Best Fidelity Index Funds: Top Picks For Your Portfolio

Index funds are a type of investment that aims to match the performance of a specific market index, like the S&P 500. They are popular among investors due to their low costs and built-in diversification. Index funds also offer a wide range of investment themes, allowing investors to combine them in different ways to create custom risk profiles. One well-known financial institution that provides index funds is Fidelity. In this article, we will discuss the advantages of investing in Fidelity index funds and provide a step-by-step guide on how to purchase them.

Fidelity 500 Index Fund (FXAIX)

The Fidelity 500 Index Fund (FXAIX) is a popular fund that provides investors with low-cost access to a high-quality portfolio. Tracking the S&P 500 index, it offers a diverse range of stocks from the 500 largest and most successful public companies in the United States. This index fund is an excellent choice for those seeking a single equity fund, providing an impressive long-term record.

With net assets of over $500 billion, an expense ratio of 0.015%, and a trailing 12-month yield of 1.4%average annual return of about 9% between 1993 and 2023, net of inflation and including dividends. The fund's inception date was February 17, 1988.

FXAIX is a solid option for investors who want to mirror the performance of the S&P 500, which is a widely recognised index of common stock prices. This fund is suitable for those who want to invest in a broad range of stocks with a single fund, often at a lower cost.

When considering this fund, it's important to align your investment goals and risk tolerance with the return characteristics and volatility of the index FXAIX tracks. Additionally, it's worth noting that some investors prefer to combine FXAIX with other funds, such as FZROX, to create a more tailored portfolio that includes both domestic and international stocks.

FXAIX is a well-established index fund within the Fidelity family, offering investors a straightforward way to invest in a diverse range of large and successful US companies.

Fidelity Mid Cap Index Fund (FSMDX)

FSMDX tracks the Russell Midcap Index, which includes the 800 smallest companies within the Russell 1000, excluding the top 20% of large-cap and mega-cap stocks. This means the fund focuses on investing in mid-sized businesses, which often have good growth potential and are reasonably well-established. By investing in FSMDX, you gain access to a diverse range of companies, as no single stock accounts for more than 0.67% of the portfolio. This protects shareholders from the failure of any individual company.

The fund's three-year average annual return was 2.4%, and it is designed to be a complementary addition to portfolios already holding large-cap stocks. With its strong performance, low fees, and diversification benefits, FSMDX is an attractive option for investors seeking exposure to mid-cap companies within the U.S. market.

Overall, FSMDX is a solid choice for investors looking for a well-diversified, low-cost fund with a focus on mid-cap companies. Its large asset base and low expense ratio make it a competitive option for those seeking long-term investment opportunities.

Fidelity Small Cap Index Fund (FSSNX)

The Fidelity Small Cap Index Fund (FSSNX) is a solid choice for investors seeking a well-diversified portfolio with growth potential. With net assets of $24.7 billion, this fund offers investors exposure to a broad range of small-cap stocks, providing a safer option compared to investing in individual small-cap companies.

FSSNX tracks the Russell 2000 Index, which includes the 2,000 smallest public US companies in the Russell Index. Investing in small-cap companies generally comes with higher risk due to their limited access to capital and higher reactivity to economic conditions. However, FSSNX mitigates this risk through its well-diversified portfolio, which holds nearly 2,000 stocks. As a result, the fund's performance is not heavily dependent on the success of any single company.

One of the key advantages of FSSNX is its low expense ratio of 0.025%, significantly lower than that of actively managed funds, which often have expense ratios of 0.50% or higher. This makes FSSNX an attractive option for investors looking to minimize costs without sacrificing growth potential.

In terms of performance, FSSNX has delivered a three-year average annual return of -3.1%. While this return is negative, it's important to consider the impact of market conditions on small-cap stocks. Small-cap companies tend to outperform their larger counterparts during certain timeframes, and the negative return experienced by FSSNX may be temporary.

Overall, FSSNX is a top choice for investors seeking exposure to small-cap stocks while maintaining a well-diversified and cost-effective portfolio. By investing in FSSNX, investors can benefit from the growth potential of small-cap companies while reducing the risks typically associated with this asset class.

Fidelity Global ex-U.S. Index Fund (FSGGX)

The Fidelity Global ex-U.S. Index Fund (FSGGX) is a solid choice for investors seeking international diversification and exposure to foreign markets. With net assets of $9.8 billion, this fund offers a low expense ratio of 0.055%, making it a cost-effective option.

FSGGX aims to replicate the performance of the MSCI ACWI (All Country World Index) ex USA Index by using a sampling strategy. This means it holds a diverse range of over 2,300 foreign large-cap stocks from Europe, emerging markets, Asia-Pacific, and Canada. Some well-known companies in its portfolio include Taiwan Semiconductor, Novo-Nordisk, and Toyota.

By investing in FSGGX, you gain access to different markets, currencies, and growth drivers compared to domestic equity funds. Additionally, the exclusion of U.S. stocks makes it a complementary addition to portfolios already holding U.S. equity funds. The fund has a three-year average annual return of 2.0%, demonstrating its potential for steady growth over time.

Overall, FSGGX is a top choice for investors seeking international diversification, low fees, and exposure to foreign large-cap stocks. Its sampling strategy effectively mirrors the performance of the underlying index, providing investors with a simple and efficient way to invest in international markets.

Fidelity Multi-Asset Index Fund (FFNOX)

The Fidelity Multi-Asset Index Fund (FFNOX) is a good choice for investors who don't want to manage multiple positions, define their own asset allocation, or rebalance their holdings. With an expense ratio of 0.06% (or 0.10% according to another source) and net assets of $7.8 billion (or $8.4 billion according to another source), it is a blended fund that holds a set composition of domestic and international stock and bond funds. The target allocation is:

• 24.2% developed market stocks
• 10.3% emerging market stocks
• 7.1% U.S. investment-grade bonds
• 4.8% long-term U.S. Treasury bonds
• 3.1% international bond funds

The fund fulfills this allocation using Fidelity funds. For example, the domestic equity exposure comes from the Fidelity 500 Index Fund (FXAIX) and the Fidelity Extended Market Index Fund (FSMAX).

FFNOX is a good option for younger or mid-age investors saving for retirement, as it has 85% stock exposure. Older investors may prefer a higher allocation of U.S. bonds to limit volatility.

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