The Best Fidelity Mutual Funds for 2015

Summary:

  • Economic conditions continue to favor real estate investments
  • Municipal income and mortgage securities can provide an alternate source of income for bond investors
  • Style rotation: value investing is likely to outperform growth stocks in 2015, just as small caps have the potential to outperform large caps
  • Gold has not yet emerged as a good choice for diversification
  • It is too early to invest in the energy sector or in international equities

The slowly improving U.S. economy and low interest rates have created a favorable environment for real estate investments. The Select Construction and Housing Fund (FSHOX) and the Real Estate Income Fund (FRIFX) are two excellent Fidelity funds, which allow investors to participate in this trend. The blue arrow in the top panel of the chart below shows that FSHOX has a positive relative strength compared to the S&P 500 index, because FSHOX has outperformed the S&P 500 index since August of 2014. Similarly, FRIFX has outperformed the benchmark Fidelity Spartan U.S. Bond Index Fund (FBIDX).

fshox

frifx

As the U.S. economy continues to improve, the Fed may start to increase interest rates in late 2015 or early 2016. In a rising interest rate environment bond investors may find it increasingly difficult to identify income funds that do not decline in value. As an example, the Fidelity High Income Fund (SPHIX) has already started to decline:

sphix

Two income funds that can outperform in 2015 are the Fidelity Spartan Municipal Income Fund (FHIGX) and the Fidelity Mortgage Securities Fund (FMSFX). The current yield of FHIGX is 3.54%, while FMSFX yields 2.49%.

fhigx

fmsfx

Style rotation refers to the periodic over and under performance of different investment styles, such as growth vs. value, or large cap vs. small cap. For most of 2014 growth has outperformed value investing, and large caps have outperformed small caps. In 2015, we think that these relative trends can easily reverse. Two Fidelity funds, which can help investors to participate, are the Fidelity Value Fund (FDVLX) and the Fidelity Low-Priced Stock Fund (FLPSX):

fdvlx

flpsx

Investing in gold mining stocks can provide an attractive opportunity for portfolio diversification. Of course, the best time to invest in the gold mining sector is when it is not declining. Unfortunately, that is not the case right now. However, should this trend reverse, the Fidelity Select Gold Fund (FSAGX) is an excellent mutual fund for investing in this sector.

fsagx

The history of the stock market shows that the weakest investments in one year can often become the best performing investments a year or two later. However, looking at natural resources and international stocks, the two weakest investments areas in 2014, we think that they likely to continue to decline in early 2015, therefore it is too early to accumulate an investment position.

fnarx

fsenx

fieux

femkx

Read more about investment strategies involving these funds at FidelitySignal.com

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The Best Fidelity Fund for Value Investors

Value investing is a time-tested strategy that involves identifying undervalued stocks with potential to grow. While many investors enjoy the research that is needed to find promising stocks, mutual funds are also available to make it easier to follow this strategy.

One of the best value funds available to individual investors is the Fidelity Value Fund (FDVLX). The low volatility market conditions have favored this investment approach since late 2012, and the management team at FDVLX continues to take full advantage of the stock picking opportunities in 2014.

fdvlx

 

Buy and sell signals for Fidelity funds are available at FidelitySignal.com

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Best Fidelity Funds for 2014 – Part 3: Value Investing

High-flying stock market sectors have received a lot of news media attention this year, since the top sectors have produced outsized returns. For example, the Fidelity Select Biotechnology Fund (FBIOX) has gained 62.54% so far in 2013.

Will this performance continue in 2014? History of the stock market tells us that it is unlikely. In fact, we have to go back to 1999 to see similar returns. And we all know what happened in the aftermath of the speculative stock market bubble in 2000.

Looking ahead to 2014 most economist draw a picture of continued economic growth in the U.S. The problem is that this can lead to an early decision by the Fed to taper the QE3 program, which will likely to have a cooling effect on equity markets.

As we consider the best investments for 2014, it is worth taking a closer look at value investing again. Value investing is a risk-averse approach for investors who would like to participate in the equity markets, but are worried about the potential of a large stock market correction in 2014.

Our favorite investment in this space is the Fidelity Value Fund (FDVLX). FDVLX has returned 36.85% since November 30, 2012, when FidelitySignal.com issued the buy signal. The chart below shows that FDVLX has been a solid investment in 2013 and the bullish trend continues to stay uninterrupted.

fdvlx

Buy/sell signals for Fidelity funds are available at FidelitySignal.com