Editor’s note: “7 Best of the Best Fidelity Funds to Buy” was previously published in September 2020. It has since been updated to include the most relevant information available.
Many investors think of Fidelity as a giant in the actively managed mutual funds space. That is true, but Fidelity funds run the gamut. It has actively managed mutual funds, passive index funds and some standout Fidelity ETFs (exchange-traded funds).
Investors also should not conflate Fidelity’s sizable footprint in the actively managed mutual fund space as meaning Fidelity funds are pricey. Actually, Fidelity funds are becoming increasingly less expensive. In fact, the Boston-based company offers commission-free trading for its ETFs, stocks and options.
In addition to the no-fee Fidelity ETFs, it eliminated several other account fees.
Whether its Fidelity funds or Fidelity ETFs, investors have plenty of solid options to choose from — and most come with favorable or no fees. Consider some of the following Fidelity funds:
- Fidelity ZERO Total Market Index Fund (MUTF:FZROX)
- Fidelity ZERO Extended Market Index Fund (MUTF:FZIPX)
- Fidelity Low-Priced Stock Fund (MUTF:FLPSX)
- Fidelity Quality Factor ETF (NYSEARCA:FQAL)
- Fidelity Nasdaq Composite Index ETF (NASDAQ:ONEQ)
- Fidelity High Yield Factor ETF (NYSEARCA:FDHY)
- Fidelity Dividend ETF for Rising Rates (NYSEARCA:FDRR)
Fidelity ETFs: Fidelity ZERO Total Market Index Fund (FZROX)
Expense Ratio: 0%, or $0 on an initial $10,000 investment.
The Fidelity ZERO Total Market Index Fund is one of the initial zero-fee index funds that Fidelity introduced. The Fidelity ZERO International Index Fund (MUTF:FZILX) is the other. Both Fidelity funds are proving to be successful with investors.
According to the company, FZROX corresponds with a “broad range” of public companies in the U.S. With that in mind, nearly all of this Fidelity fund’s holdings are U.S.-based stocks. Top holdings include Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN).
FZROX turned two years old in August and it already has over $6.1 billion in assets under management, proof positive investors love a good deal on fees, particularly when it comes to a basic strategy such as on offered by this Fidelity fund.
Fidelity ZERO Extended Market Index Fund (FZIPX)
Expense Ratio: 0%
Fidelity’s suite of zero-fee index funds has grown to four thanks to the recent debut of the Fidelity ZERO Extended Market Index Fund and another fund. Like total market funds, extended market funds are usually cost-effective, but this Fidelity fund ups that ante without charging an annual fee.
This Fidelity fund and extended market funds, in general, are useful for investors looking to fill in the gaps created by total market funds or supposedly broad market index funds that are often heavily allocated to large-cap stocks.
FZIPX holds primarily mid- and small-cap fare that often go ignored by benchmarks, such as the S&P 500. Top holdings include Moderna (NASDAQ:MRNA), Teladoc (NYSE:TDOC) and Wayfair (NYSE:W).
The fund launched on Sept. 13, 2018. With no annual fee, FZIPX is a steal in the small/mid-cap category because those funds typically carry higher expense ratios than large-cap equivalents. FZIPX is classified as a blend fund, but it leans toward growth as a third of its sector exposure is allocated to tech and healthcare.
Fidelity Low-Priced Stock Fund (FLPSX)
Expense Ratio: 0.51%
The Fidelity Low-Priced Stock Fund defines “low-priced” stocks as those with price tags of $35 or below, but this Fidelity fund is not confined to that universe.
“Normally investing at least 80% of assets in low-priced stocks (those priced at or below $35 per share or with an earnings yield at or above the median for the Russell 2000 Index), which can lead to investments in small and medium-sized companies,” according to Fidelity.
Over the past 10 years, this Fidelity fund is topping broader measures of mid-cap value stocks, a relevant comparison because many of FLPSX’s holdings are designated as value plays. Consumer discretionary and technology stocks combine for 39% of this Fidelity fund’s weight, while healthcare and financial names combine for 25%.
Fidelity Quality Factor ETF (FQAL)
Expense Ratio: 0.29%
As noted earlier, the universe of Fidelity funds includes cheap ETFs, an arena in which Fidelity is one of the fastest-growing participants.
An array of Fidelity ETFs fit the bill as “cheap,” and a case can be made that the Fidelity Quality Factor ETF is cost effective relative to other smart beta strategies.
Additional cost efficiencies can be realized with this Fidelity fund because it is part of the firm’s expansive platform of commission-free ETF offerings. FQAL tracks the Fidelity U.S. Quality Factor Index.
Compared to investment factors such as growth and value, quality is often overlooked, but that does not diminish the factor’s potency. Companies meeting the quality factor’s standards often feature strong balance sheets, an impressive return on equity and invested capital, low debt ratios and other favorable traits.
Consider this regarding FQAL: Several of this Fidelity fund’s top 10 holdings are among the most cash-rich domestic companies. That’s a big advantage at a time when investors are placing renewed emphasis on balance sheets. To that end, the quality factor is one of the best-performing factors again this year.
Fidelity Nasdaq Composite Index ETF (ONEQ)
Expense Ratio: 0.21%
The Fidelity Nasdaq Composite Index ETF is the oldest Fidelity ETF and arguably one of the most overlooked.
While many investors opting for broad-based Nasdaq exposure opt for Nasdaq-100 tracking funds, this Fidelity fund features a broader lineup. A typical Nasdaq-100 index fund holds just over 100 stocks, but this Fidelity fund has around 1,000 holdings.
ONEQ “uses statistical sampling techniques that take into account such factors as capitalization, industry exposures, dividend yield, price/earnings (P/E) ratio, price/book (P/B) ratio, and earnings growth to create a portfolio of securities listed in the Nasdaq Composite Index that have a similar investment profile to the entire index,” according to Fidelity.
This Fidelity fund’s top 10 holdings include familiar fare, such as Apple, Microsoft and Amazon. ETFs tracking the Nasdaq 100 typically garner more attention than ONEQ, but the Fidelity ETF is up almost 25% this year and allocates over 20% of its weight to Microsoft and Apple.
Fidelity High Yield Factor ETF (FDHY)
Expense Ratio: 0.45%
Fidelity funds include an expansive lineup of fixed-income offerings, an asset class that Fidelity ETFs are breaking into as well.
The Fidelity High Yield Factor ETF, an actively managed fund, is one of the newest Fidelity funds offering exposure to bonds.
This high-yield bond fund ETF, which debuted in June, looks to top the ICE BofAML BB-B US High Yield Constrained Index. As an actively managed ETF, this Fidelity fund can manage credit and interest rate risk if market conditions dictate.
FDHY has a 30-day SEC yield of 4.34%.
Fidelity Dividend ETF for Rising Rates (FDRR)
Expense Ratio: 0.29%
Conventional wisdom dictates that dividend-paying stocks can be vulnerable in rising interest rate environments, but some ETFs prove that notion wrong.
The Fidelity Dividend ETF for Rising Rates is an example of an equity-based fund explicitly designed to thrive even when the Federal Reserve boosts borrowing costs.
What is important for investors to realize is that not all dividend stocks are pinched by rising rates. The ones that are typically hail from rate-sensitive sectors with bond-like traits, such as real estate and utilities.
Real estate and utilities stocks combine for less than 7% of FDRR’s weight. Rather, the fund is more heavily allocated to cyclical sectors with a history of strength as rates rise. Technology and healthcare stocks combine for 45% of this Fidelity fund’s roster.
As of this writing, Todd Shriber did not hold a position in any of the aforementioned securities.