Fidelity Index Funds| Why You should invest in them

Fidelity index funds are one of the most recognizable names on Wall Street, and Fidelity funds are some of the most respected investment vehicles in the world.

The goal of an index fund is to track the returns of a stock market index such as the S&P 500 or Wilshire 5000. Index funds can come in various forms, including mutual funds and ETFs. An index fund can buy all the stocks that make up an index or just a representative sample.

Some investors select a few stocks and hope for some big winners, but an index fund investor buys and holds a wide range of stocks in hopes of riding the wave of long-term market growth.

This makes index funds more stable and better suited for pension investments. Just remember that as with any investment, the money you invest in an index fund is always at risk of depreciating.

What are Fidelity Index Funds?

Fidelity index funds offer investors an easy and inexpensive way to diversify their portfolios across multiple market sectors.

This overview of Fidelity index funds and ETFs focus on equity funds. Fidelity ETFs don’t have as much performance history as they are relatively new to the investment world.

If you are wondering about a Fidelity Index Fund account, comparing it to the performance of the S&P 500 is a good place to start.

Why invest in Fidelity index funds?

Fidelity Index Funds are characterized by their comparatively low costs, which are well suited for buy-and-hold investors.

According to Yahoo Finance, this was one of the first fund managers to introduce market index funds with a zero expense ratio.

Fidelity combines low spending and good growth potential with index funds that strongly focus on technology and consumer discretionary.

Investors looking for index funds that track US stock indices of all market caps, international stock markets, emerging markets, and even bonds should consider Fidelity.

With a wide selection – including sustainable index funds – you can create an asset-based portfolio that is precisely tailored to your needs and investment schedule. Some Fidelity index funds even pay dividends.

What are the best Fidelity index funds for retirement?

This Top Fidelity Index Funds for Buy rating examines several performance metrics to answer that question. For each fund you will find the following information:

• Average annual return
•  Expense ratio
•  Degree of risk
•  Fund overview

Here’s a look at some of the top performers:

#1. Fidelity OTC Portfolio (FOCPX)

The aim of this fund is capital appreciation. Fund managers invest at least 80% of their assets in common stocks of small to medium-sized companies listed on NASDAQ or over-the-counter.

Typically, it invests more than 25% in the technology sector. The fund’s top stocks include Microsoft, Apple, Amazon, Facebook, and Google parent Alphabet.

• Average annual return
• 7.82% since the beginning of the year
• 43.94% a year
• 22.46% three years
•  Expense ratio: 0.87%
•  Above average risk

#2. Fidelity Blue Chip Growth (FBGRX)

The Blue Chip Growth Fund seeks long-term capital growth. Fidelity invests at least 80% of its assets in blue-chip, typically large or medium-cap companies.

The largest holdings include Amazon, Apple, Microsoft, Google, Facebook, and Nvidia.

• Average annual return
• 10.0% since the beginning of the year
• 59.09% a year
• 26.80% three years
•  Expense ratio: 0.79%
•  Above average risk

#3. Fidelity Nasdaq Composite Index (FNCMX)

This fund seeks to accurately track the price and return of the Nasdaq Composite Index. Fidelity typically invests at least 80% of its assets in common stocks of the NASDAQ.

The top positions include Apple, Microsoft, Amazon, Tesla, Alphabet, and Facebook.

• Average annual return
• 8.682% since the beginning of the year
• 43.83% a year
• 21.81% three years
•  Expense ratio: 0.35%
•  Above average risk

#4. Fidelity Large-Cap Growth Index Fund (FSPGX)

This fund invests at least 80% of its assets in stocks included in the Russell 1000 Growth Index, emphasizing large-capitalization growth stocks.

The most important holdings include Apple, Microsoft, Amazon, Facebook, Tesla, and Alphabet.

• Average annual return
• 4.84% since the beginning of the year
• 34.45% a year
• 19.88% three years
•  Expense ratio: 0.35%
•  Above average risk

#5. Fidelity 500 Index Fund (FXAIX)

This fund seeks results that equate to the total return on US common stocks. At least 80% of the assets are invested in stocks of the S&P 500 index.

Some of the fund’s top positions are Microsoft, Apple, Amazon, Facebook, Alphabet, and Berkshire Hathaway.

• Average annual return
• 4.29% since the beginning of the year
• 17.24% a year
• 11.69% three years
•  Expense ratio: 0.015%
•  Above average risk

#6. Fidelity Total Market Index Fund (FSKAX)

The managers of this fund seek investment returns that track the total return of a wide range of domestic stocks.

With this in mind, they invested 80% of the fund’s assets in securities listed in the Dow Jones U.S. Total Market Index are included. The most important holdings include Microsoft, Apple, Amazon, Facebook, Tesla, and Alphabet.

• Average annual return
• 5.84% since the beginning of the year
• 20.54% a year
• 12.33% three years
•  Expense ratio: 0.015%
•  Above average risk

#7. Fidelity Long-Term Treasury Bond Index Fund (FNBGX)

Retired investors often want a bond option on Fidelity index funds because of their security. Fidelity’s Long-Term Treasury Bond Fund seeks high ongoing income on US Treasury bonds.

The fund invests at least 80% of its assets in bonds listed in Bloomberg Barclays U.S. Long Treasury Index are included.

• Average annual return
• -5.31% since the beginning of the year
• 5.83% a year
• 9.70% three years
•  Expense ratio: 0.03%
•  Below average risk

#8. Fidelity Intermediate Treasury Bond Index Fund (FUAMX)

The Fidelity Intermediate Treasury Bond Index Fund typically invests at least 80% of its assets in securities listed in the Bloomberg Barclays 5-10 Year U.S. Treasury Bond Index is included.

• Average annual return
• -1.06% since the beginning of the year
• 5.44% a year
• 22% three years
•  Expense ratio: 0.03%
•  Below average risk

#9. Fidelity Small Cap Index Fund

If you’d rather look beyond the typical mega-cap stocks that dominate the most iconic index funds, consider the Fidelity Small Cap Index Fund (FSSNX, $28.31).

It comprises approximately 2,000 stocks, more than 87% of which have a market value of approximately $2 billion or less.

Of course, not every small-cap stock is designed for such gains. These companies have a higher risk profile, which could also result in greater potential losses than the more stable blue chips on Wall Street.

But you can also get bigger rewards if the cards fall right in the long run.

• Assets Under Management: $ 21.4 billion
•  Dividend yield: 0.9%
•  Spending: 0.025%

#10. Fidelity Mid Cap Index Fund

What if, instead of making it big with Fidelity funds focused on the S&P 500 or the Nasdaq, you were looking for those “goldilocks” companies that are neither big nor too small?

This is what the Fidelity Mid Cap Index Fund (FSMDX, $32.00) offers intending to invest in mid-cap stocks with a market capitalization of between $2 and 10 billion.

Some stocks get smaller than the bottom of this range after declines, and some get larger than the top when they run short term.

However, if these valuations change over a sufficiently long period, the stock will either be converted to a large-cap fund or downgraded to a small-cap fund to keep the strategy in line.

• Assets Under Management: $23.2 billion
•  Dividend yield: 1.0%
•  Spending: 0.025%

#11. Fidelity Select Technology Portfolio

Speaking of narrow ribbons, some investors may be less interested in sorting stocks by size, and instead, be interested in specific sectors.

While there’s no shortage of tactical ETFs, the Fidelity Select Technology Portfolio (FSPTX, $29.37) allows a mutual fund investor to play this high-growth sector – actively instead of traditional index funds.

• Assets Under Management: $12.5 billion
•  Dividend yield: 0.00%
•  Spending: 0.69%

#12. Fidelity Select Health Care Portfolio

Another sector-focused fund that might be worth looking at is the Fidelity Select Health Care Portfolio (FSPHX, $34.19).

As many investors know, healthcare is one of the most reliable sectors on Wall Street as people age and face medical problems regardless of the macroeconomic outlook.

And without moralizing the state of the American healthcare system, it is important to also acknowledge that US healthcare cost inflation is just as reliable.

If you want to follow this steady rise in spending, why not focus on this sector? FSPHX offers a simple and versatile way of doing this.

• Assets Under Management: $ 10.9 billion
•  Dividend yield: 0.45%
•  Spending: 0.69%

#13. Fidelity Contrafund

Fidelity Contrafund (FCNTX, $ 19.74) is one of the most prestigious funds that made this asset manager as dominant as it is.

Over the past 20 years, Contrafund has consistently outperformed both the Dow Jones Industrial Average and the S&P 500 index, generating a return of 350% over that period.

The fund is a core position for almost any long-term, growth-oriented portfolio and holds a focused list of around 300 top stocks.

And more importantly, it doesn’t shy away from choosing big-weight names that it will believe in.

If things go well based on the “secret sauce” Contrafund uses over its active management style, FCNTX can easily outperform the usual passive funds out there.

• Assets Under Management: $ 144.6 billion
•  Dividend yield: 0.00%
•  Expenditures: 0.86%

#14. Fidelity Magellan Fund

The Fidelity Magellan Fund (FMAGX, $ 14.82) is more focused than the Contrafund, with fewer than 70 total positions. The approach is heavily focused on domestic large-cap stocks.

However, there is a bit of international investment included in FMAGX based on what the managers are currently interested in.

As you can imagine, these managers strongly set the tone for the fund. In fact, Magellan had one of the most enviable track records on Wall Street, seeing massive growth from 1977 to 1990 under the direction of legendary Peter Lynch.

Unfortunately, Magellan has not been keeping up with the market lately, having pegged “only” around 21% for the past 12 months, compared to more than 30% for major US stock market indices.

And at a fairly high expense ratio, that underperformance is compounded when you layer the fees.

• Assets Under Management: $ 29.9 billion
•  Dividend yield: 0.0%
•  Spending: 0.79%

#15. Fidelity International Discovery Fund

Looking abroad, the Fidelity International Discovery Fund (FIGRX, $59.52) is a core international investment for investors looking for growth but also diversification beyond the US markets.

Domestic companies consist of less than 3% of the fund’s 175-stock portfolio, with developed markets such as Japan (15%) and the UK (13%) being the most influential regions.

It’s worth noting that US stocks have slightly outperformed the rest of the world in recent years. Fidelity International Discovery is only up about 50% since mid-2016, while the S&P 500 has roughly doubled over the same five-year period.

• Assets Under Management: $ 11.1 billion
•  Dividend yield: 0.4%
•  Expenditures: 1.0%

#16. Fidelity Dividend Growth Fund

Another “taste” of equity investing is looking for companies that offer income through dividends, rather than just the potential for capital appreciation.

The Fidelity Dividend Growth Fund (FDGFX, $37.16) takes this approach with a narrow list of approximately 150 large-cap dividend payers who the fund managers believe are best equipped to deliver long-term returns as well as reliable stock price performance.

• Assets Under Management: $ 6.9 billion
•  Dividend yield: 1.6%
•  Spending: 0.49%

#17. Fidelity Investment Grade Bond Fund

Another way to get a steady stream of income from your investment portfolio is to look beyond stocks to bonds. This asset class is much more stable than stocks, which means investors take less risk of losing their net present value.

And that stability can go hand in hand with reliable returns. The tradeoff, however, is that bond funds do not have the same growth potential as equity funds.

The Fidelity Investment Grade Bond Fund (FBNDX, $8.48) focuses solely on investment-grade bonds – i. H. Loans taken out by the most creditworthy companies.

Top issuers right now include the U.S. Treasury Department and government-backed mortgage lenders like Fannie Mae, as well as world-class companies like Goldman Sachs (GS).

• Assets Under Management: $ 6.9 billion
•  SEC yield: 1.2% *
•  Spending: 0.45%

#18. Fidelity Strategic Income Fund

Of course, not all investors are willing to simply trade higher income potential for the greater reliability of investment-grade bonds.

This is where the Fidelity Strategic Income Fund (FADMX, $12.99) comes in as it is a multi-sector bond fund that looks at not only the most reliable bonds but also the next lower bond – colloquially referred to as junk bonds.

Similar to consumer finance, less creditworthy borrowers have to pay a higher premium to lenders to offset the risk of not making their scheduled payments on time.

In the bond market, investors are the lenders – and the higher-risk borrowers are troubled companies that have seen better days but still need ready capital to operate.

• Assets Under Management: $ 16.6 billion
•  SEC yield: 2.0%
•  Expenditures: 0.67%

#19. Fidelity Balanced Fund

If all of these Fidelity funds sound interesting in some ways, but you can’t make up your mind, why not just make a one-stop offer through the Fidelity Balanced Fund (FBALX, $32.04)?

This “asset allocation” fund is not limited to stocks or bonds, but aims at an allocation of around 60% in stocks and an allocation in bonds of 40% during a typical market – and builds a holistic portfolio for you.

These stocks are also not constrained by hard limits in terms of geography or size.

• Assets Under Management: $ 47.1 billion
•  SEC yield: 0.7%
•  Spending: 0.52%

#20. Fidelity Multi-Asset Income Fund

A slightly different approach to an asset allocation portfolio is the Fidelity Multi-Asset Income Fund (FMSDX, $ 14.64), which prioritizes earnings potential over the long term.

While the previous Fidelity Balanced Fund generates less than 1% per year thanks to its focus on stocks without dividends, the FMSDX generates a whopping 6% return thanks to a target of 40% to 70% of the portfolio in bonds.

Currently, the FMSDX is at the lower end of this range as it is loading stocks in response to a rising interest rate environment. But it still delivers a return roughly four times the S&P 500.

• Assets Under Management: $ 1.3 billion
•  SEC yield: 6.2%
•  Expenditures: 0.85%

Conclusion

Whether you’re into growth stocks or bond income, you’ll likely find the best Fidelity funds, covering a variety of investment approaches – sometimes in a single fund.

Remember that all investment decisions are personal and what works for one investor may not fit another perfectly. So always do your own research and trade with your own unique goals and risk tolerance.

References

• fidelity – Why Invest in Fidelity Index Funds?
• Bankrate – 10 Best Index Funds In March 2023
• gobankingrates – The 8 Best Fidelity Index Funds for Retirement