15 Best Fidelity Funds for the Next Bull Market
Investors looking to squeeze more profit from the next bull run can look to Fidelity funds for strong active management and tactical investments.
The rise of low-cost index funds and ETFs over the last decade or two has revolutionized the way people invest. However, while a lot of folks are content to simply "buy the market" with indexed long-term holdings, investors still have their choice of numerous actively managed funds with a strong track record of outperformance.
In contrast to investment giant Vanguard, which made a name for itself with low-cost index funds, Fidelity's funds are known for their active management and tactical investments. And while not every one of Fidelity's active mutual funds always beat their benchmark, many of these investments continue to thrive and outperform, even if most attention remains on index funds and exchange-traded products.
Here, we look the 15 best Fidelity funds for investors looking to squeeze a bit more profit out of the next bull market. All have more than $1 billion in assets and zero investment minimums, meaning they are simple to trade in and out of as you require. While many have higher fees than their index fund alternatives, a little research shows that investors can sometimes tap into significantly better performance as a result.
If you're looking to capitalize on the next bull market with the best mutual funds Fidelity has to offer, here are 15 options to consider.
Data as of July 6. Yields represent the trailing 12-month yield, which is a standard measure for equity funds. None of these Fidelity funds has a minimum required investment.
Fidelity Fund
- Assets under management: $4.9 billion
- Dividend yield: 0.7%
- Expense ratio: 0.50%, or $50 annually on a $10,000 initial investment
Let's start with the asset manager's namesake Fidelity Fund (FFIDX, $55.84), which has an inception date of 1930 and is one of the oldest mutual funds out there. As has long been its mission, this diversified investment still focuses on large U.S. stocks.
"Our guiding philosophy is that stocks of high-quality companies that exhibit persistent growth and generate positive free cash flow," according to official FFIDX literature, which results in a portfolio that "can outperform the market over time."
With total returns of about 21% in the past 12 months vs. an 8%-plus gain for the S&P 500 Index, that pledge of outperformance seems to be true lately, too.
Fidelity Fund is one of the more focused large-cap equity offerings out there at only about 110 holdings. However, its selectivity seems to be most of the appeal. Just be aware that its admittedly small portfolio is actually even more concentrated than it seems; roughly 40% of assets are behind its top 10 positions that include mega-cap names such as Microsoft (MSFT) and Apple (AAPL).
Fidelity Contrafund
- Assets under management: $121.4 billion
- Dividend yield: 0.0%
- Expense ratio: 0.85%
Founded in 1967 and run by the same manager (William Danoff) since 1990, Fidelity Contrafund (FCNTX, $15.53) is one of the most respected names in the mutual fund universe. It has a strong track record that has helped it maintain a huge volume of assets despite the general movement toward ETFs and index funds, and remains one of the biggest investment vehicles on the planet.
This diversified large-cap fund has a bias toward growth investments, but at its core it is an active and opportunistic investment vehicle that will go where it sees the most potential in the market.
"Philosophically, we believe stock prices follow companies' earnings," the fund's managers state in official literature. "As a result, our investment approach seeks firms we believe are poised for sustained, above-average earnings growth."
FCNTX also seeks out firms with a strong competitive position, high returns on capital, solid free cash flow and standout corporate management.
Contrafund is relatively lean, with about 280 total holdings. It's also naturally biased toward technology; about a third of assets are invested in the sector, as well as tech-adjacent stocks including Amazon.com (AMZN) and Facebook (FB). This large-cap tech focus has helped it outperform so far in 2020, racking up about 14% total returns vs. a small loss for the benchmark S&P 500 index in the same period.
Fidelity Magellan Fund
- Assets under management: $19.0 billion
- Dividend yield: 0.3%
- Expense ratio: 0.77%
Fidelity Magellan Fund (FMAGX, $11.26) is another storied Fidelity fund known for its active management and long-term outperformance. Started in 1963, the fund has logged a terrific track record with gains across 44 of those 56 years – an impressive 79% win rate.
With an incredibly selective portfolio of under 90 stocks at present, this Fidelity mutual fund might at first seem less diversified as other offerings out there. But despite a hefty weighting of almost 32% in tech stocks, it's not that out of sync with other large-cap growth funds on Wall Street. And honestly, part of Magellan's outperformance comes from the fact that it has zero dollars in energy stocks right now.
"Our investment approach seeks to identify high-quality growth stocks benefiting from long-term 'mega trends,'" write the managers, "as well as the three 'B's' – brands, barriers to entry and 'best in class' management teams."
Right now, top holdings include familiar Big Tech names that regularly top the other best Fidelity funds on this list. FMAGX also holds large positions in digital payments giants Visa (V) and Mastercard (MA), as well as home-improvement retailer Home Depot (HD).
Fidelity Trend Fund
- Assets under management: $2.3 billion
- Dividend yield: 0.2%
- Expense ratio: 0.64%
As the name implies, Fidelity Trend Fund (FTRNX, $126.38) is a mutual fund that is all about chasing the hot corners of the market based on the moment. And while the focus is decidedly on large U.S. corporations, FTRNX is not under a mandate to avoid overseas stocks. It even has a handful of international names layered in to represent about 6% of the total portfolio.
Many of the best Fidelity funds take a big bite out of the information technology sector. However, FTRNX goes back for a whole second helping of Big Tech. At present, 46% of all assets across some 120 holdings are allocated to technology stocks. Adding to the incredibly focused nature of this fund is that six of the 11 market sectors – financials, consumer staples, real estate, materials, energy and utilities – collectively add up to less than 7% of the entire portfolio at present!
This might not necessarily scare you off if you're looking to break free of the vanilla approach offered by index funds, but it's assuredly worth noting before you buy in. And with an 18% total return year-to-date while the rest of the stock market has had plenty of challenges, there certainly is an appeal to chasing trends when the managers get their strategy right.
Fidelity Focused Stock Fund
- Assets under management: $2.9 billion
- Dividend yield: 0.1%
- Expense ratio: 0.89%
Of course, if you're going to focus on trends, why even bother with a whiff of diversification and simply load up on the hot names of the moment?
That's what the Fidelity Focused Stock Fund (FTQGX, $29.43) does. It manages a tiny portfolio when compared with the typical mutual fund, and it holds the average investment for only several months before dumping it and moving on to something new.
Consider the "turnover" of this fund – a measure of how many names in the portfolio will be gone in the next year – is 180%! In other words, even though the fund only holds about 50 names at a time, it will trade in and out of about 140 total investments in a given year.
There's obvious risk in a strategy like this. But long-tenured manager Stephen DuFour has been at the helm since 2007 and has led Fidelity Focused Stock Fund to 17% average annual returns over the past decade, compared with 14% for the S&P 500 Index across the same period.
If you're looking for an actively managed mutual fund that cuts out the noise and chases a small list of names with serious momentum, you'll be hard-pressed to find one that does it better than FTQGX.
Fidelity Small Cap Discovery Fund
- Assets under management: $2.2 billion
- Dividend yield: 0.6%
- Expense ratio: 0.61%
While larger stocks are the investment of choice among most investors, if you truly believe the next bull market is here, then you might want to consider staking out a position in smaller names with more long-term potential. Obviously a trillion-dollar corporation like Microsoft has only so much headroom to grow, while startups that only have regional businesses or a small list of customers can grow exponentially if they hit their stride in the coming years.
That's the kind of approach deployed by the Fidelity Small Cap Discovery Fund (FSCRX, $19.29) via a streamlined list of just under 80 stocks. All of these are smaller stocks you likely haven't heard of, including IT services firm Synnex (SNX) and Las Vegas-based restaurant operator Cannae Holdings (CNNE).
Of course, you're relying heavily on the fund manager's expertise on these off-the-beaten trail small-cap stocks. However, one plus is that FSCRX is reasonably diversified with the top five sector allocations of this fund all between 10% and 20% to ensure the assets are spread around instead of concentrated in one corner of the market.
Fidelity Small Cap Growth Fund
- Assets under management: $3.9 billion
- Dividend yield: 0.0%
- Expense ratio: 1.05%
With a very deep bench of almost 200 stocks, Fidelity Small Cap Growth Fund (FCPGX, $27.33) represents a larger swath of these up-and-coming companies. However, FCPGX is decidedly more focused on tech than Small Cap Discovery despite the longer list of total holdings. Fidelity Small Cap Growth has almost a third of assets in information technology – about twice that of FSCRX.
That said, the 10 top holdings represent only about 18% of the portfolio, for a much less top-heavy lineup than in other funds. Right now, these names include stocks such as medical device company Insulet (PODD) and generator manufacturer Generac Holdings (GNRC).
It's worth noting that the long list of low-profile holdings coupled with an active management style demands a lot of hands-on attention. This TLC is funded through a pretty steep annual expense ratio. But with a score of four stars from mutual fund rating firm Morningstar and an amazing return of more than 36% in calendar 2019, FCPGX can more than offset those costs with big performance in a bull-market environment.
Fidelity Stock Selector Mid Cap Fund
- Assets under management: $1.7 billion
- Dividend yield: 0.7%
- Expense ratio: 0.94%
If you want to split the difference between slower-moving but stable blue chips and fast-moving but risky small firms, consider the Fidelity Stock Selector Mid Cap Fund (FSSMX, $32.53). This fund offers investors access to mid-sized "Goldilocks" corporations that are neither too large to be stagnant nor too small to be fly-by-night operations that could fold in short order.
With 175 names, FSSMX is well-diversified. The Nos. 1 and 2 sectors, technology and industrials, are neck-and-neck in weightings at about 16% each. And five different sectors all have allocations of 12% or more at present.
You might recognize a few of the names, like trucking and logistics provider Ryder System (R) or larger regional banks like Midwestern financial firm Huntington Bancshares (HBAN). But there are a host of smaller and difficult-to-analyze businesses that are tailor-made for an active management strategy. That allows Stock Selector Mid Cap to pick and choose its opportunities, and maximize returns in a bull market environment.
Fidelity Select Health Care Portfolio
- Assets under management: $8.9 billion
- Dividend yield: 0.3%
- Expense ratio: 0.70%
What if rather than investing based on size and fundamentals, you simply go for a sector-focused approach?
That's what Fidelity Select Health Care Portfolio (FSPHX, $30.74) offers. This Fidelity mutual fund holds roughly 100 names, including insurance giant UnitedHealth Group (UNH), Big Pharma icon Eli Lilly (LLY) and medical device company Boston Scientific (BSX), to name a few.
Unlike health care index funds, which typically just take the health care slice out of the S&P 500 index or some other benchmark, FSPHX is actively managed and has a few interesting features as a result. Take, for example, the fact that more than 20% of assets are actually in overseas healthcare mega-caps such as Switzerland-based drugmaker Roche Holdings (RHHBY). Or look at medical device manufacturer Penumbra (PEN), which at $7 billion isn't big enough to make the cut for large-cap indices, but appears in Fidelity Select Health Care alongside mega-cap names.
The eclectic mix ensures a dynamic look at healthcare, a sector that should see perpetual price inflation for as long as American healthcare exists in its current form. And in a bull market, the high-growth healthcare stocks in FSPHX are likely to outperform as healthcare spending moves steadily higher.
Fidelity Select Technology Portfolio
- Assets under management: $8.3 billion
- Dividend yield: 0.3%
- Expense ratio: 0.71%
As you've scrolled through the best Fidelity funds so far, you might have noticed a trend: Technology is one of the go-to sectors for growth-oriented investors looking to play the bull market. Well, just like the aforementioned FSPHX offers a more active alternative to health care index funds, Fidelity Select Technology Portfolio (FSPTX, $23.82) offers a dynamic look at the tech sector as a way to tap into outsized gains during a bull market.
While FSPTX is composed of only 60 positions or so, it blankets the sector with popular names such as Apple, as well as picks you might not have heard of yet, such as $8 billion Big Data play Elastic NV (ESTC). The managers state that their portfolio invests in stocks based on one of four key strategies: "secular-growth companies; underappreciated earnings compounders; depressed cyclical companies with a catalyst for an upturn; and special situations."
Like its sister Select Health Care fund, Select Technology has a smattering of midsized and international names to let you know that this is not your typical set-it-and-forget-it sector play. And with year-to-date total returns of nearly 25% that easily outperform index funds like the Technology Select Sector SPDR (XLK) and the iShares U.S. Technology ETF (IYW), FSPTX has proven lately that its comparatively higher expense ratio doesn't mean it can't keep up with the cheaper ETFs on Wall Street.
Fidelity Real Estate Investment Portfolio
- Assets under management: $3.7 billion
- Dividend yield: 2.2%
- Expense ratio: 0.74%
Perhaps the sector fund that has the highest risk, but also the highest reward, in a bull market is the Fidelity Real Estate Investment Portfolio (FRESX, $38.77).
We learned the hard way during the financial crisis of 2008 that everyone is happy to pay rent and take on new mortgage debt during the good times, but that this part of the global economy can really sour in a hurry when people are out of work are simply not as confident about the future.
So far in 2020, FRESX has admittedly been on the ropes thanks to the uncertainty created by the coronavirus. However, with a long track record of both strong share appreciation and significant income potential from its real estate investment trusts (REITs), this might be a fund worth staking out as part of your bull market portfolio.
Consider that since the fund's inception in 1986, it has only logged seven total years of declines – a roughly 79% win rate. Furthermore, the mutual fund sports an above average yield of about 2.2% right now thanks to the steady stream of dividends from its real estate holdings.
With only 40 or so total positions, your investment is really centered on a handful of names like warehouse and logistics operator Prologis (PLD) or tech-focused real estate player Digital Realty Trust (DLR). This can be unfortunate when the market moves away from you, but it could really deliver outsized gains if and when the bull market returns in earnest.
Fidelity Worldwide Fund
- Assets under management: $2.2 billion
- Dividend yield: 0.6%
- Expense ratio: 0.99%
After exploring different sizes and sectors, another diversification tactic that could be worth pursuing during a bull market run would be to cast a wider net geographically to take advantage of the true scope of any global economic growth.
With the Fidelity Worldwide Fund (FWWFX, $30.76), that doesn't have to mean ignoring the U.S. either. Managers have about 60% of their assets behind domestic stocks you know and love, and they fill out the rest with international names.
Particularly in an all-world approach, the active management that the best Fidelity mutual funds are known for can really shine through. Consider, for instance, that FWWFX has allocated more than 34% to information technology stocks, while the popular MSCI World benchmark only allocates about 20% to this sector. Similarly, MSCI World has about 23% across its bottom five sectors including telecom, real estate, materials, utilities and energy, while Fidelity Worldwide puts a paltry 14% or so here.
With two experienced managers who have been at the fund for more than a decade – William Kennedy since 2006 and Stephen DuFour since 2007 – Worldwide knows a thing or two about how to harness performance in a bull market. Even in a choppy year like 2020, they can harness outperformance, as shown by the fund's 8% year-to-date return vs. a negative S&P 500 and MSCI All Country World Index.
Fidelity International Capital Appreciation Fund
- Assets under management: $4.0 billion
- Dividend yield: 0.6%
- Expense ratio: 1.01%
If you're looking for a global fund for the next bull market, however, the Fidelity International Capital Appreciation Fund (FIVFX, $23.52) provides an even stronger track record of outperformance. Consider that over the past 10 years, a $10,000 investment in this fund would have turned into roughly $28,000 vs. just under $16,500 for the MSCI all-world ex-U.S. benchmark.
Technically, FIVFX hasn't completely cut out American stocks with a 13% allocation of assets to domestic equity. But there's not a single U.S.-headquartered outfit in its top 10 holdings, and the names included tend to be clearly multinational operations like payments giant Visa or tech giant Microsoft.
According to Fidelity literature, the fund "employs a unique risk-managed portfolio construction process that attempts to optimize alpha (risk-adjusted excess return)." That means rather than adjusting security weights based on the manager's advice alone, the fund has a mandate to avoid dramatic fluctuations in any single position in the short term. That lends itself to a smoother ride as well as longer-term outperformance.
Fidelity Emerging Markets Fund
- Assets under management: $4.5 billion
- Dividend yield: 1.7%
- Expense ratio: 0.94%
If you're looking for growth, then Fidelity Emerging Markets Fund (FEMKX, $36.76) is among the best Fidelity funds you can buy. The fund has really hit its stride lately since a new manager, John Dance, joined in early 2019. The fund ranked in the top 2% of all emerging-market funds with a 33.7% total return in 2019, and it's in the top 10% year-to-date, returning 5.2% to easily trounce a negative category average. That has helped it win the coveted five-star rating from Morningstar, and plenty of investor attention as a result.
Emerging-markets stocks are tricky because they demand a different kind of research than conventional top-down fundamental analysis. The research team at FEMKX digs into regions such as China and Latin America to find the very best opportunities in this focused fund of about 90 total holdings, and isn't afraid to go big on the ones it likes. Consider that at present, 21% of total assets are in three Asian stocks: Tencent Holdings (TCEHY), Alibaba Group (BABA) and Taiwan Semiconductor Manufacturing (TSM).
Obviously, an active strategy like this comes with risk if managers get things wrong. But based on the track record, this Fidelity fund has what it takes to identify the best opportunities in the next bull market.
Fidelity Total Market Index Fund
- Assets under management: $46.4 billion
- Dividend yield: 1.9%
- Expense ratio: 0.015%
If all these options leave you a bit lukewarm and you'd rather simply "play the field" instead of picking a specific asset class or relying on a specific active manager, Fidelity does offer a powerful low-cost mutual fund option.
The Fidelity Total Market Index Fund (FSKAX, $89.32) is cheaper than many other broad-market funds with a mere 1.5 basis points charged in annual fees, adding up to a mere $1.50 annually on every $10,000 invested. In exchange, you get access to a wide swath of the U.S. stock market via almost 3,500 total holdings of all shapes and sizes. There's no international equity here; every cent of the fund is invested in U.S.-headquartered stocks. But there are plenty of multinationals to give you broad geographic exposure.
The low-cost index fund revolution is real for good reason, as stock markets generally tend to trend higher over time. And while Fidelity offers a host of actively managed mutual funds with a strong track record of outperformance, you could do worse than just look to this low-cost leader to capitalize on the bull market in a simple and effective way.
