These are 2021’s best Fidelity mutual funds by performance.
Investing for retirement means playing the long game, whether you use an IRA, a Roth IRA or a 401(k) plan. But it can be helpful to understand why your portfolio moves the way it does over the shorter term, especially as you get closer to retirement. A look at the best-performing Fidelity mutual funds over the past year shows a microcosm of what’s been happening with the wider market and may provide a few snapshots of what’s in store this year as 2021’s main themes of economic reopening, supply chain disruptions and rising interest rates continue. Here’s a look at the eight best Fidelity funds based solely on their performance over the last year through Dec. 31. “As a broad stroke, all of these funds benefited from the reopening of the economy after the COVID shutdowns, overall supply chain shortages and distribution issues and increased demand based on post-pandemic lifestyle choices,” says Faron Daugs, CEO of Harrison Wallace Financial Group.
Fidelity Select Semiconductors Portfolio (ticker: FSELX)
A global semiconductor shortage emerged as demand for chips increased amid the economic rebound but supply didn’t keep up. That’s been a headache for users of computer chips, such as the automobile industry and consumer electronics companies. But the rising prices that have accompanied the shortage have been great for semiconductor producers. The fund has been around since 1985, so it’s seen plenty of the ups and downs in the evolution of the microchip, a key contributor to modern life. It could be worth holding on to for a while, but don’t expect the fund to have as good of a year in 2022, as the supply-and-demand snarl will probably get at least somewhat worked out.
1-year return: 59.19%
Expense ratio: 0.70%
Fidelity Select Construction and Housing Portfolio (FSHOX)
People wanted to buy houses to take advantage of low mortgage rates in 2021. At the same time, people wanted to buy new homes to get more space for social distancing during the pandemic, which made urban shopping and dining less attractive. Meanwhile, the economic uncertainty of the recession made some people nervous about selling their home, and home showings dipped, helping keep supply tight while demand rose. “Housing inventories dried up while home buyers that were now working remotely shopped for houses with more space,” Daugs says. With that kind of demand, it wasn’t just homebuilders that benefited. So did two of the fund’s top holdings, Home Depot Inc. (HD) and Lowe’s Companies Inc. (LOW), which provide building materials.
1-year return: 57.55%
Expense ratio: 0.78%
Fidelity Select Energy Portfolio (FSENX)
Along with other commodities, oil and natural gas prices have been on the rise because of higher demand and supply that hasn’t kept up. Fossil fuel producers have been carefully managing how much supply to add to the market and curtailing spending on exploration amid pressure from investors, activists and politicians. “Energy not only experienced increased demand but reduced supply after policy changes shut down pipelines and access to other energy sources,” Daugs says. All of that is great for the price of fossil fuels and the stock of companies that produce them. “If the reopening can actually continue without too many restrictions, demand for energy will continue, which could be good for the energy stocks,” Daugs says. “However, my concern there is that if supply does not increase, energy inflation will hit the consumer harder, which could put an overall damper on demand.”
1-year return: 55.35%
Expense ratio: 0.85%
Fidelity Real Estate Investment Portfolio (FRESX)
This fund’s largest allocations are in infrastructure, industrial and data centers. Data centers were in need like never before during the pandemic as more people shopped, worked, socialized and entertained themselves online. Meanwhile, infrastructure has been a priority in Washington, with the recent signing of the $1.2 trillion infrastructure package. “Real estate could continue to benefit from the reopening if employees actually need to start going back to the office,” Daugs says. “I believe the commercial real estate sector is going to be going through a big transition over the next few years as it adjusts inventory to the new work environment.”
1-year return: 42.35%
Expense ratio: 0.73%
Fidelity Real Estate Index Fund (FSRNX)
This real estate fund is much less expensive because it tracks an index, yet its performance is pretty close to that of the previous fund. While its top two areas of exposure are also infrastructure and industrial, its third-biggest is apartments, which could benefit if people opt to rent instead of buy as interest rates rise. “If inflation continues, it will not only hit the pocketbooks of consumers but will prompt the Federal Reserve to increase interest rates,” Daugs says. “These two factors alone will slow down consumer spending and potential home purchases.” Still, real estate could be a good pick in an inflationary environment because of pricing power, Daugs says.
1-year return: 40.66%
Expense ratio: 0.07%
Fidelity Select Brokerage and Investment Management Portfolio (FSLBX)
Last year marked record inflows into exchange-traded funds, strong interest in trading meme stocks, record highs for the stock market, rising commodities prices and rebounds in initial public offerings and mergers and acquisitions. In turn, 2021 was a good year for this fund, which primarily invests in stock and commodity brokers, investment banks, companies involved with tax-advantaged investment or investment sales, investment managers or related investment advisory companies. Its largest holdings include S&P Global Inc. (SPGI), Charles Schwab Corp. (SCHW) and BlackRock Inc. (BLK). In 2022, you might not see a repeat performance for the fund if higher interest rates and overvaluation fears put a damper on stock trading.
1-year return: 40.61%
Expense ratio: 0.76%
Fidelity Natural Resources Fund (FNARX)
In addition to fossil fuel companies, this fund also invests in copper and gold mining, agriculture and forest products, construction materials and other industries. Copper, which is often viewed as an indicator of economic demand because it’s so widely used in industry, makes up more than 10% of its holdings, behind oil and gas companies. Commodities in general have been rising as the economy recovers from the pandemic. “Housing and natural resources went hand-in-hand,” Daugs says. “This increased demand naturally raised the prices of natural resources, like lumber.” He’s also generally bullish on the industry this year. “In the current environment of higher inflation, continued concerns over employee shortages and supply-chain issues, I would look to products that have power to increase prices such as commodities,” Daugs says.
1-year return: 39.38%
Expense ratio: 0.89%
Fidelity Select Banking Portfolio (FSRBX)
Bank stocks have been ascendant as they’ve had to set aside less money for potentially bad loans, their brokerage and investment banking services have been in demand and interest rates have been on the rise. Stock trading and corporate deal making is a boon for banks. Fixed-income interest rates have been on the rise, with the yield on the 10-year Treasury above 1.8% this week, more than seven-tenths of a percentage point above where it was about a year ago. The Federal Reserve is virtually certain to raise its benchmark policy rate in 2022 to attempt to stave off rising inflation. Higher interest rates mean banks can charge more to loan out money. And when long-term interest rates rise faster than short-term ones do, the margin increases on what banks can charge in interest versus what they have to pay on deposits.
1-year return: 38.33%
Expense ratio: 0.79%
8 of the best-performing Fidelity funds for retirement:
— Fidelity Select Semiconductors Portfolio (ticker: FSELX)
— Fidelity Select Construction and Housing Portfolio (FSHOX)
— Fidelity Select Energy Portfolio (FSENX)
— Fidelity Real Estate Investment Portfolio (FRESX)
— Fidelity Real Estate Index Fund (FSRNX)
— Fidelity Select Brokerage and Investment Management Portfolio (FSLBX)
— Fidelity Natural Resources Fund (FNARX)
— Fidelity Select Banking Portfolio (FSRBX)
