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5 Best Fidelity Index Funds To Buy and Hold Forever - YouTube
Channel: Jarrad Morrow
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in this video i'm gonna go through the
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five best fidelity funds to buy and hold
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forever now you're going to notice that
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all of the fidelity zero index funds are
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missing from this top five because they
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aren't really what they appear to be on
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the surface later in the video i'll send
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you to another video i made uncovering
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their dirty little secret first up is
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the fidelity 500 index fund fx iax
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there's only a few funds that i would
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consider a foundational fund that most
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people should hold and if you prefer
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fidelity funds then this would be one of
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them fx aix tracks the s p 500 which is
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made up of the 500 largest u.s stocks
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based on market cap all the market cap
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is is the total number of outstanding
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shares multiplied by the price of the
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stock these 500 stocks represent about
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80 percent of the us market cap so these
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companies are what really moves the
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price of the overall stock market to put
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it into perspective there's about 4 300
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publicly traded u.s stocks that means
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once we remove the largest 500 the
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remaining 3 800 only account for 20 of
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the total u.s market cap everyone loves
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to talk about the upside potential and
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we'll cover that in just a minute but i
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personally like to call out the
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downsides as well because what you do
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during those times will have the biggest
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impact on your future returns because
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the fidelity 500 fund has only been
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around since 2011 we'll be looking at
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the s p 500 drawdowns to get a larger
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sample size the largest drawdown started
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in 2007 due to the financial crisis this
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fund would have seen a 51 drawdown which
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means that if you had one million
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dollars invested then at one point it
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would have been down to 490 000 this
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portion of your portfolio would have
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taken about three and a half years to
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recover the next largest drawdown was in
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2000 where it had a drawdown of 45
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and took a little over four years to
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recover the third largest drawdown was
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in 2020 due to the health crisis where
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that drawdown was 20
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and took four months to recover a
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four-month recovery period is comical so
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do not expect that happening in the
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future because they're not very common
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although past returns are irrelevant
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because we are investing for the future
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they're always good to be aware of after
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taxes and sales fx aix has had a
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one-year return of 9.5 percent
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three-year return of 15
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5-year return of 13
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and 10-year return of 12 this is one of
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the lowest cost s p 500 index funds
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coming in at an expense ratio of 0.015
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percent per year for every 1 000
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invested you're only paying 15 cents per
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year fees are everything with investing
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because they eat into your returns so
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keeping these as low as possible is
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extremely important if you look at the
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sector breakdown 28 of this fund is held
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in technology followed by financial
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services health care and consumer
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cyclical while some might say that it's
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overweight in technology that's only
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because those companies are so dominant
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this is the nice thing about a fund that
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tracks an index there's no opinions
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about what should or shouldn't be added
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because the market and size of the
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business determines that for you if the
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businesses in one sector start to shrink
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in size then this fund will reflect that
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and replace those stocks with what
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should be there the top 10 holdings are
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made up of a ton of companies most of
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you recognize
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apple microsoft amazon and alphabet
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these 10 make up about 30 of the total
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fidelity 500 portfolio which is
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perfectly fine because they're all solid
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companies and when they eventually
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shrink in size they'll automatically
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fall down this list and be replaced with
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the next best company the fidelity 500
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index is for anyone who is looking to
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match the performance of those largest
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u.s companies because they make up 80
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percent of the total u.s market cap
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they're what really moves the market
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this index fund has a nice mix of large
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cap stocks that are at the upper limit
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between value and growth with a leaning
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more towards growth stocks this is good
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if you're looking to invest for
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portfolio growth with the safety that
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comes along with those larger more
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stable companies if we take a look at
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the stock weighting 39 percent are large
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cap growth 26
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are large cap blend and 19 are large cap
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value the downside of this fund is that
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you're missing out on those mid and
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smaller calf stocks while it's not a
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huge downside it's still something to be
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aware of if you are enjoying this video
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so far then help support my dog molly
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and this channel by hitting that thumbs
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up button if you are someone who wants
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to take advantage of those 500 stocks
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plus the additional thousands of stocks
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traded on the stock market then you'd
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want to think about investing in the
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fidelity total market index fund
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fskax before we get too deep into it
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i'll have to admit that i am biased
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towards this fund and any other total
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u.s stock market index fund so keep that
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in mind while i'm going through this one
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specifically fskax does exactly what the
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name says invests in the total u.s stock
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market that means your money is invested
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among pretty much every u.s based stock
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out there at this point it's made up of
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a little over 4 000 companies and
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growing every year as more businesses go
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public since it holds that many stocks
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your money is diversified among large
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mid and small cap companies when you
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invest in an index fund like this you're
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betting on the future of the us as a
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whole i know there's a lot of tinfoil
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hat people out there who are all doom
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and gloom about the future of america
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but as long as the businesses behind
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these stocks are continuing to innovate
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make money and grow there's nothing to
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worry about there are naturally going to
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be a ton of losers among these 4 000
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stocks so that's why it can be
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beneficial to place bets across the
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board by investing in this type of fund
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after taxes on distributions and sale of
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fund shares it's had a one year return
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of seven percent three year return of
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fourteen percent
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five year return of twelve percent and a
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10-year return of almost 12 this index
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fund is extremely low cost coming in at
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an expense ratio of 0.015
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per year that means for every 1 000
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invested you're only paying 15 cents per
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year looking at the sector breakdown of
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the total market index fund technology
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is once again dominating at 27 of this
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fund the rest of the breakdown is pretty
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similar to the fidelity 500 fund with
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health care at 13
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consumer discretionary at close to 12
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percent and financials at close to 12
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percent as well within the top 10 of the
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fidelity total market index fund we see
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a ton of names that we recognize the
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exact same companies within this top 10
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are in the top 10 of the fidelity 500
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fund as well the only difference is how
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much money is allocated to each company
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with the fidelity 500 fund 29
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was in the top 10. within the fidelity
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total market index fund there's only
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about 25 allocated to those top 10. a
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lot of this has to do with the fact that
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fskax has over 4 000 companies to spread
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your money across while the 500 fund
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only has to spread your money across of
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course 500 companies the fidelity total
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market index fund is for the person who
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wants the stability that comes with
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investing in those biggest 500 companies
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while still gaining exposure to those up
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and coming mid and small cap stocks as
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well as you can see this index fund is
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considered a blend between value and
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growth stocks with a tilt more towards
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growth while most of the weighting is in
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the large cap area we see that about 18
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percent is in mid caps and 9 is in small
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cap stocks just like the fidelity 500
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index fund the total market fund is one
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of the foundational funds that should be
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a part of everyone's portfolio in some
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form i personally don't think it makes
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sense to hold both of them at the same
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time because there is some portfolio
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overlap once you have your us
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investments covered the next best fund
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is the fidelity total international
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index fund
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ftihx and this fund is currently made up
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of over 5000 stocks the fidelity total
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international index fund is just like
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the total u.s index fund except the
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international fund holds stocks that
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exist outside of the united states this
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fund seeks to provide investment results
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that match the total return of foreign
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developed and emerging stock markets
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ftihx specifically tracks the msci all
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country world index xus which covers
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about 85 percent of global equities
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outside of the united states by
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investing in ftihx your money is
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diversified among different countries
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regions sectors and even currencies
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since this fund has only been around
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since 2016 i looked at the drawdowns
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from a global xus stock portfolio the
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largest drawdown started in 2007 of
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course due to the financial crisis and
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ended up down 58
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it took a little over eight years to
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recover the next largest drawdown
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started in 2000 due to the dot-com crash
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where it dropped by 47
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and it took about two and a half years
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to recover the third largest drawdown
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was in 1990 where it saw a max drawdown
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of 31 percent and took three years and
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four months to recover one year returns
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are negative one percent three-year
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returns are six percent and five-year
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returns are five percent since this is a
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newer fund we don't have enough data to
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get out to the 10-year returns the
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expense for this total international
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fund is one of the lowest in the
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industry coming in at point zero six
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percent that means for every one
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thousand dollars invested you'll only
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pay 60 cents per year the sector
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breakdown is a lot different when we
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compare it to those first two u.s funds
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that we looked at for this international
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fund we can see that the majority of the
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holdings are in financials at an almost
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19 percent allocation followed by
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industrials tech then consumer
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discretionary the top 10 holdings only
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make up less than 10 percent of the
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overall holdings which is night and day
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compared to the first two us funds that
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we looked at for those us funds if you
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don't remember the top 10 made up about
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30 percent of the holdings i don't see
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an issue with this because there's a
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little more risk when investing in
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companies outside of the united states a
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lot of these companies you probably
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recognize but once we get out of these
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top 10 you probably don't recognize a
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lot of the companies within this index
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fund when we look at region breakdown
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about 70 of the money is diversified
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among european and emerging market
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companies the fidelity total
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international index is perfect for
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someone who wants to get that broad
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exposure to anything outside of the us
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as with any stock-based index funds
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there are many risks to be aware of
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those can range from political
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economical regulations currency and
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interest rate risk the good news is that
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ftihx is more concentrated in stocks
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that are larger with a blended mix
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between value and growth the fidelity
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u.s bond index fund fx nax is perfect
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for the conservative side of your
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portfolio at this point it has about 8
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400 holdings from 593 issuers it tracks
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the bloomberg u.s aggregate bond index
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which holds a mixture of u.s treasuries
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corporate bonds and mortgage-backed
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securities tax drawdowns for bond index
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funds look drastically different from
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stock-based index funds which is exactly
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how things should look the largest
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drawdown started at the end of 2020
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where it was down
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7.77
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and it still hasn't recovered the second
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largest was in 2013 where it went down
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3.87
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and took nine months to recover the
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third largest was in 2016 where it was
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down 3.5 percent and it took nine months
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to recover for a one-year period this
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fund is down 2.74
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three-year returns are at 0.87 percent
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five-year returns are at 1.08 percent
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and the 10-year return is at 1.21
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percent the fidelity total u.s bond fund
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is extremely low cost at .025 percent
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per year that means for every one
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thousand dollars invested you're paying
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25 cents this bond index is mainly
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diversified among three different types
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of bonds 39 is in u.s treasuries 27 are
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in mortgage-backed security pass-through
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bonds and 24 are in corporate bonds if
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you're someone who is building a
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three-funded portfolio then you're going
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to need a bond fund now this is a great
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index fund to fill the gap in that type
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of strategy don't sleep on bonds because
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they still serve the same purpose as
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they always have to reduce volatility
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within your portfolio now this is
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especially needed when you're getting
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closer to retirement i'll have my three
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fund portfolio video linked up down in
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the description above my head and at the
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end of this video as well real estate
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has had great returns over the years so
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if you're looking to gain more exposure
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to that asset class on the fidelity
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investment platform then the fidelity
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real estate index fund fsrnx is the one
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that i prefer time out real quick
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because after reviewing my notes on this
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one i'm calling an audible in the middle
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of this recording to pull this one off
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of my top five list this fund isn't
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tracking the underlying index as well as
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i thought it was on top of that the fund
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manager is trading the underlying stocks
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like it's an actively managed fund which
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could result in higher trading costs for
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investors like you the turnover rate is
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53 for this fund this basically means
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that they're buying and selling off 53
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of the holdings within a 12-month period
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compare that to the vanguard real estate
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index etf where the turnover is only 7
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and i cannot with good conscience
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recommend the fidelity real estate index
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fund if you want a real estate fund on
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the fidelity platform then go with the
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vanguard version vnq be honest i don't
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like any of the other fidelity funds
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either so i don't have a replacement for
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their real estate fund don't forget to
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hit that thumbs up button before you go
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my video on why you should avoid the
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fidelity zero fee index funds will be
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linked to your left and in the
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description of this video a couple of
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days after this one's released if you
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prefer vanguard funds that you can
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purchase on the fidelity investment
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platform then to your left i'll also
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have my top 5 video on those
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