Best Fidelity index mutual funds with top Morningstar rating. Highest performing Fidelity index funds for IRA investing: Spartan Total Market Index Fund (FSTMX), Fidelity Spartan 500 Index Fund-Investor Class (FUSEX), Fidelity Four-in-One Index Fund (FFNOX), Fidelity Spartan International Index Fund- Investor Class (FSIIX).
Fidelity Investments, one of the leading mutual fund companies in the nation, offers a wide range of index funds in stocks, bonds, and international assets. Below are the four top Fidelity index funds based on 10-year total return (not including two funds that were mentioned inBest Fidelity mutual funds review: the Fidelity NASDAQ Composite Index fund, and the Spartan Extended Market Index fund).
All funds have a $2,500 minimum initial investment, relatively low expense ratios, and no upfront transaction fees.
This fund is comprised of stocks found in the Dow Jones US Total Stock Market Index, which is an unmanaged, market capitalization-weighted index of more than 5000 actively traded US equities. These stocks are generally large-cap stocks and reflect a mix of valueoriented companies and growth companies. The fund may invest in foreign equities, but will normally invest at least 80% of its assets in US companies.
The funds 10-year annualized return is 8.01, a shade below its benchmark indexs return of 8.07%. This ranks FSTMX in the top 16% of funds in its category for overall return. The expense ratio is 0.10%, which ranks in the lowest 10% of fund expenses for its category. However, there is a short-term redemption fee of 0.50% on shares sold within 90 days of purchase. FSTMX has earned a 4-star rating from Morningstar.
Fidelity Spartan 500 Index Fund – Investor Class (FUSEX)
Fidelitys entry in the S&P-500 Index category is a top performer. The fund seeks to replicate the performance of the S&P-500 Index, perhaps the leading measure of stock market performance in the United States. An investors returns in this fund should track the overall returns of the stock market in up years as well as down years.
The 10-year annualized return for FUSEX is 7.78%, compared with 7.85% for its benchmark S&P 500 Index. This puts the fund in the top 22% of all funds in its category. The net expense ratio is 0.095%, which is more than 90% lower than the average expense ratio for the category. FUSEX has earned a 4-star rating from Morningstar.
Uncommon in the mutual fund world are funds made up of two or more mutual funds (a so-called fund of funds), which seek to achieve an overall return based on some measure of market diversification between asset classes such as stocks, bonds, real estate, and commodities. FFNOX is a fund comprised of four Fidelity index funds. The goal is broad diversification with an asset allocation strategy based on market indexes.
The four index funds that make up FFNOX are the Fidelity Spartan 500 Index Fund (FUSEX), the Fidelity Spartan Extended Market Index Fund (FSEMX), the Fidelity Spartan International Index Fund (FSIIX), and the Fidelity Spartan US Bond Index Fund (FBIDX). This combination provides asset diversification among three asset classes: US stocks, International stocks, and US bonds.
The risk of a fund like FFNOX comes with the decision on asset allocation. Bonds and stocks move independent of each other and often go in opposite directions. Being over weighted in stocks during a bull market is a positive, but when stocks are in a bear market, a stock-heavy mix will underperform a similar portfolio that has a higher allocation of bonds. In addition, international stocks may perform better or worse than US stocks over a given time frame. An investor in FFNOX must be willing to accept any underperformance of the fund based on misjudgments in asset allocation.
Currently, the asset allocation if FFNOX is 25% international index, 48% S&P 500 Index, 12% Extended Market Index, and 15% Bond Index. With only 15% in bonds, this fund is aggressively allocated compared with typical stock/bond allocations of 70%/30% or 60%/40%, so it is geared toward investors with a higher tolerance of return risk.
The 10-year annualized return of FFNOX is 6.50% compared with its benchmark of 6.66% and the S&P 500 Index return of 7.85%. The fund rates in the top 17% of its category according to Morningstar. The expense ratio is 0.22%, one of the lowest ratios in the funds category. FFNOX has earned a 4-star rating from Morningstar.
Fidelity Spartan International Index Fund – Investor Class (FSIIX)
Fidelitys International Index fund seeks to replicate the returns of the international stock market in general, excluding United States stocks. FSIIX will normally invest 80% of its assets in common stocks that comprise the Morgan Stanley Capital International Europe, Australasia, Far East (MSCI EAFE) Index. The stocks in this index are primarily large-cap stocks of foreign companies that are of similar size to the largest US companies.
The inherent risks of any international fund are currency risk combined with economic and geo-political risks in a given country. A fund such as FSIIX is suitable as a complementary fund to a portfolio that already has substantial exposure to domestic stocks.
The 10-year annualized return for FSIIX is 4.04%, compared with 4.21% for its benchmark index, the MSCI EAFE index. This return puts FSIIX in the top 41% of funds in its category. The expense ratio is 0.20%, which has crept up slightly in recent years but is still only about one-sixth that of the average expense ratio for its category. There is a 1.00% redemption fee for shares held less than 90 days. FSIIX has earned a 4-star rating from Morningstar.
Index funds are a viable option for most investors, but maximizing returns compared with benchmarks is difficult due to expense ratios. Fidelitys four top index funds over the past 10 years all have extremely low expenses, which is why savvy investors should seriously consider Fidelity Index funds for a diversified portfolio.
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