Your investments have most likely been rattled by incessant stock market volatility. Because your portfolio has been so rocked, it may not look like you anticipated, which is why yesterday was the best time to rebalance your retirement account with Fidelity index funds. And today, now! is the second best time to do so.
While many of the funds listed below have outperformed the market over the last ten years as of Feb. 29, many are down over 20% year-to-date. The Fidelity Long-Term Treasury Bond Index Fund, on the other hand, is up 21% year to date.
This is where you may rebalance your life: While these beaten-down equity funds are on sale, sell your valued bond funds to purchase more of these beaten-down equity funds. And you can do all this with Fidelity.
Fidelity is one of he best and they have been here for a long time and has come to know all that is to know about index funds.
Fidelity index fund promises the best value your money can get you. Fidelity offers zero minimum investment Fidelity Mutual Funds, no minimums to open an account, no account fees for retail brokerage accounts, and awesome 24/7 online customer service.
What are index funds?
An index fund is an investment product that aims to match, rather than exceed, the performance of an underlying index. It’s a type of mutual fund or exchange-traded fund (ETF) with a portfolio constructed to match or track the components of a financial market index such as the Standard & Poor’s 500 Index (S&P 500).
With their low operating expenses and broad market exposure, such funds follow their benchmarks irrespective of the market state.
Index funds are growing in popularity and still maintaining their best advantage which is the low fees that they charge.
They are generally considered ideal core portfolio holdings for retirement accounts, such as individual retirement accounts (IRAs) and 401(k) accounts.
Some of the world’s best investors like Warren Buffett have recommended it as a haven for savings for the later years of life.
According to him, it’s better to buy all of the S&P 500 companies at the low cost an index fund offers, rather than as individual stocks.
How to Invest in Index Funds
Below are the three steps you should follow to invest:
#1. Pick an Index
Index funds can be used to monitor hundreds of different indexes. The S&P 500 Index, which covers 500 of the largest businesses in the United States stock market, is the most popular index.
Aside from broad indexes, there are sector indexes for specific industries. There are also country indexes for stocks in specific countries, style indexes for fast-growing firms or value-priced stocks, and other indexes.
Some of these indexes limit their investments depending on their own filtering algorithms.
#2. Choose the right fund for your index
If you’ve successfully picked your index, then you must now choose the right fund for your index. This fund will help you to track the index.
However, for popular indexes like the S&P 500, you might have a dozen or more choices all tracking the same index.
You’ll want to ask some basic questions if you have more than one option for your chosen index.
First, which index fund closely reflects the index’s performance? Second, which has the most cost-effective strategy? Third, does it have any limitations or restrictions that prevent you from investing in it?
Finally, does the fund provider offer any other index funds that you’d want to try? The answers to those questions should make choosing the best index fund for you a lot easier.
If you’re able to answer these questions, you will be in a good position to make better investment decisions.
#3. Buy the shares
You can usually open an account directly with the mutual fund provider that offers the index fund to acquire shares in it.
You can also open a brokerage account with a broker that allows you to purchase and sell shares of the index fund you want to invest in.
Again, consider fees and features when selecting which method is ideal for you to purchase shares of an index fund. Some brokers charge more for consumers who want to buy index fund shares, making it cheaper to open an account directly with the company.
Many investors, however, prefer to keep all of their assets in a single brokerage account.
If you want to invest in a variety of funds from several fund managers, the brokerage option may be the ideal approach to consolidate all of your investments into a single account.
Why Invest in Fidelity Index Funds
They offer some of the best and lowest prices In the industry. Additionally, they have 24/7 online customer service to help you with any difficulties you want to encounter at all times. You could also call in to speak with a customer service representative.
Fidelity index funds were named Barron’s 2016, 2017, and 2018 Best Online Broker. Having said this, there are other reasons why you should invest in Fidelity index funds, and they include;
Range of Choices
With Fidelity index funds, you have a variety of index stocks to choose from, thereby automatically diversifying your investment portfolio. Fidelity index funds also offer index funds that will try to monitor the performance of a line of the best-followed equity and fixed income indexes.
If you invest with Fidelity, you will see funds that seek to track U.S stock market indexes of all market caps. You will also see those that tract international equity funds, and emerging markets index stocks are not left out.
You’ll also find bond index funds, including a fund that seeks to track the Bloomberg Barclays Indices. If you’d rather not build your own portfolio of index funds, you can buy a diversified portfolio containing a combination of four Fidelity stock and bond index funds.
Sustainable Index Funds
Fidelity’s lineup also includes sustainable index funds: Fidelity U.S. Sustainability Index Fund (FITLX), Fidelity Sustainability Bond Index Fund (FNDSX), and Fidelity International Sustainability Index Fund (FNIDX).
Experience in Management
For the past 30 years, Fidelity has been managing index funds. They understand your motivation for investing in index funds: you want an investment that performs as closely as possible to its benchmark.
Over time, they now aim to reduce tracking error or the difference between an index fund’s performance and its target index.
Fidelity index fund is committed to tracking benchmark performance and delivering the results their clients have come to expect, whether through solid trading techniques that completely replicate an index or their use of statistical sampling and optimization techniques when and where necessary.
Best fidelity index funds
Fidelity has lots of index funds as shown above, but some remain the best among them and we’d be looking at some of them.
#1. Fidelity 500 Index Fund
The U.S. stock market index of choice for the majority of investors is the Fidelity 500 Index Fund (FXAIX, $155.97). When it comes to Fidelity funds, FXAIX is one of the simplest ways to get broad exposure to the domestic equities market.
As the name implies, it is benchmarked to the S&P 500 Index, which is the top 500 publicly traded corporations listed on U.S. stock exchanges. And its makeup gives investors access to all the big names, including Microsoft (MSFT) and Apple (AAPL).
The major drawback, if there is one, is that the S&P 500 is weighted by market capitalization. So trillion-dollar tech stocks like MSFT and AAPL represent more than 10% of the entire portfolio combined.
And when you add up the top 10 positions, you get 27% or so of the fund’s total assets. In this respect, the idea of the S&P being built by 500 total companies doesn’t tell the whole story; a small list of heavy hitters can move this index more than other stocks.
Still, many of these companies are big for a reason and investors might not be turned off by the weightings. Furthermore, while the makeup isn’t terribly creative, the fees are incredibly cheap at just a few dollars a year for most investors.
#2. Fidelity Nasdaq Composite Index Fund
If you’re looking for an alternative index fund to the S&P 500, consider the Fidelity Nasdaq Composite Index Fund (FNCMX, $189.26). FNCMX comprises roughly 3,100 stocks listed on the Nasdaq Composite exchange.
As most investors probably know, the Nasdaq tends to be populated by more tech-oriented companies than the roughly 230-year old New York Stock Exchange (NYSE). In fact, some of the biggest stocks on Wall Street, including Microsoft, Apple, and Amazon.com (AMZN) are all Nasdaq-listed names.
Of course, this tech focus brings with it some challenges. Consider that the top 10 positions in this fund tally 44% of the entire portfolio to make it even more top-heavy than the FXAIX. Also, the tech sector and closely related telecom sector are the top two areas of focus, respectively, accounting for more than 57% of the fund’s total assets.
This is not necessarily a bad thing for investors who really like the growth potential of high-tech stocks or the stability of mega-cap Silicon Valley icons. If that’s your investing style, this is one of the best Fidelity funds for you.
#3. Fidelity Small Cap Index Fund
If you’d rather look past the typical mega-cap stocks that dominate the most prominent index funds, then consider the Fidelity Small Cap Index Fund (FSSNX, $28.31). It is made up of roughly 2,000 stocks, with more than 87% having market values of roughly $2 billion or less.
Consider current holdings like hydrogen fuel cell company Plug Power (PLUG) or development-stage biopharmaceutical company Novavax (NVAX) as representative examples. Both companies are currently unprofitable as they invest heavily in future growth – but in the last 24 months, PLUG stock is up 1,150% or so while NVAX is up 3,600%!
Not every small-cap stock is destined for those kinds of gains, of course. These companies have higher risk profiles that also could result in larger potential losses than the more stable blue chips on Wall Street. But you also can score bigger rewards in the long run if the cards fall right.
#4. Fidelity Mid Cap Index Fund
What if rather than go big with Fidelity funds focused on the S&P 500 or Nasdaq, you’re looking for those “goldilocks” companies that are neither big nor too small? That’s what the Fidelity Mid Cap Index Fund (FSMDX, $32.00) provides, with an aim to invest in mid-cap stocks with market capitalizations that fall between about $2 billion and $10 billion.
Some stocks get smaller than the low end of that range after declines and some get larger than the high end when they go on a short-term run. However, if those valuations change for a long enough period of time, then the stock will either graduate into a large-cap fund or be demoted to a small-cap fund to keep the strategy in line.
The resulting makeup of this 800-stock fund is quite interesting, and truly diversified thanks to this narrow band of investments in the equity market.
Specifically, no sector is worth more than about 20% of the total assets, with technology (19.6%) at the top. Plus, every position is weighted at less than 0.5% of the portfolio at present. The top stocks currently are social media firm Twitter (TWTR) and animal healthcare company IDEXX Laboratories (IDXX) at 0.48% apiece.
#5. Fidelity Select Technology Portfolio
Speaking of narrow bands of the stock market, some investors might be less interested in sorting stocks by size and instead are interested in specific sectors.
While there is no shortage of tactical ETFs out there, the Fidelity Select Technology Portfolio (FSPTX, $29.37) allows investors a mutual fund to play this high-growth sector – and one that does so in an active way instead of traditional index funds.
Right now, FSPTX owns just 113 stocks. You’ll find heavy weightings in fan favorites like Microsoft, but you’ll also find $9-billion solar technology firm Sunrun (RUN) among its top 10 positions right now. That’s not the typical makeup you’ll find in a passive tech ETF.
Of course, fees are a bit steeper than a simple index fund that buys all the Silicon Valley giants.
However, Fidelity funds have historically empowered active managers – so if you’re concerned about some kind of shakeup in the market, the hands-on approach of FSPTX might provide some peace of mind.
Fidelity zero index funds
Fidelity index has a couple of zero-index funds and they are as follows:
Fidelity® ZERO Large Cap Index Fund (FNILX)
- Seeks to provide investment results that correspond to the total return of a broad range of large-capitalization U.S. companies.
- There is a 0% expense ratio and no minimums to invest in FNILX.
Fidelity® ZERO Extended Market Index Fund (FZIPX)
- Seeks to provide investment results that correspond to the total return of a broad range of mid- to small-capitalization U.S. companies.
- There is a 0% expense ratio and no minimums to invest in FZIPX.
Fidelity® ZERO Total Market Index Fund (FZROX)
- Seeks to provide investment results that correspond to the total return of a broad range of publicly traded companies in the US.
- There is a 0% expense ratio and no minimums to invest in FZROX.
Fidelity® ZERO International Index Fund (FZILX)
- Seeks to provide investment results that correspond to the total return of foreign developed and emerging stocks.
- There is a 0% expense ratio and no minimums to invest in FZILX.
If you’ve read to till this point, we hope that you’d have understood why Fidelity should be your choice while buying index funds. With the incredible offers, they have,