Fidelity offers a variety of mutual funds with low fees and boasts a long history of success in the industry.
In business for over 75 years, Fidelity ranks as one of the larger players in the market, with more than 42 million investors and $11.1 trillion in assets under management, as of June 1, 2023. Beyond its popular brokerage platform, Fidelity offers research services and a range of ETFs and mutual funds for retail investors.
“Fidelity mutual funds present an appealing investment opportunity, owing to their history of impressive performance, expert management and competitive fee structure,” says Sean August, CEO of The August Wealth Management Group. “Many Fidelity mutual funds charge no sales load or commission fees, making them an attractive choice for cost-conscious investors.”
For our rankings of the best Fidelity mutual funds, we screened more than 300 funds based on a set of strict criteria: passive index structure, net expense ratio under 0.1%, no transaction fees or minimum investments, a 10-year minimum track record and management tenure, portfolio turnover of 18% or less, $1 billion or above in assets under management (AUM) and a broad diversification across sectors and market caps.
Best Fidelity Mutual Funds
Methodology
Our curated ranking of the top Fidelity mutual funds was created by screening a list of more than 300 total available funds based on the following criteria:
Management style: We only included passively managed funds that tracked an index. While some actively managed funds can outperform their benchmark index, identifying potential outperformance in advance is highly difficult. Given the poor odds of outperforming an index over long periods, we believe that most retail investors are best served by low-cost, passively managed index funds.
Fees: We excluded funds with net expense ratios above 0.1% and funds with transaction fees. We also excluded some index funds with higher expense ratios and portfolio turnover ratios. All else being equal, higher fees and increased transactions within a fund tend to lower overall returns.
With no sales loads, low fees and no minimum investment requirements, it’s easier to start investing in Fidelity funds without breaking the bank.
Minimum investments: All funds on this list have no minimum required investment amounts. We also eliminated funds that posed barriers to entry for new or low-net-worth investors. These included factors like transaction fees and minimum investment requirements. We believe the best funds are accessible to all types of investors and shouldn’t impose onerous requirements to qualify for purchase.
Track record: All funds ranked have an inception date and management team tenure of more than 10 years. Funds with management tenures and operations of less than 10 years were also excluded. While some new funds may offer strong performance and interesting strategies, we believe investors are best served with tried-and-true funds that have undergone and survived many market and economic cycles.
Turnover: Each fund on this list has an annual portfolio turnover rate of 18% or less. For mutual funds, a high turnover rate can lead to increased capital gains transactions, which decreases tax efficiency.
AUM: Each fund on this list has attracted at least $1 billion or higher in assets.
An experienced fund analyst selected the funds above, but they may not be right for your portfolio. Before purchasing any of these funds, do plenty of research to ensure they align with your financial goals and risk tolerance.
Why other funds didn’t make the cut
To rate the best Fidelity mutual funds, we excluded any actively managed funds that do not passively track a benchmark index. The rationale behind this decision was based on the results of the latest SPIVA Scorecard from S&P Dow Jones Indices, which measures the performance of actively managed funds. The research found that over the last 15 years, 93.4% of all U.S. large-cap funds failed to outperform the S&P 500 index, as of Dec. 31.
Actively managed funds still have use cases for certain investors, such as hedging or providing income. For investors who have already accumulated a sizable nest egg and are more focused on capital preservation, actively managed funds might make more sense.
We also omitted funds with narrow exposure to a particular market capitalization, style or sector. For instance, a low expense ratio, low turnover index fund with a sufficiently long tenure would be excluded if it only tracked small-cap stocks, value stocks or real estate investment trusts, known as REITs. This ensures the list of selected funds is broadly diversified across market caps, styles and sectors.
Final verdict
When it comes to the best Fidelity mutual fund, we recommend FSKAX. Investors who buy this fund gain exposure to the broad investable U.S. market, covering large-, mid- and small-cap stocks weighted by market cap across all sectors. The fund is highly diversified within U.S. geography, making it a great way to obtain the average returns of the U.S. market.
The other benefit of FSKAX is its low 0.015% expense ratio. For a $10,000 investment, this works out to around $1.50 in annual fees. This fund makes for a great core holding that can be complemented with a global ex-U.S. stock fund like FSGGX in any proportion desired.
That being said, which Fidelity mutual fund is ultimately best depends on an investor’s circumstances.
“Before investing in any fund, investors should carefully review its prospectus and consider factors such as the fund’s investment strategy, fees and expenses, historical performance and risk profile,” August says.
Investors should also ensure that these factors align with their investment goals and risk tolerance.
Frequently asked questions (FAQs)
Based on 10-year annualized returns, the best-performing Fidelity mutual fund as of March 31 is the Fidelity OTC Portfolio (FOCPX), which has returned 17.18% over the last 10 years. FOCPX has returned an annualized 13.75% since its inception on Dec. 31, 1984.
Investors who want to buy mutual funds on Fidelity can begin by opening an account on the company’s brokerage platform.
You can navigate to the “Accounts & Trade” tab and select “Trade.” Select “Trade Mutual Funds,” then “Buy a Mutual Fund.”
To complete a purchase, you must enter the ticker symbol corresponding to the fund you wish to buy, enter a dollar amount for the trade and place an order. To find the right mutual fund, you can use Fidelity’s mutual fund screener to sort a list of options based on various criteria and view their metrics.