocation to Microsoft, with Salesforce Inc. (CRM) and Adobe Inc. (ADBE) coming in second and third. FSCSX is a very concentrated fund, with a total of just 48 holdings and Microsoft dominating a quarter of its weight. The fund charges a 0.64% expense ratio and has a 14% annual turnover rate.
Fidelity OTC Portfolio (FOCPX)
In investing, OTC stands for “over the counter” — referring to stocks not traded on exchanges like the New York Stock Exchange or the Nasdaq. Usually, this refers to riskier, small-cap penny stocks, but it can also include larger, established foreign companies that choose to not list with an exchange due to costs or regulatory barriers. To access these stocks, Fidelity offers FOCPX, a fairly unique fund.
This fund starts by allocating most of its portfolio to Nasdaq-listed companies, giving it a tilt toward mega-cap growth stocks. It also features a minimum 25% tilt toward technology companies, with Apple, Nvidia and Amazon dominating. However, the fund is also able to hold OTC stocks as needed, something many funds don’t do. Currently, FOCPX has a high 37% turnover rate and a 0.73% expense ratio.
Fidelity Blue Chip Growth Fund (FBGRX)
With an inception date of December 1987 and assets under management (AUM) totaling $67 billion, FBGRX is one of Fidelity’s oldest and largest active funds. Managed by Sonu Kalra since 2009, FBGRX selects stocks defined as “well-known, well-established and well-capitalized,” screened for growth characteristics. It currently charges a 0.47% expense ratio, reduced from prior years.
Many active funds fail to consistently beat their index benchmarks, but that hasn’t been the case for FBGRX. Over the trailing 10- and five-year periods, this fund has outperformed both the Russell 1000 Growth index and the Morningstar “large growth” peer category average. However, it does pay frequent and high capital gains distributions due to a 22% turnover rate, so tax efficiency isn’t the best.
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.” For a broader approach to the tech sector that doesn’t just focus on software companies, Fidelity offers FSPTX.
This actively managed fund currently has a total of 98 holdings. It shares some similarities with FSCSX, namely Microsoft and Salesforce. However, it also holds many technology hardware companies. Notably, this includes semiconductor giant Nvidia and competitor Marvell Technology Inc. (MRVL). Investors should note that this fund is pricey, with a 43% turnover rate and a 0.64% expense ratio.
Fidelity Select Semiconductors Portfolio (FSELX)
The technology sector has performed well overall in recent years, but this isn’t homogenous. While software companies provided market-beating returns, it was actually semiconductors that truly punched above their weight. Long-term secular trends like the Internet of Things, AI and geopolitical tensions have contributed to skyrocketing valuations for semiconductor designers and manufacturers.
All this contributed to FSELX earning the top spot as Fidelity’s best-performing fund over the past decade. Nvidia currently sits in the top spot among its holdings, followed by Broadcom Inc. (AVGO), Marvell Technology and Taiwan Semiconductor Manufacturing Co. Ltd. (TSM). However, FSELX’s historical performance has been very similar to the MSCI U.S. IMI Semiconductors & Semiconductor Equipment 25/50 index.
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8 Top-Performing Fidelity Funds for Retirement originally appeared on usnews.com
Update 01/22/25: This story was previously published at an earlier date and has been updated with new information.