3 Best Fidelity Funds for Stability

Some of the best Fidelity funds have an allocation of stocks, bonds and cash that provide price and income stability for a wide range of investment objectives.

best-fidelity-fundsIt is important to keep in mind, however, that “stability” is a relative term. It doesn’t mean risk-free, nor does it mean you should park all of your retirement assets in bond funds and cash.

In my personal and professional opinion, the primary object of investing is to achieve a rate of return that will, at a minimum, keep pace with inflation. Therefore, the best funds for stability are those that are less volatile than a portfolio of 100% stocks but are allocated in such a way that the portfolio returns will keep pace with or stay ahead of inflation, which has historically averaged a bit more than 3%.

So with that backdrop I give you the best Fidelity funds for stability.

Best Fidelity Funds for Stability: Fidelity Balanced (FBALX)

best-fidelity-funds-fbalxExpenses: 0.56%, or $56 annually per $10,000 invested
Minimum Investment: $2,500

If you want to stay ahead of inflation by a significant margin, and you don’t mind a moderate level of risk, you’ll want to take a look at Fidelity Balanced (FBALX), which is one of the highest-rated funds in the entire Fidelity funds lineup.

Although it’s not the most stable of Fidelity funds, FBALX may be the best choice in terms of return in relation to risk and for keeping volatility lower than a portfolio of 100% stocks. The portfolio is moderately allocated with a mix of about two-thirds stocks and one-third bonds.

The stock portion consists primarily of large-cap stocks like Apple (AAPL), JPMorgan (JPM), and Alphabet (GOOG, GOOGL).

Year-to-date, FBALX is essentially flat, whereas the average moderate allocation fund is negative. Long-term performance is impressive with 10-annualized returns averaging 6.3%, which ranks FBALX ahead of 90% of category peers.

Best Fidelity Funds for Stability: Fidelity Freedom Income (FFFAX)

best-fidelity-funds-fffaxExpenses: 0.49%, or $49 annually per $10,000 invested
Minimum Investment: $2,500

Conservative investors or those looking for the best Fidelity funds with low volatility will like Fidelity Freedom Income (FFFAX).

The asset allocation for FFFAX was recently about 25% stocks, 50% bonds and 25% cash. The stock allocation is below average for retirement income funds and the cash allocation is roughly double the category average.

This conservative allocation has turned out to be smart in 2015, as evidenced by the 0.6% year-to-date gain, which compares to -0.75% for the average retirement income fund. The fund’s worst year in the past decade was 2008 when it fell 12.1%. However the average retirement income fund fell 18.1% and the S&P 500 fell 37%.

FFFAX tends to maintain its conservative allocation, which results in average long-term returns but it does this with below-average market risk. The 10-year annualized return of 4% shows that FFFAX can produce inflation-beating performance while maintaining stability for shareholders.

Best Fidelity Funds for Stability: Fidelity Government Income (FGOVX)

best-fidelity-funds-fgovxExpenses: 0.45%, or $45 annually per $10,000 invested
Minimum Investment: $2,500

Investors looking for stability and a well-managed fund that invests in high credit quality bonds will like Fidelity Government Income (FGOVX).

The FGOVX portfolio consists of a balance of U.S. Treasury bonds and a blend agency bonds, such as Fannie Mae and GNMA bonds. A solid 98% of the bonds are rated AAA, which is high above the category average of 80%.

Year-to-date FGOVX has generated a solid 1.5% gain, which compares to 1.4% for the average intermediate-government bond fund. Long-term performance is also above category average. The 10-year annualized return is 4.4%, which is significantly ahead of 3.9% for category peers.

The intermediate-term average duration for the bond holdings may also prove valuable when interest rates are rising again because long-term bonds are more interest-rate sensitive, while short-term bonds may struggle to stay ahead of inflation.

As of this writing, Kent Thune did not personally hold a position in any of the aforementioned securities, although he holds FBALX from some client accounts. His No. 1 holding is his privately held investment advisory firm in Hilton Head Island, SC. Under no circumstances does this information represent a recommendation to buy or sell securities.

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