The 10 Best Fidelity Funds for Your 401k

The good news: When it comes to securing a successful retirement, you’re not on your own.

Fidelity mutual fundsThe bad news: One can easily feel overwhelmed by the responsibility of building and maintaining an investment portfolio.

Many products feed off this feeling, annuities chief among them. Numerous predators will charge you an arm and a leg, thus securing their own financial future at the expense of your own. Be forewarned and forearmed: Look every so-called gift horse in the mouth.

But you can corral a solid overall portfolio — or complement the one you currently have — on your own. It’s not hard to do. It’s not expensive. And the reward ought to be not just happier returns but more restful days and nights.

Fidelity has been in the 401k business since its inception. It also has led the charge for low-cost investment products whose managers and performance records have rivaled the best of any breed — from ballyhooed hedge funds and smarty-pants institutional endowments to soporific index funds and ETFs.

But not all Fidelity managers nor all Fidelity funds are created equal. I examine the world of Fidelity funds in my Fidelity Investor service, and several funds stand head and shoulders above not only their market benchmarks and internal peer groups — but compared to lions like Warren Buffett, George Soros and the now tainted Bill Gross.

As I cast my eye down not just 2015’s road, here are the 10 best Fidelity funds for navigating the twists and turns in your 401k’s road.

Best Fidelity Funds for Your 401k: Blue Chip Growth (FBGRX)

Manager: Sonu Kalra
Expenses: 0.8%, or $80 annually for every $10,000 invested

Fidelity Blue Chip Growth Fund (MUTF:FBGRX) manager Sonu Kalra invests in blue-chip companies that he believes have above-average potential for earnings growth. Battleship balance sheets are the best way to play 2015’s charted and uncharted waters — you never know when the seas will turn turbulent, but you can rest reasonably assured that when they do, bigger will either be better or become so.

There are plenty of technology and healthcare names in this fund: Apple Inc. (NASDAQ:AAPL), Google Inc (NASDAQ:GOOG, NASDAQ:GOOGL) and Gilead Sciences, Inc. (NASDAQ:GILD), among others.

The top three sectors are information technology (33.2%), consumer discretionary (23.1%) and health care (16.4%). Foreign holdings make up 10.2% of the investments.

Best Fidelity Funds for Your 401k: Contrafund (FCNTX)

Manager: Will Danoff
Expenses: 0.64%

Will Danoff has been managing Fidelity Contrafund (MUTF:FCNTX) for almost 25 years. He invests in companies believed to be undervalued or whose potential is not recognized by the public, or whose potential is assumed to be fully realized.

My view that FCNTX is among the best Fidelity funds is based on Danoff’s performance over meaningful time periods. He is trailing a bit this year. Noted. But his three-, five- and 10-year numbers, as well as those of his overall tenure, make this a solid choice for time in the markets, not market timing.

Like Blue Chip Growth, FCNTX is heavy on technology (26.3%), with healthcare (18.9%) and financials (16.9%) making up other major weightings. Foreign investments are similar too at 9%.

Top holdings include Berkshire Hathaway Inc. (NYSE:BRK.A, NYSE:BRK.B), Wells Fargo & Co (NYSE:WFC), Apple, Facebook Inc (NASDAQ:FB) and Google.

Best Fidelity Funds for Your 401k: International Growth (FIGFX)

Manager: Jed Weiss
Expenses: 1.04%

Jed Weiss’ Fidelity International Growth Fund (MUTF:FIGFX) invests in companies from around the globe that he believes shows above-average potential for growth. Jed looks for multiyear structural growth stories and high-barriers-to-entry businesses at attractive valuations on his earnings forecast.

Currently, more than half of FIGFX’s holdings are in Europe, though the top country representation is the United States at 20%. The U.K. follows at a 14.8% weighting, Switzerland at 13.2% and Sweden at 5.6%.

Healthcare (16.9%), consumer staples (15.6%) and consumer discretionary (15.4%) are the highest-weighted sectors in the fund, reflected in top holdings such as Roche Holdings (OTCMKTS:RHHBY), Anheuser Busch Inbev SA (ADR) (NYSE:BUD) and Novartis AG (ADR) (NYSE:NVS).

A couple other notes: FIGFX began trading in November 2007 and has a market value of over $700 million.

Best Fidelity Funds for Your 401k: Japan Smaller Companies (FJSCX)

Manager: David Jenkins
Expenses: 1%

Manager David Jenkins invests in Fidelity Japan Smaller Companies’ (MUTF:FJSCX) clever namesake, smaller-cap Japanese companies.

The key to understanding this fund’s focus and scope comes down to understanding the “er.” The market caps are similar to those of companies found in the Russell/Nomura Mid-Small Cap Index; a lot of room to maneuver toward more unproven, smaller-cap growth plays or toward more established, real-product, real-earnings, real-market-share, real-management mid-caps.

Current top holdings are Daiichikosho, JSR and Lintec, and more than half the fund is dedicated to just three sectors — industrials (23.1%), consumer discretionary (20.8%), and information technology (12.7%).

Best Fidelity Funds for Your 401k: Low-Priced Stock (FLPSX)

Manager: Joel Tillinghast
Expenses: 0.82%

Still inimitable, still head and shoulders above even the best crop of giants you can find in the space, lead manager Joel Tillinghast is about as far a cry from leveraged stocks as you can get.

Fidelity Low-Priced Stock (MUTF:FLPSX) invests in low-priced stocks, which for his purpose are stocks $35 or less. While that sounds like a gimmick, it’s the secret to this fund’s genius, and was Joel’s brainchild, making him of one of the best managers of any generation. It can lead to a small-/mid-cap tilt, but it also can lean toward even mega-caps in ultra-bear markets (like the one we got in 2008).

FLPSX began trading in December 1989 and has a market value of over $30 billion. The fund is heavily weighted toward consumer discretionary (26.1%), with ample weight given to information technology (19.2%) and financials (11.8%). Top holdings for now are UnitedHealth Group Inc. (NYSE:UNH), Seagate Technology PLC (NASDAQ:STX) and Next plc. It’s noteworthy that of the funds we’ve discussed so far, FLPSX is the only one with more than 5% of the fund currently in cash (9.4%).

Joel is a stock picker’s stock picker; if he’s around the water cooler, other managers are keen to hear what he has to say. While unsung by the media, he is a manager that compares with Peter Lynch, his mentor while Joel was learning the trade. His stealth advantage: He’s always been a global investor.

I continue to think the best way to pursue foreign stock opportunities is through managers with longstanding expertise in the foreign stock arena as part and parcel of global funds. So, if you’re looking at the best Fidelity funds for your 401k, any list must include Joel Tillinghast and Low-Priced Stock.

Best Fidelity Funds for Your 401k: Mega Cap Stock (FGRTX)

Manager: Matt Fruhan
Expenses: 0.68%

There are a lot of funds out there that sound like they’re buying the big boys, but few actually do just that. Not so with Fidelity Mega Cap Stock Fund (MUTF:FGRTX). Manager Matthew Fruhan invests more than 70% of the fund in companies with mega-cap capitalizations of the battleship balance sheet variety — these are Texas-sized dividend producers with more cash than they can count let alone spend, and are emerging-market-capable.

You could contrast FGRTX with Vanguard Dividend Growth Fund (MUTF:VDIGX), which invests about 40% of its assets in mega-cap companies.

Fruhan can reach across the pond, but prefers U.S. battleships. Top holdings include Apple, JPMorgan Chase & Co. (NYSE:JPM) and Microsoft Corporation (NASDAQ:MSFT), reflecting the heavy weightings given to information technology (24.5%) and financials (18.2%).

Best Fidelity Funds for Your 401k: Select Health Care (FSPHX)

Manager: Eddie Yoon
Expenses: 0.77%

Fidelity Select Health Care Portfolio (MUTF:FSPHX) invests in companies involved in numerous parts of the healthcare industry — so that’s pharmaceuticals, medical instruments, biotechs and hospitals, among others.

This nearly $10 billion fund’s top holdings include Actavis plc (NYSE:ACT), Medtronic PLC (NYSE:MDT), McKesson Corporation (NYSE:MCK), Amgen, Inc. (NASDAQ:AMGN) and Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN). This also is a very international-heavy fund at 31.6% of FSPHX’s investments.

I like Select Healthcare for reasons that follow this refrain: Healthcare provides necessary goods and services for huge, worldwide demographics that are aging and whose collective demand isn’t slowing.

Eddie Yoon invests with an eye on the necessary demographic trends and stories of aging boomers needing a youth-inducing crutch, as well as on the emerging-market theme of new consumers demanding better healthcare.

Best Fidelity Funds for Your 401k: Strategic Dividend & Income (FSDIX)

Manager: Joanna Bewick
Expenses: 0.74%

Income investors need three types of income. They need to have good bond income, they need to have some inflation protection and they need to have non-bond income in the form of a less interest-rate-sensitive capital appreciation opportunity. That’s where Fidelity Strategic Dividend & Income Fund (MUTF:FSDIX) comes in.

FSDIX invests in a mix of approximately 50% stocks, 15% real estate investments, 15% convertible securities and 20% preferred stocks. (The current mix is 50.1%, 16.5%, 7% and 18.2%).

From a stocks perspective, top holdings include dividend stalawarts Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX) and Procter & Gamble Co (NYSE:PG). However, it’s financials that make up the biggest portion of the fund’s holdings, at 29%. Healthcare (10.2%) and consumer staples (10%) are far leaner as Nos. 2 and 3.

Best Fidelity Funds for Your 401k: Strategic Real Return (FSRRX)

Manager: Joanna Bewick
Expenses: 0.77%

Primary manager Joanna Bewick and her team again use an investment allocation guide for Fidelity Strategic Real Return Fund (MUTF:FSRRX). The fund invests roughly 30% in inflation-protected investments, 25% in floating-rate bonds, 25% in commodities and related investments and 20% in REITs or other real estate investments. (Current mix is 27.6%, 23.4%, 23.1% and 22.1%).

FSRRX will tend to trade more like a basket of commodities than any single type of bond, but also more like a diversified basket of bonds than any one commodity.

I recommended purchasing this fund in tandem with Strategic Income to broaden our approach to the income landscape in general and to diversify within it as best as possible.

Best Fidelity Funds for Your 401k: Total Bond (FTBFX)

Manager: Ford O’Neil
Expenses: 0.45%

Primary manager Ford O’Neil (along with managers Michael Foggin, Jeff Moore and Matthew Conti) uses the Barclays U.S. Universal Bond Index as an investment guide for Fidelity’s diversified bond fund, Fidelity Total Bond Fund (MUTF:FTBFX).

Investments in this $17 billion-plus fund are allocated across investment-grade (76.2%), high-yield (16.2%) and emerging-market (4.8%) bonds. The investment-grade debt includes a 29% total weighting in U.S. Treasuries. The result? A 30-day yield around 3.5%.

Foreign holdings make up 9.8% of the investments.

Jim Lowell is the editor of Fidelity Investor. Sign up for Fidelity Investor today and you’ll also receive his free report on the top sector funds and ETFs for 2015.

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