Index funds typically provide broad market exposure and low costs.
Fidelity is the fourth-largest asset-management firm in the U.S., surpassed only by Vanguard, Pimco and BlackRock. Because of that size, it offers a big menu of cheap index mutual funds and exchange-traded funds for investors. When it comes to 401(k) plan participant satisfaction rankings in a J.D. Power study, Fidelity is among the top two positions for medium and small plan providers and in the top six for large-plan providers. Given their their ubiquity in 401(k) plans, many savers with employer-sponsored retirement plans will likely see Fidelity index funds available for their accounts. Here are eight of the best Fidelity index mutual funds and ETFs.
Fidelity 500 Index Fund (ticker: FXAIX)
For investors seeking exposure to the S&P 500, Steve Azoury, president of Azoury Financial in Troy, Michigan, likes FXAIX, calling it "a nice index fund that is very consistent with very low fees." It has an extremely low expense ratio of 0.015%, or $1.50 for every $10,000 invested annually. Considered a large-blend fund, FXAIX seeks to replicate the S&P 500's composition and performance, and its one-year return is in-line with the S&P 500 -- both up by about 10%. "This is a smart and extremely cheap way to get diversified access to large United States companies," he says.
Fidelity Total Market Index Fund (FSKAX)
This is a broad market fund following the Dow Jones U.S. Total Stock market, and it holds more than 3,000 stocks. "This is a consistent fund for the multi-cap category," Azoury says, and offers greater diversity than the typical large-cap fund. Like FXAIX, this fund has the same extremely low expense ratio of 0.015%, but FSKAX year-to-date return is almost double that of FXAIX, up by nearly 20%. The broad diversity of its holdings helps with its return. This fund also outperforms its index and the large-blend category on a three- and five-year basis.
Fidelity Extended Market Index Fund (FSMAX)
To get exposure outside of the S&P 500, Azoury likes FSMAX. It follows the Dow Jones U.S. Completion Total Stock Market Index, putting it in the mid-cap blend category. "This team-managed fund seeks to provide investment results that corresponds to the total returns of mid- to small capitalization of U.S. companies," Azoury says. Geode Capital Management has been at the helm since 2003. It has very cheap fees, at 0.045%. Year to date, FSMAX is up by about 20%, beating the S&P 500 and the mid-cap blend category.
Fidelity MSCI Energy ETF (FENY)
Steven Jon Kaplan, CEO of True Contrarian Investments, says the energy sector offers value in an otherwise overpriced stock market. His pick is FENY, which follows the MSCI USA IMI Energy Index, a market-cap-weighted index of U.S. energy companies covering 98% of market, making it a broad-based choice. "Energy shares are currently very undervalued with huge insider buying during the past several weeks of the components of these and similar funds," he says. FENY's expense ratio is only 0.08%, which makes it cheaper than competing ETFs like Energy Select Sector SDPR ETF (XLE) at 0.13% and Vanguard Energy ETF (VDE) at 0.1%.
Fidelity MSCI Consumer Staples Index ETF (FSTA)
Rusty Vanneman, president and chief investment officer at CLS Investments in Omaha, Nebraska, says the U.S. economy is in the late end of its economic cycle. FSTA could benefit in a late-cycle economy because "non-cyclical sectors such as consumer staples should perform well." FSTA follows the MSCI USA IMI Consumer Staples Index. This is a market-cap weighted index which includes stocks in sectors such as food and household goods. Those three sectors make up 80% of the index's holdings. This is another low-cost index fund, costing only 0.08%, making it competitive with more expensive ETFs like Vanguard Consumer Staples ETF (VDC) and Consumer Staples Select Sector SPDR ETF (XLP). FSTA's year-to-date return is 17%.
Fidelity MSCI Real Estate ETF (FREL)
Vanneman also likes value-oriented themes such as real estate. "We think that the real estate sector has one of higher expected rates of return in the years ahead and particularly so on a risk-adjusted basis," he says. FREL follows the MSCI USA IMI Real Estate Index, which is a cap-weighted index of U.S. real estate investment trusts, known as REITs, and real estate companies. It has broad market exposure as the index includes holdings across the entire market-cap spectrum. Vanneman points to FREL's very cheap expense ratio of 0.08%, which beats competitors such as Vanguard Real Estate ETF (VNQ) and Real Estate Select Sector SPDR (XLRE) while delivering strong performance in different time frames.
Fidelity MSCI Information Technology Index ETF (FTEC)
Investors who want low-cost exposure across the technology sector could look to FTEC, says Chuck Self, chief investment officer at iSectors in Appleton, Wisconsin. It tracks the MSCI USA IMI Information Technology Index, which consists of more than 330 holdings across large-, mid- and small-cap companies, making this a diverse fund. Self points out historically FTEC has outperformed other technology funds due to its large holdings of Microsoft Corp. (MSFT) and Apple (AAPL), which account for 15.6% and 14.9% of the fund, respectively. The cheap 0.08% expense ratio "and strong trading liquidity [means] FTEC is a superior way to gain exposure to the strong technology sector," Self says.
Fidelity Zero Large Cap Index Fund (FNILX)
FNILX is part of a new set of zero-fee mutual funds, and JR Robinson, co-founder and CEO of Financial Planning Hawaii, is a fan. He notes that even small fees can add up in the long term, "so the opportunity to invest with zero internal operating expenses is worth exploring." He uses FNILX along with two more of these new Fidelity Zero index funds to create a "basic, classic portfolio model ... not dissimilar to the basic equity models employed in most robo platforms." FNILX follows the Fidelity U.S. Large Cap Index, a market-cap weighted index designed to reflect the performance of the largest 500 U.S. companies.
Consider these Fidelity index mutual funds and ETFs.
-- Fidelity 500 Index Fund (FXAIX)
-- Fidelity Total Market Index Fund (FSKAX)
-- Fidelity Extended Market Index Fund (FSMAX)
-- Fidelity MSCI Energy ETF (FENY)
-- Fidelity MSCI Consumer Staples Index ETF (FSTA)
-- Fidelity MSCI Real Estate ETF (FREL)
-- Fidelity MSCI Information Technology Index ETF (FTEC)
-- Fidelity Zero Large Cap Index Fund (FNILX)
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