Picking the right retirement fund can be difficult. While most brokerage services provide a screener where investors can filter funds according to different metrics, knowing which statistics to look for or what factors to prioritize isn’t always intuitive.
For instance, on Fidelity’s platform, investors can sort through more than 320 mutual funds by various metrics like historical returns, expense ratios, sustainability characteristics and Morningstar ratings. For many new investors, gravitating toward the historical-return metric seems right. After all, doesn’t it make sense to pick the winning funds and bet on their continued outperformance?
It turns out it isn’t that simple. “It’s important to remember that choosing winning sectors of the past is easy, but it’s much harder to know the future,” says Allen Mueller, director of financial planning at 7 Saturdays Financial. “Dumping money into the winners of the last decade means you’re deliberately buying what is now expensive compared to the rest of the market, which bodes poorly for expected returns,” Mueller says.
That being said, assessing funds based on historical performance can still be useful. By looking at trailing returns, investors can better understand how different equity sectors, styles and geographies have historically responded to economic and market cycles. They can also get a sense of how much volatility a particular fund endured and assess if they’re willing to tolerate that level of risk.
Here’s a look at the eight current best-performing Fidelity funds based on their trailing 10-year annualized returns up to Feb. 28:
|Fidelity fund||Trailing 10-year annualized return up to Feb. 28|
|Fidelity Growth Discovery Fund (ticker: FDSVX)||14.70%|
|Fidelity NASDAQ Composite Index Fund (FNCMX)||14.80%|
|Fidelity Blue Chip Growth Fund (FBGRX)||15.20%|
|Fidelity Select Medical Technology and Devices Portfolio (FSMEX)||16%|
|Fidelity OTC Portfolio (FOCPX)||16.60%|
|Fidelity Select Software and IT Services Portfolio (FSCSX)||17.10%|
|Fidelity Select Technology Portfolio (FSPTX)||17.70%|
|Fidelity Select Semiconductors Portfolio (FSELX)||24%|
Fidelity Growth Discovery Fund (FDSVX)
FDSVX is an actively managed fund. Unlike passive funds that strictly track the composition of a benchmark index, actively managed funds can select their holdings based on the fund manager’s own strategy. In this case, FDSVX selects stocks that Fidelity believes to have “above-average growth potential.” Over the last 10 years, FDSVX returned an annualized 14.7%.
“Growth stocks are those that are growing or are expected to grow earnings at an above-average rate, for which investors are willing to pay a premium,” says Daniel Dusina, director of investments at Blue Chip Partners. “The last 10 years, which consisted of ultralow interest rates and a relatively stable domestic economy, aligned well for growth stocks,” Dusina says. The fund charges a 0.77% expense ratio.
Fidelity NASDAQ Composite Index Fund (FNCMX)
With a lower expense ratio of 0.3%, FNCMX offers growth investors more affordable exposure by passively tracking the popular Nasdaq composite index. The top holdings of this index are dominated by large-cap U.S. tech stocks like Apple Inc. (AAPL), Microsoft Corp. (MSFT), Alphabet Inc. (GOOG, GOOGL) and Nvidia Corp. (NVDA), along with growth stocks like Amazon.com Inc. (AMZN) and Tesla Inc. (TSLA).
“Overall, growth and information technology have come to dominate the U.S. market over the trailing 10-year period,” Dusina says. “Funds with high exposure to tech heavyweights such as Apple, Alphabet, Microsoft and Nvidia were rewarded with market-leading returns,” he says. Over the trailing 10 years, FNCMX returned an annualized 14.8%.
Fidelity Blue Chip Growth Fund (FBGRX)
An actively managed alternative to FDSVX is FBGRX, which in addition to the growth screen imposes requirements for “blue-chip” status. FBGRX will only select medium- and large-cap growth stocks that Fidelity defines as “well known, well established and well capitalized.” Familiar names in FBGRX’s top holdings include Apple, Microsoft, Amazon, Nvidia, Alphabet and Tesla.
“This growth fund has significant exposure to technology, as that is the sector in which earnings have generally grown the fastest over the last 10 years,” Dusina says. As of Jan. 31, 43.7% of the stocks in FBGRX were classified as information technology, with its top 10 holdings making up 47.8% of the fund. FBGRX has returned 15.2% over the trailing 10 years and charges a 0.76% expense ratio.
Fidelity Select Medical Technology and Devices Portfolio (FSMEX)
“The two best-performing sectors of the U.S. equity market over the last 10 years were information technology and health care,” Dusina says. “FSMEX is focused on the medical devices industry within the health care sector, and therefore received tailwinds in the same vein as technology,” he says. Over the trailing 10 years, FSMEX returned an annualized 16% against a 0.68% expense ratio.
Investors looking for a fund that blends attributes from both the health care and technology sectors might like FSMEX. The fund targets the stocks of companies involved in researching, manufacturing or distributing a wide range of health care equipment and technology, with names like Thermo Fisher Scientific Inc. (TMO), Danaher Corp. (DHR) and Boston Scientific Corp. (BSX) sitting in its top holdings.
Fidelity OTC Portfolio (FOCPX)
FOCPX puts a spin on the usual large-cap growth style by holding stocks that trade over the counter, or OTC. This provides better exposure to not only small- and mid-cap stocks, but also foreign equities that do not trade on major U.S. exchanges like the Nasdaq or New York Stock Exchange. This is why FOCPX has a 6.5% allocation to emerging-market equities from places like Taiwan and India.
The top holdings in FOCPX are the usual Nasdaq-centric tech and growth stocks like Apple, Microsoft, Amazon, Alphabet and Meta Platforms Inc. (META). Taiwan Semiconductor Manufacturing Co. (TSM) also holds a 2.2% allocation in the fund. FOCPX returned an annualized 16.6% over the trailing 10 years and charges a 0.81% expense ratio.
Fidelity Select Software and IT Services Portfolio (FSCSX)
“Along with growth stocks outperforming value stocks over the last decade, we also saw a lot of tech sector development that fueled the rise in valuations,” says Anessa Custovic, chief investment officer at Cardinal Retirement Planning Inc. “For example, demand for cloud computing services skyrocketed, with a number of firms significantly benefiting from this opportunity,” Custovic says.
Many of the top holdings in FSCSX like Microsoft, Visa Inc. (V), Mastercard Inc. (MA), Adobe Inc. (ADBE) and Salesforce Inc. (CRM) either directly provide cloud computing services or make significant use of them in their operations. The growth in this tech sector sub-industry gave FSCSX strong tailwinds, with the fund returning an annualized 17.1% over the last decade against a 0.67% expense ratio.
Fidelity Select Technology Portfolio (FSPTX)
FSPTX is an actively managed fund with a tech focus, selecting stocks that Fidelity believes will either provide or benefit from “technological advances and improvements.” This resulted in a portfolio with high allocations to semiconductors at 26%, technology hardware at 19.4% and systems software at 19.3%. Over the last decade, FSPTX returned an annualized 17.7%
“The top holdings in this fund are names we all recognize, such as Microsoft and Apple,” Custovic says. “They are all solid companies that are well capitalized and have high demand,” she says. Within FSPTX, Apple and Microsoft hold high weightings at 19.4% and 15.7%, respectively. Similar to the other Fidelity Select Portfolio funds, FSPTX charges a 0.67% expense ratio.
Fidelity Select Semiconductors Portfolio (FSELX)
“Ever since the 2008 Great Recession, the Federal Reserve’s loose monetary policy fueled investor’s risk appetites, causing them to flock to tech and growth looking for the next big thing,” Custovic says. One of the top-performing tech industries as a result of this was semiconductors, which houses companies that design and manufacture the sophisticated chips used in modern electronics.
The top-performing Fidelity fund on this list, FSELX returned an annualized 24% over the last 10 years thanks to the strong double-digit annualized returns of semiconductor stocks like Nvidia, Taiwan Semiconductor Manufacturing, Broadcom Inc. (AVGO) and ON Semiconductor Corp. (ON). Eighty-seven percent of FSELX’s portfolio is concentrated in semiconductors, making it a high-conviction fund. FSELX charges a 0.67% expense ratio.
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