6 Best Fidelity Mutual Funds To Invest In

10 7 minutes read

Fidelity is among the top five largest fund families in the world. The brand has a strong reputation in no-transaction-fee funds with low expense ratios that provide access to popular market segments. An example is the Fidelity 500 Index Fund, which is the third-largest U.S. mutual fund in terms of net assets.

There are more than 2,100 Fidelity funds specializing in U.S. equities, plus hundreds of other choices for investors seeking debt and international exposure. Across that sizable catalog, six funds stand out as excellent wealth-building vehicles for novice investors with long timelines. Read on to meet those six Fidelity funds below.

Advantages Of Investing In Mutual Funds

Before diving into fund specifics, let’s touch on the advantages of mutual fund investing. The big ones are diversification and breadth of choice.

Billionaire investor Warren Buffett has said that diversification protects you against being wrong. He meant it in a negative sense, but the reality is that investors—even experienced ones—can be wrong more than they’re right. That is why diversification is an important risk-management strategy for most of us.

Mutual funds provide quick diversification. A single fund position holding hundreds of different assets is cheaper to buy and easier to manage than a portfolio of individual stocks.

Even better, the breadth of mutual funds available makes it easy to implement a targeted asset allocation, whether you want a two-fund portfolio or something more complex.

Criteria Used For Choosing These Fidelity Mutual Funds

With that context, let’s define the features that make our six best Fidelity mutual funds so attractive. All six meet the criteria below.

No transaction fees. The fund does not charge return-diluting sales loads.
Competitive expense ratios. The expense ratios in this group of funds range from 0.015% to 0.54%. While this is not a small variance, each fund is competitive on expenses relative to its investment strategy.
Four- or five-star Morningstar ratings.Morningstar ratings compare a fund’s historic record against its peers. The ratings do not guarantee future performance, but they do show how effective the fund has been to date.
No investment minimum. Funds with no investment minimum are easier to budget and more suitable for a broader range of investors.
Net assets of $8 billion or greater. Large funds with greater demand can usually be liquidated faster than niche funds.

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6 Best Fidelity Mutual Funds To Invest In

The table below introduces the six selected Fidelity mutual funds that stack up well against peers, in terms of returns and expenses.

Table data source: Fidelity.com

Despite the shared characteristics noted above, these funds do vary in their investment strategies. Let’s review each to help you decide which, if any, fit your investment goals and risk tolerance.

1. Fidelity 500 Index Fund (FXAIX)

FXAIX by the numbers:

Net assets: $585.5 billion
Net expense ratio: 0.015%
10-year average annual return: 13.0%
1-year average annual return: 27.1%
Trailing 12-month (TTM) yield: 1.2%

Fidelity 500 Index Fund Overview

The Fidelity 500 index fund invests in all S&P 500 stocks. As a reminder, the S&P 500 includes leaders in each of the 11 economic sectors that meet size, profitability and liquidity requirements. Cumulatively, S&P 500 companies account for 80% of the value in the U.S. public stock market.

Why FXAIX Is A Top Choice

FXAIX provides low-cost access to a stock group that has historically performed well. Over the long-term, the S&P 500 has grown about 7% annually on average after inflation. The fund’s low expense ratio allows nearly all the underlying returns to benefit fund shareholders.

The fund is a good choice as a sole equity position or as a core holding in a more complex allocation.

2. Fidelity Large Cap Growth Index Fund (FSPGX)

FSPGX by the numbers:

Net assets: $27.2 billion
Net expense ratio: 0.035%
Lifetime average annual return (since 2016): 18.1%
1-year average annual return: 30.8%
TTM yield: 0.5%

Fidelity Large Cap Growth Index Fund Overview

Another Fidelity index fund, this large-cap growth portfolio tracks the Russell 1000 Growth Index. The index includes stocks within the large-cap Russell 1000, which have higher price-to-book ratios, optimistic growth outlooks from analysts and relatively high sales per share growth over the past five years.

Why FSPGX Is A Top Choice

FSPGX targets large companies with growth characteristics. There is an overlap between the Russell 1000 Growth and the S&P 500, so you probably don’t want to hold this fund alongside the previous one on this list. The S&P 500 fund has more positions and a lower expense ratio, while FSPGX could produce greater returns—albeit with more volatility.

FSPGX did outperform the S&P 500 fund over the last one-year and five-year timeframes. However, the S&P 500 fund had a slightly higher average return over the past three years.

3. Fidelity Equity Income Fund (FEQIX)

FEQIX by the numbers:

Net assets: $8.6 billion
Net expense ratio: 0.54%
10-year annual return: 9.4%
1-year average annual return: 23.4%
TTM yield: 1.5%

Fidelity Equity Income Fund Overview

Fidelity Equity Income Fund invests in a portfolio of large-cap stocks that collectively deliver a higher dividend yield than the S&P 500. The portfolio stocks primarily fall into the value category. Top sector weightings are financials at 19%, healthcare at 15% and industrials at 12%.

Why FEQIX Is A Top Choice

FEQIX provides both income and capital appreciation from its large-cap portfolio. This fund is somewhat less risky than the two funds above, which means it’s suitable for investors with a more moderate risk tolerance. Most of the fund, 83%, is in U.S. stocks. There is also exposure to Europe, Canada and emerging markets.

4. Fidelity International Index Fund (FSPSX)

FSPSX by the numbers:

Net assets: $54.7 billion
Net expense ratio: 0.035%
10-year annual return: 5.4%
1-year average annual return: 19.9%
TTM yield: 2.8%

Fidelity International Fund Overview

The Fidelity International Fund tracks the MSCI EAFE index, which includes large and midcap stocks from developed countries not including U.S. and Canada.

Individual foreign stocks are more volatile than their domestic counterparts. Fortunately, this fund is heavily diversified across more than 750 positions. Top holdings include Ozempic-maker Novo Nordisk, semiconductor supplier ASML Holdings and food and beverage maker Nestle.

Why FSPSX Is A Top Choice

The FSPSX portfolio provides diversified and low-cost international exposure without overlapping U.S. large-caps that often dominate core holdings. Since foreign stocks can be volatile due to exchange rates and changing sociopolitical environments, most investors will want to hold FSPSX in a smaller allocation versus U.S. stocks.

5. Fidelity Multi-Asset Index Fund (FFNOX)

FFNOX by the numbers:

Net assets: $8.6 billion
Net expense ratio: 0.11%
10-year annual return: 8.5%
1-year average annual return: 20.2%
TTM yield: 0.46%

Fidelity Multi-Asset Index Fund Overview

The Fidelity Multi-Asset Index Fund invests in Fidelity stock and bond index funds to maintain a targeted asset allocation across both asset classes. The fund provides exposure to domestic stocks, developed and emerging market equities, investment-grade bonds, U.S. Treasury bonds and international bonds.

Why FFNOX Is A Top Choice

FFNOX is a complete portfolio that invests in roughly 85% stocks and 15% bonds. With its low net expense ratio of 0.11%, the fund is ideal for investors who want global diversification with minimal effort. There is no rebalancing required, nor do FFNOX shareholders need to hold any other positions—that is, unless they also want exposure to alternative assets like cryptocurrency or real estate.

FFNOX shareholders should revisit their risk tolerance and goals periodically to ensure continued alignment with the fund’s asset allocation.

6. Fidelity Investment Grade Bond Fund (FBNDX
Vanguard Total International Bond ETF
)

FBNDX by the numbers:

Net assets: $10.9 billion
Net expense ratio: 0.45%
10-year annual return: 2.1%
1-year average annual return: 7.8%
TTM yield: 3.8%

Fidelity Investment Grade Bond Fund Overview

Fidelity Investment Grade Bond Fund invests in high- and medium-quality debt securities. U.S. Treasury securities comprise nearly 52% of the portfolio, while corporate bonds make up another 24%. There are smaller positions in mortgage-backed and asset-backed debts.

Why FBNDX Is A Top Choice

FBNDX has a balanced portfolio that delivers a nice yield with moderate interest-rate sensitivity. This isn’t the lowest-risk bond fund out there, but it’s not overly aggressive either. FBNDX can complement and stabilize an equity-heavy portfolio while delivering relatively reliable income payments monthly.

Bottom Line

Fidelity has a large catalog of mutual funds, many featuring popular exposures and competitive expense ratios. Novice, hands-free investors with a long timeline can’t go wrong with Fidelity’s Multi-Asset Fund. Those with more experience may prefer teaming a U.S. large-cap fund with smaller holdings in international stocks and investment-grade bonds.

For more low-cost fund options, see our picks for Vanguard ETFs that can fund your retirement.

Frequently Asked Questions (FAQs)

What Are Mutual Funds?

Mutual funds are pooled investment portfolios. The fund collects capital from many investors, uses the money to maintain a portfolio of securities, and allocates shares of the portfolio to its investors.

How Do Fidelity Mutual Funds Differ From Index Funds?

Fidelity is the name of a fund family, while index refers to the type of fund. Many Fidelity mutual funds are index funds, which seek to replicate the performance of an underlying financial market index.

Are Fidelity Mutual Funds Suitable for Long-Term Investing?

Many Fidelity mutual funds are suitable for long-term investors. The best funds will depend on the investor’s goals, but low-fee funds with quality assets are usually good choices for long-term portfolios.