Fidelity Investments is a financial services business based in Boston, Massachusetts. It is one of the largest asset managers in the world and is best known for its actively managed, no-load mutual funds. It also offers financial services for retirement plans, such as 401(k)s and individual retirement accounts (IRAs).
Fidelity has dozens of low-cost, top-performing mutual funds in several diverse categories. While it may be best known for actively managed funds, it offers some of the cheapest index funds available on the market. Therefore, it's easy to see why it is one of the best no-load mutual fund companies in the investment universe today.
Below, we narrow down and present a list of the best funds that Fidelity offers.
Fidelity Fund Types
Fidelity offers many high-quality mutual funds, which makes it tough to choose the best ones for you. We'll break down this list of best funds into three categories: Best Actively Managed Funds, Best Index Funds, and Best Balanced Funds.
Here's the general method for choosing the best funds:
- Actively Managed Funds: These funds usually show long-term performance that beats the index the fund follows. The managers have a tenure of at least five years and try to manage the funds to perform better than the index or market they mirror.
- Index Funds: These funds focus on the various indexes and have low expense ratios.
- Balanced Funds: Balanced funds mix stocks, bonds, and other debt securities to balance risk and growth. Balanced funds work for various investors, have a strong record, and offer diversified portfolios.
Mutual Fund Alternative
You don't have to buy only mutual funds to become more diverse. Active ETFs allow you to take advantage of the investment strategies of an actively managed fund while also offering additional benefits. Two of the most alluring benefits are lower taxes and flexible trading schedules.
ETFs, or exchange-traded funds, can be more tax-efficient than mutual funds.
ETFs typically have fewer taxable events when compared to similar mutual funds.
Mutual fund managers rebalance their funds at regular intervals. This involves buying and selling assets to keep returns at the level the fund strategy requires. On the other hand, an ETF manager manages the fund's inflows and outflows of capital by creating or redeeming "creation units," which are baskets of assets that approximate the ETF's exposure. The result of this process is fewer events that trigger capital gains taxes.
ETFs also allow you to trade on your own schedule, because shares can be bought and sold on exchanges during trading hours. Mutual funds can only be bought or sold at the end of the trading day.
Actively Managed Funds
Actively managed funds are bundles of investment securities that the manager buys and sells strategically, usually for the unstated goal of beating an index.
For example, an actively managed large-cap stock mutual fund hopes to outperform the S&P 500 Index in more calendar years than not. It would therefore have long-term returns that are better than the index.
Here are four actively managed funds that outperform their respective benchmark index (compared to five- or 10-year annualized returns):
Will Danoff has managed this large-cap stock index fund for over 30 years. Contrafund has performed very well over the entire period. Since its inception in 1990, FCNTX has averaged nearly a 13% return, a rare feat in the mutual fund world.
The stock market averages around 10%. Any fund that returns higher than this over time is a good choice.
The fund invests in growth stocks and value stocks. Most of the holdings are large-cap, with a few mid-cap stocks in the mix. The expense ratio for FCNTX is a decent 0.86%, and there is no minimum initial investment.
Strategic Dividend & Income (FSDIX)
This fund invests mainly in value stocks to produce income in the form of dividends for shareholders. The fund also has a growth objective. Therefore, FSDIX can be a good choice for retired people who want to buy funds for income purposes.
It could also be a good fit for investors looking for long-term capital growth. The expense ratio for FSDIX is 0.70%, and there is no minimum initial investment.
Select Biotechnology Portfolio (FBIOX)
This is a health sector fund, which focuses its stock holdings on companies within the health sector. In this case, the biotechnology sector is the focal point for the fund. Although biotech health stocks have the potential for immense growth, they can have short periods of steep declines.
Therefore, FBIOX can be considered an aggressive stock fund, which it's best for long-term investors who don't mind the ups and downs. The expense ratio for FBIOX is 0.72%, and there is no minimum to invest.
Puritan Fund (FPURX)
This five-star fund seeks income and growth with a reasonable amount of risk. About 60% of the fund's assets are in stocks and other equities. The remainder is in bonds and other debt securities.
Manager Daniel E. Kelly states that the fund relies mainly on fundamental and quantitative analysis. For the equities portion, it seeks to find securities that the market has mispriced. The expense ratio for FPURX is 0.52%, and there is no minimum to invest.
Fidelity has some of the lowqest-cost index funds on the market. Although the company offers more than 30 index funds, we'll highlight three of the best passively managed offerings.
Fidelity 500 Index Fund (FXAIX)
One of the best S&P 500 Index funds on the market, FXAIX (formerly FUSVX), does a great job tracking the S&P 500. It has one of the lowest expense ratios (0.015%) in the entire mutual fund universe.
There are close to 5,000 indexes that funds can follow. The three most followed are the Dow Jones Industrial Average, Standard & Poor's 500, and the Wilshire 5000.
Because of its broad exposure to over 500 of the largest U.S. stocks, FXAIX makes a good core holding for a long-term portfolio of funds. There is no minimum initial investment.
U.S. Bond Index Fund (FXNAX)
If you're looking for an index fund that does a good job of covering the U.S. bond market, you'll want to consider FXNAX (formerly FBIDX). FXNAX tracks the Bloomberg Barclays Capital U.S. Aggregate Bond Index.
Shareholders of this bond index fund will gain access to thousands of bonds, making FXNAX a diverse holding that covers the bond market. The expense ratio for FXNAX is just 0.025%, and there is no minimum initial purchase.
Mid-Cap Enhanced Index Fund (FMEIX)
If you want a mutual fund that offers exposure to mid-cap stocks, FMEIX is one of the best funds you can buy in this category. This fund tracks the Russell Mid Cap Index, which means that shareholders of FMEIX will get broad access to about 300 mid-cap stocks.
Mid-cap stocks have greater growth potential than large-cap stocks, but they can also see larger short-term declines. This makes FMEIX an aggressive holding that is better for long-term investors with a medium-to-high tolerance for risk. The expense ratio for FMEIX is 0.59%, and there is no minimum initial purchase.
Balanced funds invest in a balance of stocks, bonds, and cash.
Balanced funds are good choices for investors who want to invest in just one fund or those who would like a solid core holding to build around.
Balanced Fund (FBALX)
This is a moderate allocation fund, which means shareholders of FBALX will get a medium-risk asset allocation of roughly two-thirds stocks and one-third bonds.
This mix presents less risk than a portfolio of 100% stocks. However, the long-term returns have historically been near what you'd expect for a pure stock fund.
Since the fund's inception over 30 years ago, FBALX has put up an average rate of return close to 9.7%. The expense ratio for FBALX is 0.52%, and there is no minimum initial purchase.
Freedom Income Fund (FFFAX)
This fund is one of Fidelity's "freedom" funds. It's the most conservative of the group and aims to provide income and to preserve principal.
Therefore, the fund is best for investors who are interested in keeping what they have rather than growing their account balance. The expense ratio for FFFAX is 0.47%, and there is no minimum initial purchase.
Capital & Income Fund (FAGIX)
This five-star fund can accomplish both the growth and income aspects of investing by balancing the stock and bond allocation. Stocks are close to 20% of the portfolio, and bonds make up about 80%, so the market risk is higher than with a bond fund but lower than with a stock fund. However, the long-term returns have been consistently higher than those of most bond funds. The expense ratio for FAGIX is 0.67%, and there is no minimum initial purchase.
The Balance does not provide tax or investment advice or financial services. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk, including the possible loss of principal.