Fidelity's mutual fund operations, which date back to 1946, are split into two separate operations. The first is a family of mutual fund products under the umbrella of Fidelity Investments. The second, the three-division Fidelity Management & Research Company, is the acting investment advisor to all Fidelity funds. The company is headquartered in Boston, Massachusetts, but it has operations across the world.

Fidelity's financial statements for Q2 2015 list its assets under administration to be greater than $5.2 trillion, with assets under management (AUM) of greater than $2.1 trillion, making it one of the largest investment managers in the United States. Globally, Fidelity is the second-largest mutual fund and financial services group in terms of managed assets.

Ned Johnson, son of founder Edward Johnson II, is the chairman of Fidelity Investments. The Johnson family controls 49% of the company shares among multiple members, but always votes as a block.

Fidelity Mutual Fund Investment Philosophy

There are two themes that separate Fidelity's mutual fund investment philosophy from its chief competitors: global research and strategic diversity. That's not to say that other companies don't aim for diversity or don't have excellent research capabilities; it's just that no other company so actively markets the themes of proprietary research and diverse choices.

On its official company website, Fidelity openly states its disagreement with both the Efficient Market Hypothesis (EMH) and Modern Portfolio Theory (MPT). The company doesn't expect markets to always price every security correctly, which means that skilled managers and good research are necessary to spot and adapt to mispriced stocks.

In fact, Fidelity uses the word "research" about as often as any other noun on its investment philosophy page. The Fidelity research approach is hands on and very fundamental in nature, meaning on-the-scene contact with companies combined with a broad-level review of each sector. Fidelity scours senior management, production lines, distribution routes, outlets and every line of integration to find unpriced or mispriced value plays.

Fidelity's portfolio managers are given more ideological flexibility than other companies' investment managers. Each Fidelity portfolio is backed by the company's impressive research divisions, but otherwise, the managers are left alone to seek returns as they see fit. Fidelity believes in strength through dynamism, diversity and flexibility—and investors receive the added bonus of a colorful range of choices.

The Fidelity website is an excellent place to search funds and trade many of them (mostly Fidelity offerings) without any transaction fees. The nice thing about the openness of Fidelity is that you can easily compare returns, Morningstar ratings, fees and other information among more than 10,000 funds.

Asset Classes Offered

Few come close to competing with the breadth of Fidelity's mutual fund offerings. As of December, 2015, Morningstar lists more than 350 different Fidelity mutual funds. The Fidelity website divides these funds into seven large asset groups (Domestic Equity, International Equity, Sectors, Fixed Income, Asset Allocation, Index and Money Market) and more than 40 subgroups.

For those familiar with the Morningstar style box, Fidelity offers equity funds in each of the nine spaces. Even though the Fidelity website does a good job codifying its offerings, the Morningstar website is better for those who are looking for a specific type of fund and are more comfortable with the style box.

In its Domestic Equity category, Fidelity presents dozens of mutual funds and separates them into the following categories: large value, large blend, large growth, small/mid value, small/mid blend, small/mid growth, income-oriented, go-anywhere and diversifiers. International Equity is a smaller segment, with 25 different funds across four subcategories: core international, regional & single country, global, and emerging markets.

Other equity options are split into the Sector and Index categories. Sector investors can pick mutual funds in discretionary, consumer staples, energy, health care, industrials, financials, information technology, utilities, telecommunications, real estate and materials.

Index funds are segregated very simply. The company has 20 equity funds divided into domestic stock and international stock lines.

Blended or balanced investors who want a mix of equity and fixed income can select from Fidelity Asset Allocation funds. These tend to be organized by volatility and risk; generally speaking, riskier funds have greater equity exposure and less risky funds have greater bond exposure.

Standout Funds

Naturally, Fidelity's huge product line covers nearly every type of investment and has performance grades across the board. Morningstar is a big fan of many of Fidelity's funds; as of December, 2015, there were 18 Fidelity mutual funds with five-star overall Morningstar ratings. Of those 18 funds, nine were pure equity plays (meaning no bond exposure), and another four funds had blends of stocks and bonds.

Five of the 18 Fidelity five-star funds also ranked in the top 5% for 1-year performance. Three of those five were pure equity plays: the Fidelity Select IT Services Portfolio Fund, the Fidelity Select Retailing Portfolio Fund and the Fidelity Select Biotechnology Fund. The Fidelity Select Retailing Portfolio Fund and the Fidelity Select Biotechnology Fund each ranked in the top 1% for 3-year, 5-year and 10-year performance. If you go by Morningstar methodology—which isn't exactly infallible—these two mutual funds are the strongest equity funds in the Fidelity lineup (at least in terms of past performance and current momentum).

Only one Fidelity income fund can boast a five-star lifetime rating and a top 5% 1-year ranking from Morningstar: the Fidelity Michigan Municipal Income Fund. Even though it has never ranked in the top 1% of performers, it does carry impressive rankings in the 3-year (top 3%), 5-year (top 6%) and 10-year (top 3%) performance categories.

Of course, Morningstar isn't the end-all in mutual fund selection. Many fidelity funds are outstanding and well-run that don't rank as highly through the Morningstar system.

The Fidelity International Growth Fund is a few years old and has averaged an annualized total return of nearly 17% since 2011. The fees are high—which ding it in the eyes of many—but it's diverse, well-run and a great satellite or core for those looking for international exposure.

The Fidelity New Millennium Fund has been an even stronger performer in recent years than the International Growth Fund. It also charges lower fees and was named one of Kiplinger's top 25 no-load funds in recent years.

Of course, investors should always take a look at the Fidelity Capital & Income Fund. It's a huge, conservative fund with a long track record and is easily one of the company's most proud flagships. The Fidelity Contrafund is the largest single-manager mutual fund in the U.S. with more than $111 billion in net assets and a five-star Morningstar rating.

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