Best Fidelity Mutual Funds for Every Stage of Your Life

Fidelity offers over 10,000 mutual funds; this guide will help you find the best Fidelity mutual fund for you, whether you want to retire or build wealth.

I’ll share my best Fidelity mutual funds for retirees, young people, and those looking to avoid inflation and weather through the next recession.

I’ll also explain the difference between investing with Fidelity vs. Vanguard and how to pick between index funds vs. actively managed funds.

Fidelity Investments Overview

In 1946, a guy called Edward Johnson created Fidelity Investments. After more than 75 years, Fidelity is still thriving and managing trillions.

Edward Johnson is from Boston, and he’s a New England guy through and through, including having a name as waspy as Edward Johnson.

The Johnson family are direct descendent of Puritans, early settlers who came to work hard and later vacation on Martha’s Vineyard because the Church of England isn’t pure enough for them.

Like all upstanding (and white) New Englanders, Johnson went to Harvard. And he went there twice: once for undergraduate, another for law.

To understand whether you should invest with Fidelity, it’s important to understand the company’s ownership structure and how that impacts your net worth.

Fidelity: A (Very Profitable) Family Business

Fidelity is a private company; one family owns Fidelity today.

When Edward Johnson retired, he passed the helm to his son, who passed it to his daughter Abigail Johnson, who is the current CEO of Fidelity.

The Johnson family owns 49% of Fidelity’s common shares (employees own the rest) and most of its voting shares, and they vote as one.

This means the Johnson family has total control over Fidelity. While the family has done a fine job running Fidelity, let’s be clear: Fidelity exists to serve the interests of the Johnson family.

Every company serves its owners. The public company protects its shareholders. Vanguard protects mutual funds because its owners are the mutual fund holders.

Fidelity serves its controlling owners the Johnson Family.

And this ownership structure drives how much and where the company seeks to make money.

Ownership and Profit Sharing

Let’s compare how Vanguard, Charles Schwab, and Fidelity make money.

In the table below, you see how much assets, revenue, and profit each company generates:

What do you notice? Vanguard manages by far the most assets: more than $7.1 trillion, nearly twice as much as Fidelity.

However, Vanguard doesn’t make much revenue or profit compared to Fidelity or Charles Schwab.

For every $1,000 of assets managed, Vanguard makes less than a dollar ($0.98) while Fidelity makes $3.67.

Vanguard’s profit margin is so low it’s almost nothing whereas Fidelity has a whopping $38% in profit margin.

This is not surprising given Vanguard’s ownership structure. As a company owned by mutual funds, Vanguard seeks to operate at cost so that it can return all the benefits back to its owners, the mutual fund holders in the form of lower fees.

Vanguard has no responsibility to make a profit for its owner.

On the other hand, Fidelity makes nearly $7 billion in profit every year. Why? Because it’s a family-owned business that wants to enrich itself.

And where does that profit come from? From its clients like you.

What this means is that you have to be careful with Fidelity. Fidelity does not always look out for its clients – Fidelity seeks to maximize returns for the Johnson Family at the tune of 7 billion dollars a year.

This makes selecting a mutual fund even more important at Fidelity because you don’t want to end up with a mutual fund that doesn’t benefit you but costs you a lot of fees in the long run.

So which Fidelity mutual funds should I avoid? And what are the ones I should buy? I’ll tell you now.

Best Fidelity Mutual Funds

Fidelity has traditionally sold only actively managed funds with a healthy dose of fees (why it makes $7 billion profit.)

But in recent years, Fidelity started to offer index funds because its clients are leaving Fidelity for Vanguard.

And Fidelity has a few good index funds worth considering. I would say its index funds beat its famous actively managed funds.

Here are my favorites:

Fidelity 500 Index Fund (FXIAX): Best Index Fund for Lazy, Wealthy People

The S&P 500 index fund is a growth fund for rich people because it tracks the stocks of the largest 500 public companies in the U.S.

Therefore, it’s relatively safe but still growth-oriented.

The S&P 500 has done really well in the past 10 years thanks to the big technology companies such as Apple, Microsoft, Amazon, Google, and Netflix.

This index fund is full of blue-chip companies and wealthy people like blue-chip stocks because they’re less volatile and risky.

Warren Buffett put all of his inheritance to his wife into the S&P 500 index fund. If the S&P 500 is good enough to take care of Warren Buffett’s wife, it’s good enough for any rich person.

Fidelity’s index fund for the S&P 500 is FXIAX. This fund is nearly identical, down to the symbol, to the iconic Vanguard 500 Index Fund VFIAX.

Not surprisingly, Fidelity created the FXIAX to stop its customers from going over to Vanguard.

And to Fidelity’s credit, it really went above and beyond to make the FXIAX fund the most attractive S&P 500 index fund on the market today:

1. FXIAX has no minimums to invest… whereas Vanguard’s VFIAX has a $3K minimum to invest.
2. FXIAX charges the lowest management fee on the market at 0.015%; it is even cheaper than Vanguard VFIAX’s rock-bottom fee of 0.04%.

Fidelity’s S&P 500 index fund has the same performance as any other S&P 500 index fund, and this index fund has performed well lately.

So if you’re in the market to buy an S&P 500 index fund, Fidelity’s is my #1 recommendation.

S&P 500 vs. Fidelity Fund vs. Magellan Fund

What’s more? The S&P 500 beats two of Fidelity’s most famous actively managed funds at Fidelity: the Fidelity Fund and the Fidelity Magellan Fund.

See this comparison table of the S&P 500 vs. Fidelity Fund vs. Magellan Fund (you may need to scroll on phone to see everything).

The Fidelity Fund (FFIDX) is the very first fund at Fidelity. It started in the 1930s and is still going today.

The fund focuses on large-cap equity and has only 110 holdings, with 40% of its holdings in the top 10 companies. So it’s essentially a large-cap fund.

But this fund’s 10-year performance is just slightly worse than the S&P 500. Sure, there may have been periods of time when the Fidelity fund beats the S&P 500 index fund, but it is unclear whether this fund is superior in the long-term, especially if you take into account taxes and fees.

The Fidelity Magellan Fund (FMAGX) is another famous fund with more than 50 years of history. It was managed by a famous mutual fund manager, Peter Lynch, who, between 1977 and 1990, produced growth that doubled the S&P 500 market index, making the Magellan Fund the world’s best-performing mutual fund.

But that’s no longer the case today. Since 2011, the Magellan fund has performed somewhat similarly to the S&P 500.

I hope you now see the power of the S&P 500 and why Fidelity has no choice but to offer it. S&P 500 is the simplest way to invest, and it’s beating out two of the most iconic, actively managed funds at Fidelity!

Next, let’s talk about another iconic index fund and how Fidelity’s version is actually a great one to consider.

Fidelity Total Market Index Fund (FSKAX): The Only Index Fund You Need

Investing can be as easy as A-B-C. JL Collins recommends a one-fund portfolio, and that one-fund is the Total U.S. Market index fund.

That’s right: invest 88% of net worth into the Total U.S. Stock Market and keep 12% in cash and a solid emergency fund.

Fidelity has an index fund for this occasion, it’s the Fidelity Total Market Index Fund (FSKAX):

Once again, Fidelity created FSKAX to compete against Vanguard’s equally iconic Total Stock Market Index Fund, VTSAX.

And compared to Vanguard, Fidelity’s FSKAX also has a lower management fee (0.015% vs. 0.04%) with no investment minimum ($0 vs. $3,000).

But it gets better!

Fidelity ZERO Funds

For your money inside a brokerage account (that is, any money outside of a retirement account), Fidelity has launched a new index fund in 2018 called Fidelity ZERO Total Market Index Fund (FZROX).

This new index fund (FZROX), available only inside brokerage accounts, is the same as FSKAX (Total U.S. Stock Market), except FZROX has ZERO management fees rather than the 0.015% charged by FSKAX.

While 0.015% is already so low that you are only spending $150 a year with an investment of $1 million, zero is still zero, pretty amazing.

How does Fidelity afford not to charge fees, you ask? Well, Fidelity is likely losing money on this particular fund.

But it hopes the people who come to Fidelity for zero-fee index funds will buy other services and more expensive mutual funds; thus, overall, Fidelity is making more money rather than losing customers to Vanguard.

But you know better. Take advantage of Fidelity’s zero fee index funds and don’t buy anything else that you shouldn’t buy.

Best Fidelity Mutual Funds for the Young and Ambitious

I always recommend a little investment into small-cap value stocks for any young person looking to take some risks.

In my Best Vanguard Fund guide, I gave a more in-depth overview of what are small-cap value funds.

We saw that small-cap value funds got really damaged by the pandemic, dropping by more than 40%.

But since then, small-cap value has rebounded the most, growing nearly 100% in 2021 alone.

So if you are young and ambitious and want to invest in risky companies and have a long investment horizon, consider small-cap value.

Fidelity Small Cap Value Index Fund (FISVX): The Risky Fund for Long-Term Investment

FISVX is Fidelity’s small-cap value index fund, a competitor to Vanguard’s small-cap value funds I’ve written before.

This is the only index fund from Fidelity that is small-cap AND value.

FISVX has a low fee of only 0.05% and no minimums.

Fidelity-small-cap

The FISVX has over 1,500 stocks, and the top 10 holdings account for less than 6% of its portfolio.

Be careful investing in small-cap value funds. These stocks are highly volatile.

You should not put the majority of your portfolio money into small-cap value stocks. But there are times when it might be smart to invest in small-cap value, especially right after it tanks in value!

Fidelity Nasdaq Composite Index Fund (FNCMX): For Those Who Believe Software Is Eating the World

If you believe that robots will take over and that the future belongs to technology that will transform our world more than we can even imagine today, then you want to invest in Nasdaq.

Some people choose not to invest in all of Nasdaq but in the Nasdaq 100, which is an index that tracks the 100 largest non-financial companies on the Nasdaq stock exchange.

There is only 1 ETF from Fidelity that tracks the Nasdaq 100, and it is QQQ.

QQQ has basically been the top-performing index fund in the last decade. Why? Because technology has been the top-performing fund in the last decade, including stocks like Apple, Microsoft, Amazon, Tesla, Google, Facebook, NVIDIA, etc.

So why am I not recommend the QQQ? Well, precisely because I think it’s too hot. The index has grown on average 20% every year for 10 years.

And in 2021 for the first time, the total Nasdaq index beat the Nasdaq-100.

I think large tech will still dominate, but their innovation is now slow and culture more corporate than dynamic. I believe in technology and I think the future wave of innovation will come outside of big tech.

So I want to recommend the Fidelity Nasdaq Composite Index Fund for those who want to take risks and invest in the technology sector.

A word of warning, again: do not ever invest most of your money into a particular industry or sector, even if it’s a sector that you believe will eat the world.

I work in tech, and I believe in tech, but technology is also volatile and ruthless. As I wrote in the “dot-com bubble” guide, the tech bubble will burst, and you want to spread out your risks.

Best Fidelity Mutual Funds for Retirees

If you are nearing retirement, retired, or want to retire early, you want less risk, more safety.

You’ve probably built up enough net worth such that you care less about significantly growing your wealth and more about protecting it.

Fidelity recommends the following allocation, which I find a bit too conservative and too reliant on the bond market, which has not provided any returns in our current zero-interest-rate environment.

Normally, I’d recommend a Balanced Fund, such as the Vanguard’s 60/40 VBIAX. But none of Fidelity’s balanced funds are that outstanding.

Fidelity has a Four-in-One Fund with almost 85% of the investments in equities and a 0.11% expense ratio – but its performance is not that spectacular.

Similarly, the Fidelity Balanced Fund (FBLAX) has nearly 72% equity and good but not great performance. It also carries a 0.52% fee.

And last but not least, Fidelity has an actively managed fund that is more than 70 years old. It’s Fidelity Puritan Fund (FPURX), and it invests about 70% in stocks and 30% in bonds.

The Puritan fund is famous. But for reasons I’ll explain below, I don’t think it’s worth investing in because its performance has not been clearly better than basic, dumb index funds.

Plus, all three funds above are actively traded so you end up paying more taxes on capital gains.

What to do, then, if you need a balanced fund at Fidelity?

Make Your Own DIY Fidelity Balanced Fund

If you want a fund of some stocks and bonds because, as a retiree, you can’t afford to put everything in stocks, you can move your money over to Vanguard and get VBIAX or Vanguard Wellington.

If you want to keep money in Fidelity, I recommend buying 60% Fidelity Total Market Index Fund (FSKAX) and 40% Fidelity U.S. Bond Index Fund (FXNAX).

Or use a stock / bond combination that’s more fitting if 60/40 isn’t for you.

Here’s why.

Suppose I split my money and put 72% into the Fidelity Total Market index fund and 28% into the Fidelity U.S. Bond index fund, my 10-year growth rate, shown in the table below, is slightly better than what I would get with Fidelity Balanced Fund or Fidelity Four-in-One.

Similarly, if I split my money 70/30 into. two basic, dumb index funds, I get a better return than investing with the Fidelity Puritan, which has a much higher expense ratio and turnover rate (higher taxes).

All in all, I don’t think fancy Fidelity mutual funds are worth buying.

(You may need to scroll on phone to compare)

You see, this is where Fidelity is charging you higher fees for no better results so the owners can make more profit.

Please only take advantage of Fidelity’s best index funds and blend them yourself to DIY your perfect retirement solution.

But I couldn’t end this guide without giving an in-depth assessment of Fidelity’s actively managed mutual funds that are doing well lately…

Best Fidelity Actively Managed Mutual Fund for Growth + Yolo

Actively managed funds differentiate Fidelity and make profits.

Fidelity offers thousands of actively managed mutual funds, most of which are bad. And I’m also going to ignore funds less than 30 years old because they have not withstood the test of time.

There are three funds that I will talk about, they all have the following characteristics:

1. Older than 30 years old
2. Have beaten the S&P 500 in the past 10 years
3. Still beat the S&P in the past 10 years after removing taxes

(You may need to scroll to compare)

This doesn’t mean I encourage you to buy these funds. I personally do not own any of these funds.

I am simply pointing out that some funds at Fidelity have outperformed index funds in the past decade. Good for them. I wish they offer more data beyond just the past 10 years.

Next, I’ll offer my reasons for their success (hint: might be luck).

Fidelity Blue Chip Growth Fund (FBGRX)

Like the name, FBGRX invests in high-quality companies with above-average growth.

Personally, I think this fund won big because it invested in NVIDIA and TESLA.

But even removing taxes, this fund grew by 15.84% over the past 10 years, compared to the S&P 500 growing by 11.51% after removing taxes.

I would not assume that past success predicts future success here, though. This fund might have gotten lucky with NVIDIA and TESLA.

My recommendation is to not invest in this fund unless you want to yolo: hey you are young, you live once, take some risks with 5% of your portfolio.

Fidelity Trend Fund (FTRNX)

The Fidelity Trend fund chases the hottest stocks. Nearly half of its holdings are in technology, and a small portion is international.

Similar to the Blue Chip Growth Fund above, the Trend Fund also became successful, I think because it has NVIDIA and TESLA as two of its top ten holdings.

And yes, I think this could be due to luck, not skills. So you may not want to dump all of your money to the Trend Fund.

Again, interesting fund, but my recommendation is to stick with index funds unless you are ready to yolo.

Fidelity Contrafund (FCNTX)

The Contrafund started in 1967 and has been managed by the same portfolio manager William Danoff since 1990.

The Fidelity Contrafund invests in large-cap, with an eye toward those that are undervalued.

This fund also has a bias toward technology.

Of all of Fidelity’s actively managed funds, this is my favorite.

It has a steady portfolio manager, and doesn’t completely rely on tech to win.

It doesn’t have the most impressive growth, but it could beat the S&P 500 without major allocations to Tesla and NVIDIA.

Further, the fund has a lifetime growth rate of 12.90% since the 1960s.

Sadly, it’s also one of the most expensive funds with an expense ratio of 0.86%.

But if you want to make a bet with high feels, I’d say invest with caution and do so sparingly, but Contrafund seems like a better one.

Best Fidelity Mutual Funds: Summary

Fidelity has over 10,000 mutual funds, most of which are worthless actively managed funds you should try to avoid like the plague.

It’s overwhelming having to pick out of so many choices the best funds for you.

The simplest solution is the best solution.

A smart investment strategy eliminates complexity, makes a simple decision, and retains the willpower to do nothing while emotions go up and down.

Two index funds, the S&P 500 and the Total U.S. Stock Market, are enough as long as you make sure to keep ample cash. And if you want to lower risk, mix in a little bit of the Total U.S bond index fund.

Here’re the best Fidelity mutual funds:

• Best Fidelity index fund for lazy, wealthy people:
  • Fidelity 500 Index Fund (FXIAX)
• The only Fidelity index fund you need
  • Fidelity Total Market Index Fund (FSKAX)
• Best Fidelity index fund for the young and ambitious
  • Small Cap Value Index Fund (FISVX)
  • Nasdaq Composite Index Fund (FNCMX)
• Fidelity funds for retirees
  • None are great.
  • Solution: DIY 60% FSKAX (Fidelity Total Makret Index Fund), 40% FXNAX (Fidelity U.S. Bond INdex Fund)
• Best Fidelity actively managed mutual fund (BUY WITH CAUTION)
  • Fidelity Contrafund (FCNTX)

Got any more questions or thoughts? Comment below and let me know! 

What’s Next?

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