Investing in index funds is a popular strategy for those seeking broad market exposure, low costs, and solid returns. Fidelity offers a suite of index funds that cater to various investment needs. Here, we highlight our top five Fidelity index funds, explaining why they are worth considering for your portfolio. Additionally, we provide recommended portfolio allocations for different levels of diversification.
1. Fidelity 500 Index Fund (FXAIX)
Features and Benefits:
- Expense Ratio: 0.015%
- Objective: Provides investment results that correspond to the total return of the S&P 500 Index.
- Why Own It: This fund offers exposure to 500 of the largest U.S. companies, making it a cornerstone for any portfolio. It’s a cost-effective way to invest in established, blue-chip stocks, providing stability and growth potential.
2. Fidelity Total Market Index Fund (FSKAX)
Features and Benefits:
- Expense Ratio: 0.015%
- Objective: Seeks to provide investment results that correspond to the total return of the entire U.S. stock market.
- Why Own It: FSKAX includes small-, mid-, and large-cap stocks, offering comprehensive exposure to the U.S. equity market. It’s ideal for investors looking for diversification across different market capitalizations.
3. Fidelity U.S. Bond Index Fund (FXNAX)
Features and Benefits:
- Expense Ratio: 0.025%
- Objective: Provides investment results that correspond to the aggregate price and yield performance of the U.S. investment-grade bond market.
- Why Own It: This fund offers a diversified portfolio of U.S. investment-grade bonds, making it suitable for those seeking income and stability. It helps balance the risk of a stock-heavy portfolio.
4. Fidelity International Index Fund (FSPSX)
Features and Benefits:
- Expense Ratio: 0.035%
- Objective: Seeks to provide investment results that correspond to the total return of foreign developed market stocks.
- Why Own It: FSPSX provides exposure to large- and mid-cap stocks in developed markets outside the U.S., such as Europe, Japan, and Australia. It’s perfect for investors looking to diversify globally and reduce home country bias.
5. Fidelity Extended Market Index Fund (FSMAX)
Features and Benefits:
- Expense Ratio: 0.036%
- Objective: Seeks to provide investment results that correspond to the total return of the Dow Jones U.S. Completion Total Stock Market Index.
- Why Own It: This fund complements an S&P 500 fund by including mid- and small-cap stocks not covered in the S&P 500, providing more complete market exposure and additional growth potential.
Recommended Portfolios
Single Fund Portfolio:
- 100% Fidelity Total Market Index Fund (FSKAX)
- Comprehensive U.S. market exposure across all capitalizations.
Two Fund Portfolio:
- 70% Fidelity 500 Index Fund (FXAIX)
- 30% Fidelity U.S. Bond Index Fund (FXNAX)
- Balances equity growth with bond stability.
Three Fund Portfolio:
- 60% Fidelity 500 Index Fund (FXAIX)
- 20% Fidelity International Index Fund (FSPSX)
- 20% Fidelity U.S. Bond Index Fund (FXNAX)
- Adds international diversification for enhanced global exposure.
Four Fund Portfolio:
- 50% Fidelity 500 Index Fund (FXAIX)
- 20% Fidelity International Index Fund (FSPSX)
- 20% Fidelity U.S. Bond Index Fund (FXNAX)
- 10% Fidelity Extended Market Index Fund (FSMAX)
- Complements large-cap stocks with mid- and small-cap exposure.
Five Fund Portfolio:
- 40% Fidelity 500 Index Fund (FXAIX)
- 20% Fidelity Total Market Index Fund (FSKAX)
- 20% Fidelity International Index Fund (FSPSX)
- 10% Fidelity U.S. Bond Index Fund (FXNAX)
- 10% Fidelity Extended Market Index Fund (FSMAX)
- Offers a well-rounded mix of U.S. large-cap, total market, international, bonds, and extended market exposure for a balanced and diversified portfolio.
These Fidelity index funds provide a strong foundation for any investment strategy, offering a blend of growth, income, and diversification. Whether you are just starting or looking to optimize your portfolio, these funds are worth considering.