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Is Fidelity International Real Estate (FIREX) a Strong Mutual Fund Pick Right Now?

Zacks Equity Research

Having trouble finding a Sector - Real Estate fund? Well, Fidelity International Real Estate (FIREX) would not be a good potential starting point right now. FIREX possesses a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

FIREX is one of many Sector - Real Estate funds to choose from. Sector - Real Estate mutual funds are known to invest in real estate investment trusts (REITs). A popular income vehicle thanks to its taxation rules, a REIT is required to pay out at least 90% of its income annually to avoid double taxation. This technique makes securities in these funds high dividend players, and even bond-like in some instances, though their risk is similar to equities.

History of Fund/Manager

FIREX is a part of the Fidelity family of funds, a company based out of Boston, MA. Since Fidelity International Real Estate made its debut in December of 2004, FIREX has garnered more than $250.23 million in assets. Guillermo de las Casas is the fund's current manager and has held that role since April of 2010.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of 7.84%, and is in the middle third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 13.46%, which places it in the top third during this time-frame.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. FIREX's standard deviation over the past three years is 9.18% compared to the category average of 9.95%. Over the past 5 years, the standard deviation of the fund is 10.28% compared to the category average of 10.15%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should always remember the downsides to a potential investment, and this segment carries some risks one should be aware of. In FIREX's case, the fund lost 67.51% in the most recent bear market and underperformed its peer group by 3%. These results could imply that the fund is a worse choice than its peers during a sliding market environment.

Investors should note that the fund has a 5-year beta of 0.57, so it is likely going to be less volatile than the market at large. Another factor to consider is alpha, as it reflects a portfolio's performance on a risk-adjusted basis relative to a benchmark-in this case, the S&P 500. Over the past 5 years, the fund has a positive alpha of 1.33. This means that managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, FIREX is a no load fund. It has an expense ratio of 1.01% compared to the category average of 1.29%. Looking at the fund from a cost perspective, FIREX is actually cheaper than its peers.

While the minimum initial investment for the product is $0, investors should also note that there is no minimum for each subsequent investment.

Bottom Line

Overall, Fidelity International Real Estate ( FIREX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, Fidelity International Real Estate ( FIREX ) looks like a somewhat weak choice for investors right now.

Don't stop here for your research on Sector - Real Estate funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare FIREX to its peers as well for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.


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