The best Fidelity funds for 2018 take advantage of the wide range of mutual fund offerings at Fidelity Investments.
Fidelity offers dozens of high-quality actively-managed funds and low-cost index funds. This combination of choices makes Fidelity funds one of the best one-stop shops for mutual funds, and that’s without mentioning their top-notch status as a discount broker.
Another distinction of Fidelity Investments is that some of their best funds are sector funds, which will likely serve as valuable tools in 2018, where the distance between the best and worst sectors is likely to widen in the face of volatility and sector rotation.
So, if you’re looking for the best mutual funds to own in 2018, you could build an entire portfolio for the year with these Fidelity funds.
Best Fidelity Funds for 2018: Fidelity Contrafund (FCNTX)
Expenses: 0.68%
Minimum Initial Investment: $2,500
If there is one fund that sums up the greatest strengths of Fidelity funds, it could be Fidelity Contrafund Fund (MUTF:FCNTX).
FCNTX has the key qualities that make for the best funds at Fidelity: Outstanding management, low expenses and top-notch performance history. Legendary portfolio manager, Will Danoff, has been at the helm of FCNTX for 27 years and his performance record during his tenure could be described as legendary. Through Nov. 31, the 10-year return is an impressive 8.5% and the lifetime return is an unbelievable 12.5%.
FCNTX can be described as a growth fund with value leanings, when it makes sense. Danoff likes growth stocks like Facebook Inc (NASDAQ:FB), but he’ll occasionally hold value stocks like Berkshire Hathaway Inc. (NYSE:BRK.A, NYSE:BRK.B).
Best Fidelity Funds for 2018: Fidelity Nasdaq Composite Index (FNCMX)
Expenses: 0.43%
Minimum Initial Investment: $2,500
The economy is arguably in its mature phase of the business cycle now, which can be a good time for broad growth index funds like the Fidelity Nasdaq Composite Index Fund (MUTF:FNCMX).
In the mature phase of the business cycle, when interest rates and corporate earnings are rising, the momentum of growth stocks tends to win over their value counterparts.
FNCMX passively tracks the Nasdaq Composite Index, which means you’ll get low-cost exposure to a portfolio of growth stocks like Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT) and Amazon.com, Inc. (NASDAQ:AMZN). Tech stocks like these make up roughly half of the fund’s assets with the other half primarily in consumer discretionary, health care, financials and industrials.
Best Fidelity Funds for 2018: Fidelity Select Banking Portfolio (FSRBX)
Expenses: 0.79%
Minimum Initial Investment: $2,500
Rising interest rates and lower corporate tax rates combine to make financial stocks bullish bets in 2018. This makes financial sector funds like Fidelity Select Banking Portfolio (MUTF:FSRBX) one of the best mutual funds to buy now.
Rising interest rates are bullish for banking stocks because the spread between the cash held in customer accounts and the yields the bank generate from that cash widens and this translates directly to higher earnings.
If this environment plays out next year, as it is expected, FSRBX holdings like Wells Fargo & Co (NYSE:WFC), U.S. Bancorp (NYSE:USB) and Bank of America Corp (NYSE:BAC) could have a great year.
Best Fidelity Funds for 2018: Fidelity Select Consumer Staples (FDFAX)
Expenses: 0.76%
Minimum Initial Investment: $2,500
2018 could prove to be a tale of two markets, where the first half continues the strength of 2017 and the second half turns negative after government stimulus peters out. To play both sides, defensive funds like Fidelity Select Consumer Staples (MUTF:FDFAX) are smart bets.
FDFAX is a play to have your cake and eat it too. You’ll get gains, albeit relatively mild compared to the broader market, in a growth environment but you’ll also reap the rewards of defensive stocks, such as FDFAX top holdings Procter & Gamble Co (NYSE:PG), British American Tobacco PLC (ADR) (NYSE:BTI) and CVS Health Group (NYSE:CVS), if the market turns volatile and weak.
This makes FDFAX a smart diversification tool in an increasingly uncertain environment that could very well play out in the second half of 2018.
Best Fidelity Funds for 2018: Fidelity Select Health Care Portfolio (FSPHX)
Expenses: 0.74%
Minimum Initial Investment: $2,500
Although the negative press and political rhetoric around healthcare in 2017 created some volatility for health stocks, the health sector as a whole remained resilient and was a top performer during the year.
The health sector looks to put up a repeat performance in 2018 and the best Fidelity fund to take advantage of this scenario is Fidelity Select Health Care Portfolio (MUTF:FSPHX). Health sector funds also make good defensive plays, should the market begin a downward trend during the year.
The FSPHX portfolio has a healthy dose of bio-tech stocks, at about one-third allocation, and the balance is in other health sub-sectors like healthcare equipment, pharmaceuticals and managed care. Therefore, shareholders gain exposure to health stocks like top holdings Amgen, Inc. (NASDAQ:AMGN), UnitedHealth Group Inc (NYSE:UNH) and Allergan plc Ordinary Shares (NYSE:AGN).
Best Fidelity Funds for 2018: Fidelity Inflation-Protected Bond Index Fund (FSIQX)
Expenses: 0.19%
Minimum Initial Investment: $2,500
The economic environment in 2018 looks good for Treasury inflation-protected securities, or TIPS, which makes Fidelity Inflation-Protected Bond Index Fund (MUTF:FSIQX) one of the best Fidelity funds to buy now.
Inflation is historically low, but expected to rise for the foreseeable future and this environment is ripe for holding TIPS. Judging by the yield on the 10-year Treasury bond, the market forecast for inflation is for less than 3%, the historic average. However, it’s arguable that inflation could rise above that level, which would be especially favorable for buying TIPS funds like FSIQX.
An additional benefit of TIPS funds is to diversify the fixed income portion of a portfolio. Therefore, long-term investors have more than one reason to buy FSIQX in 2018.
Best Fidelity Funds for 2018: Fidelity Short-Term Bond Fund (FSHBX)
Expenses: 0.45%
Minimum Initial Investment: $2,500
If you want to reduce interest rate risk in 2018, Fidelity Short-Term Bond Fund (MUTF:FSHBX) is a smart way to do it.
Bond prices generally move in the opposite direction as interest rates and since 2018 is expected to see more rate hikes, investors can expect to see low or, in some cases, slightly negative returns on bond mutual funds during the year.
Bonds with longer durations are generally more sensitive to interest rates than those with lower durations. Therefore, short-term bond funds will have lower market risk, and possibly higher returns, in 2018.
As of this writing, Kent Thune did not personally hold a position in any of the aforementioned securities, although he holds FCNTX in some client accounts. His No. 1 holding is his privately held investment advisory firm in Hilton Head Island, S.C. Under no circumstances does this information represent a recommendation to buy or sell securities.
