Just over three years ago, Fidelity introduced a broad lineup of sector exchange-traded funds, indicating at least two things. First, the Boston-based funds giant was finally taking the rapidly-growing ETF business seriously, and secondly, that Fidelity was late to the ETF party.
To its credit, Fidelity has been making up for lost time. Fidelity ETFs now have over $5.16 billion in assets under management, putting the issuer among the top 20 U.S. ETF sponsors.
Plus, Fidelity has not been shy about bringing new ETFs to market. For example, earlier this year, the Fidelity ETF roster increased by six when the company introduced six new smart beta funds. Fidelity had previously followed up its sector lineup with a real estate ETF and fixed income funds.
While Fidelity ETFs have grown in number, the company is currently home to just 21 ETFs, a far smaller number than rivals such as iShares and Vanguard. That is not a bad thing, as it makes identifying the best Fidelity ETFs an easier task.
Best Fidelity ETFs to Buy: Fidelity Low Volatility Factor ETF (FDLO)
Expense Ratio: 0.29% per year, or $29 on a $10,000 investment.
The Fidelity Low Volatility Factor ETF (NYSEARCA:FDLO) low volatility factor spent ample time in the limelight in 2016, but much of that luster faded later in the year on concerns that less volatile stocks were richly valued. That could be taken as a sign that this Fidelity ETF debuted too late in 2016 to capture investors’ enthusiasm for the low volatility factor.
Still, FDLO fits the bill as one of the best Fidelity ETFs because, over the long term, reducing volatility is proven to bolster a portfolio’s overall performance. Plus, it should be noted that this Fidelity ETF does things differently than the standard low volatility fund.
For example, FDLO, which holds 123 stocks, devotes more than 21% of its weight to tech stocks, an unheard-of trait among rival “low vol” ETFs. This Fidelity ETF tracks the Fidelity U.S. Low Volatility Factor Index, “which is designed to reflect the performance of stocks of large and mid-capitalization U.S. companies with lower volatility than the broader market. It may lend to earn income for the fund,” according to Fidelity.
By the standards of smart beta ETFs, FDLO is cost efficient with an annual fee of 0.29%, and Fidelity clients can realize additional cost savings by trading FDLO on the company’s commission-free ETF platform. The same goes for all Fidelity ETFs and some others, too.
Best Fidelity ETFs to Buy: Fidelity Core Dividend ETF (FDVV)
Expense Ratio: 0.29% per year
When Fidelity rolled out its six factor-based offerings in September, two dividend ETFs were included in that mix with FDVV being one.
The Fidelity Core Dividend ETF (NYSEARCA:FDVV) follows the Fidelity Core Dividend Index, which “is designed to reflect the performance of stocks of large and mid-capitalization dividend-paying companies that are expected to continue to pay and grow their dividends.”
Over the past couple of years, the energy sector has been home to more negative dividend action than any other group in the S&P 500. However, this Fidelity ETF has identified some of the safer dividend payers from the energy patch, as highlighted by FDVV’s 18% weight to energy stocks, the largest sector weight for this Fidelity ETF.
FDVV also gives investors exposure to the resurgence of financial services dividends growth with a 17% allocation to that sector. None of this Fidelity ETF’s 106 holdings account for more than 3.3% of the fund’s weight.
Best Fidelity ETFs to Buy: Fidelity Quality Factor ETF (FQAL)
Expense Ratio: 0.29% per year
For investors looking to emphasize quality, the Fidelity Quality Factor ETF (NYSEARCA:FQAL) is one of the best Fidelity ETFs. FQAL tracks the Fidelity U.S. Quality Factor Index, “which is designed to reflect the performance of stocks of large and mid-capitalization U.S. companies with a higher quality profile than the broader market,” according to Fidelity.
Some of the hallmarks of the quality factor include a company’s ability to generate cash, stellar corporate credit ratings and sound balance sheets. To that end, it probably is not surprising that some of the top 10 holdings in this Fidelity ETF are Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT) and Procter & Gamble Co (NYSE:PG).
Seven of FQAL’s top 10 holdings are members of the Dow Jones Industrial Average. FQAL’s spin on quality is unique as technology, healthcare and consumer discretionary stocks account for more than 47% of this fund’s weight, making this Fidelity ETF more of a growth fund. In fact, that is how Morningstar categorizes FQAL.
As of this writing, Todd Shriber did not hold a position in any of the aforementioned securities.