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By Kent Thune
| September 6, 2017
If you’re looking for the best Fidelity funds to buy now, smart selection criteria will include long-term performance potential as well as short-term trends for the rest of 2017.
When putting together a list of funds to buy, it’s not wise to chase after whatever is the hottest idea of the day.
Instead, a solid portfolio of mutual funds should include a combination of core holdings that will receive the largest allocation percentages, along with some satellite holdings to help juice returns while adding diversification.
The best funds to use for core holdings are usually index funds investing in U.S. securities and smart satellite holdings will usually consist of international stock funds and sector funds.
In our list of the best Fidelity funds to buy now, we’ll include a combination of outstanding index funds and some of their best actively managed funds to fill in the satellite spaces.
Prices and data are from the original InvestorPlace story published on August 30, 2017. Click on ticker-symbol links in each slide for current prices and more.
Expenses: 0.09%, or $9 annually per every $10,000 invested
Minimum initial investment: $2,500
One of the cheapest index funds on the market is Fidelity 500 Index, which makes for an outstanding core fund to buy now and for the long run.
Capital markets are difficult, if not impossible, to predict in the short run. This uncertainty is what makes diversified funds like FUSEX smart choices now.
Also, cheap index funds tend to outperform the more expensive actively managed funds in the long run. This combination of advantages makes FUSEX a smart investment choice for most investors.
FUSEX keeps cost low by passively tracking the S&P 500 Index. This includes roughly 500 stocks of the largest U.S. companies like Apple Inc. (AAPL), Microsoft Corporation (MSFT) and Amazon.com, Inc. (AMZN).
Sometimes the cheapest core bond funds are not the best and Fidelity Total Bond is a prime example of this.
FTBFX can be considered an enhanced index fund, which is to say that it doesn’t tightly track a benchmark index but instead uses the index. In this case, it uses the Bloomberg Barclays U.S. Universal Bond Index, as a guide.
This combination of diversity and manager discretion is especially wise in today’s environment of rising interest rates and has enabled FTBFX to beat the broad bond market indices in both the short term and in the long run.
International stocks are smart long-term holdings and they’re broadly beating U.S. stocks in 2017, which makes now a good time to hold funds like Fidelity Overseas in your portfolio.
Although the market environment has favored international stocks lately, and will likely continue with that momentum for the foreseeable future, now is not an ideal time for heavy exposure to emerging markets stocks.
The FOSFX portfolio leans more toward large-cap European stocks like top holdings Nestle SA (NSRGF), Bayer AG (BAYRY), and Unilever plc (UL). These are the kind of international stocks that may prove to be the best to hold now.
Increasing potential for volatile markets makes well-managed funds like Fidelity Low-Priced Stock smart holdings now and for the long term.
The legendary fund manager, Joel Tillinghast, has been at the helm of FLPSX since the fund’s inception date of Dec. 27, 1989. Its long-term returns outpace the S&P 500 and the past few months have shown a similar edge over the broad market.
The average market cap for FLPSX makes it a mid-cap stock fund but it has a go-anywhere style, which means shareholders get exposure to large-caps like UnitedHealth Group Inc. (UNH) and Seagate Technology PLC (STX).
Not to mention mid-caps like Best Buy Co Inc. (BBY), as well as small-cap stocks, all of which can be from anywhere around the globe.
Health sector funds like Fidelity Select Biotechnology (FBIOX) can be winners in the short term and in long run.
Although biotech stocks can be volatile short-term holdings, the best mutual funds in this health sub-sector are smashing the S&P 500 in 2017, as well as for long-term returns.
FBIOX has been a leader among health sector funds, featuring big biotech stalwarts such as Amgen Inc. (AMGN), Regeneron Pharmaceuticals (REGN) and Celgene Corp. (CELG).
As covered on our list of best sector funds to hold for the rest of 2017, Fidelity Select Defense & Aerospace Portfolio is a sector fund that looks to be a leader this year and beyond.
FSDAX is a top performer among funds that invest in defense and aerospace stocks like Northrop Grumman Corp. (NOC), General Dynamics Corporation (GD) and United Technologies Corp. (UTX).
The escalation of international saber rattling combined with other geopolitical challenges could keep defense stock sector funds like FSDAX among the top performers in the short term, but it can also help diversify your portfolio over the long term.
The current economic environment appears ripe for Treasury inflation-protected security (TIPS) funds, which makes now a good time to hold Fidelity Inflation-Protected Bond.
The best time to buy TIPS funds is generally when inflation is relatively low but expected to pick up during the holding period. Based upon what the 10-year Treasury bond is forecasting, expectations for inflation over the next decade are between 2% and 2.5%.
Since the average rate of long-term inflation is higher, at around 3%, TIPS are arguably a value now. In addition, many advisers recommend making TIPS funds a permanent fixture in a long-term portfolio.
This article is from Kent Thune of InvestorPlace. As of this writing, he did not hold any of the aforementioned securities.
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