Fidelity Investments is one of the most recognizable investment companies in the world. Headquartered out of Boston, Fidelity has over 24 million individual investors. As of June 30, 2015, Fidelity has nearly $5.2 trillion in client assets under management (AUM), making it one of the top asset managers worldwide. Originally founded by Edward Johnson II in 1946, the company has grown exponentially in the last few years with the advent of the discount broker business model.

Fidelity Products and Services

Fidelity Investments has established itself as a “one-stop” shop for investors. The company prides itself on being technologically advanced, having a very consumer-friendly website and mobile application. Fidelity offers an online brokerage trading account with an average commission of $7.95 for U.S. equity trades. If an investor is interested in mutual funds, Fidelity has over 10,000 different funds from both Fidelity and other third-party companies. Fidelity clients are allowed to purchase certificates of deposit (CDs), bonds, exchange-traded funds ETFs and options, along with stocks and mutual funds. Clients are also eligible to purchase life insurance and annuities through Fidelity.

Outside of its extensive product lineup, Fidelity also offers its clients a variety of services. Beginning with its website, there is a wealth of information on matters of investing, retirement and estate planning. If a client is looking for stock or fund research, the website offers tons of analysts’ reports and breaking news updates. For its higher-net-worth investors looking for a personalized approach, Fidelity offers diversified portfolios through managed accounts.

Domestic Equity Funds

Fidelity has many different types of domestic equity funds, which are mutual funds invested in the U.S. stock market. Investors can narrow down a fund’s specific focus based on average market capitalization or investment style. For explanation purposes, only Fidelity-managed funds are mentioned.

Large-Cap Growth

Fidelity offers 10 different large-cap growth funds. Growth funds are traditionally invested in stocks expected to increase in capital value. Most of these companies are considered more volatile, as often these stocks trade with higher-than-average P/E ratios and expected earnings. Fidelity’s most popular growth fund is the Contrafund, which was started in 1967. Having a strong long-term track record, fund manager William Danoff has the fund invested in companies such as Google, Apple, Facebook and Starbucks. With a low expense ratio of 0.64% and over $111 billion in AUM, the Fidelity Contrafund is one of the largest equity funds in the world.

Large-Cap Value

Fidelity offers four different value funds, which are based on selecting companies deemed to be undervalued in price and likely to pay dividends. For example, the Fidelity Large Cap Value Enhanced Index Fund has a net expense ratio of 0.46% and a Morningstar rating of four stars. The fund is managed by Geode Capital Management and has several well-known stocks such as Exxon Mobil, Wells Fargo and Procter & Gamble as its top 10 holdings.

Large-Cap Core

If an investor desires a mix of both growth and value stocks, then a blend-style fund is an appropriate choice. As of December 2015, Fidelity offers four different large-core funds in its lineup. Fidelity’s only five-star Morningstar fund is the Large Cap Core Enhanced Index Fund. With an expense ratio of 0.45%, the fund invests in a mix of both investment styles. With Geode Capital Management at the helm, investors can gain access to growth stocks such as Apple and Pfizer, as well as value stocks such as JPMorgan and Johnson & Johnson.

Mid-Cap Growth

Mid-cap funds specialize in companies that have market capitalizations between $2 billion and $10 billion in size. Although historically more volatile than the large-cap sector, mid-cap stocks have higher long-term returns. In the growth portion of the mid-cap lineup, Fidelity offers three strategies. The Fidelity Mid Cap Stock Fund has a Morningstar rating of four stars with an expense ratio of 0.76%. Under manager John Roth, the fund has performed very well. Over the last 10 years, the fund has had a return of 8.02%, which is 0.5% better than the Mid-Cap Growth benchmark index.

Mid-Cap Value

In the value arena for mid-cap stocks, Fidelity has four different funds to consider. The best-rated and best-performing fund is the Fidelity Low-Priced Stock Fund. Management, led by Joel Tillinghast, has one goal: capital appreciation with stocks priced below $35 or less. This philosophy has led to the fund outperforming the benchmark in every time period. This track record, mixed with a low expense ratio of 0.79%, should be attractive to investors looking for exposure to this investment style.

Mid-Cap Core

Fidelity’s best fund out of the five available in the mid-cap core area is the Mid Cap Enhanced Index Fund. This fund is rated five stars by Morningstar and has a net expense ratio of 0.61%. It is considered a mid-cap blend, incorporating growth stocks such as Electronic Arts with value stocks such as PPL Corporation.

Small-Cap Funds

Small-cap funds invest in small companies that have less than $2 billion in market capitalization. These companies are generally of the startup nature and tend to be highly speculative, made for investors seeking high rewards with high risks. Fidelity offers only four small-cap core funds and one small-cap growth fund. The best-performing core fund is the Fidelity Small Cap Enhanced Index Fund. The fund is rated four stars and is managed by Geode Capital Management. Although it does not have a long-term track record, it has done well since inception in 2007. It has an average annual five-year return of 14.08%, which is 3.1% higher than the small blend benchmark.

Fidelity’s one true small-cap growth fund is the Fidelity Small Cap Growth Fund. The fund has an expense ratio of 0.92% and has been managed by Patrick Venanzi since 2011. Most of the companies the fund invests in have very low volumes and little-to-no analyst research. This fund invests in companies such as G-III Apparel and Global Payments within its top 10 holdings.

Go Anywhere/Income Funds

Outside of the traditional asset class and investment style funds, Fidelity offers funds classified as “go anywhere” and “income-oriented.” A very popular fund is the Fidelity Magellan Fund which has been around since 1963. This fund has a goal to seek capital appreciation and can invest in any equity investment asset class or investment style. Morningstar categorizes it as a large-cap growth fund, but the fund has the ability to switch to a value or blend at a moment’s notice.

For those investors seeking dividends, the income-oriented funds are the best choice. Considered a large-cap value fund, the Fidelity Equity Dividend Income Fund has a current yield of 2.34%. The objective of this fund is to seek reasonable income, with the ultimate goal of capital appreciation.

International Equity Funds

Fidelity gives its clients plenty of options for investing on an international level. This is a great benefit to investors, as they can rely on the expertise of Fidelity’s money managers instead of trying to perform their own due diligence. There are four categories of international mutual funds: core; regional and single country; global; and emerging markets. The core portion invests in companies outside the United States, primarily in developed areas such as Europe and Asia. The Fidelity Diversified International Fund is considered a foreign large-growth fund with an expense ratio of 0.91%. The fund invests in international companies such as Bayer AG, Sanofi and Lloyds Banking Group.

Along with the core portfolio of funds, investors can get more specific according to regions or countries. Fidelity offers country-specific funds such as the Fidelity Japan or China Region funds. For investors looking to gain exposure to smaller, undeveloped areas, the emerging markets funds is an excellent choice.

Index/Sector Funds

Similar to an ETF, Fidelity offers both index- and sector-specific mutual funds. Sector funds can invest in an overall sector such as consumer discretionary or health care companies. Fidelity even offers more in-depth funds within a sector, such as the Fidelity Select Biotechnology Portfolio. This fund only invests in companies in the biotechnology sector such as Gilead Sciences and Biogen. If an investor is looking for overall diversification and wants to mirror a major index, Fidelity also offers a variety of these funds. Its “Spartan” series mirrors indexes such as the S&P 500 and NASDAQ Composite. It also mirrors international indexes or indexes tied to market capitalization.

Summary of Fidelity Equity Funds

Overall, Fidelity Investments has the most extensive selection of equity mutual funds in the industry. With so many different choices, it may be difficult for an investor to select the appropriate options. It is important to understand risk tolerance and how it relates to an investor’s portfolio. Fidelity offers a variety of resources in the “Guidance & Retirement” section of its website. This area should provide plenty of information for a novice investor on how to properly asset allocate a portfolio.

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