Although Fidelity index funds don’t get as much financial media press as their actively managed funds, any serious fan of passive investing knows that Fidelity offers some of the best index funds on the market.
Fidelity Investments has been a major market player in the world of mutual funds and retirement plans for more than 30 years, with much of their attention and assets coming from actively managed funds like the Fidelity Magellan Fund (FMAGX) and Fidelity Contrafund (FCNTX).
But the Fidelity index funds lineup is one of the best available with a broad selection of low-cost, passively managed funds that rival Vanguard Investments’ funds.
We analyzed all 16 index funds offered by Fidelity and narrowed down the list to three of the best Fidelity index funds to buy.
3 Best Fidelity Index Funds: Fidelity Spartan 500 Index (FUSEX)
Expenses: 0.095%, or $9.50 for every $10,000 invested
Minimum Initial Investment: $2,500
If you want one of the cheapest S&P 500 index funds that also has a long track record, Fidelity Spartan 500 Index (FUSEX) should be at the top of potential choices.
As we pointed out in the recent story, 31 Index Funds That Are Robbing You Blind, low expenses is a primary criterion for selecting the best index funds. The rock-bottom expense ratio of .095 for FUSEX beats almost every S&P 500 index fund on the market. That’s almost seven basis points lower than the standard-bearer of index funds, Vanguard 500 Index Fund (VFINX).
Best Fidelity Index Funds: Fidelity Spartan Extended Market Index Fund (FSEMX)
Minimum Initial Investment: $2,500
If you’re looking for a fund to compliment an S&P 500 index fund or to serve as an aggressive core holding in a portfolio, the Fidelity Spartan Extended Market Index Fund (FSEMX) is one of the best and cheapest index funds on the market to get the job done.
FSEMX tracks the Dow Jones U.S. Completion Total Stock Market Index, which represents performance of small- and mid-cap stocks in the U.S. stock market. In different words, FSEMX differs from a total stock market index fund because it holds stocks not found in the S&P 500 index; hence the “extended market” descriptor.
Furthermore, total stock market funds are commonly cap-weighted, which means investors end up with an oversized exposure to large-cap stocks. So, if you want full coverage to the total U.S. market, using a cheap extended market index fund like FSEMX, in addition to an S&P 500 index fund, is a smart move.
Best Fidelity Index Funds: Fidelity Spartan U.S. Bond Index Fund – Fidelity Advantage Class (FSITX)
Minimum Initial Investment: $10,000
You’ll have a difficult time finding a quality bond index fund for a lower cost than the Fidelity Spartan U.S. Bond Index Fund – Fidelity Advantage Class (FSITX).
Like other total bond market index funds, FSITX tracks the Barclays U.S. Bond Index, which means you’ll capture the entire U.S. bond market with one low cost index fund.
Although Fidelity offers this bond index fund in an investor share class with a minimum initial investment of $2,500, the $10,000 minimum for the advantage share class isn’t a huge hurdle, and it’s worth the extra investment, especially for a bond fund, where even a few basis points makes a difference in the long run.
The 0.07% expense ratio even beats the wildly popular total bond market exchange traded fund, iShares Core U.S. Aggregate Bond (AGG), which has a slightly higher expense ratio of 0.08%.
As of this writing, Kent Thune did not hold a position in any of the aforementioned securities, although he holds FUSEX and AGG for 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.