Mutual Fund Only Account Fidelity: A Comprehensive Guide

Fidelity's mutual fund only account is a great option for investors who want to keep their costs low and their investment options high. This type of account allows you to buy and sell mutual funds with no commission fees.

One of the key benefits of a mutual fund only account at Fidelity is the wide range of mutual funds available, with over 4,000 options to choose from. This includes index funds, actively managed funds, and even socially responsible investing options.

You can open a mutual fund only account at Fidelity with a minimum initial investment of $2,500, and there are no maintenance fees to worry about. This makes it a very accessible option for new investors or those on a tight budget.

There are many types of mutual funds, with most falling into four main categories: stock, money market, bond, and target-date funds. With over 8,700 mutual funds in the U.S., it's no wonder investors have a lot to choose from.

Balanced funds, on the other hand, invest across different securities, such as stocks, bonds, the money market, or alternative investments. This diversification helps cut risk through diversification.

Mutual funds detail their allocation strategies, so you know ahead of time what assets you're indirectly investing in. Some funds follow a strategy for dynamic allocation percentages to meet diverse investor objectives.

Balanced funds are a type of mutual fund that invests across different securities, such as stocks, bonds, and money markets. They aim to cut risk through diversification.

These funds have a dynamic allocation strategy, which means the portfolio manager can adjust the ratio of asset classes as needed to meet the fund's stated strategy. This may involve responding to market conditions, business cycle changes, or the changing phases of the investor's life.

The Fidelity Balanced Fund (FBALX) is a good example of a balanced fund, as it invests about 60% of its total assets in stocks and 40% in bonds, primarily U.S. Treasury or "agency" debt issued by government-backed mortgage providers like Fannie Mae.

Balanced funds can be a good option for investors who want a single holding that does it all, but they may not be perfect for all investors. If you have a relatively longer runway to grow your nest egg, you might want to consider a fund with a heavier allocation towards stocks, or if you're in capital-preservation mode late into retirement, the added risk that a 60% allocation to stocks provides might not be right for you.

Here are some key characteristics of balanced funds:

The Fidelity Balanced Fund (FBALX) is a good example of a balanced fund, with a 60% allocation to stocks and 40% to bonds.

International mutual funds can invest in assets located outside an investor's home country, making them a great option for diversifying a portfolio.

These funds can be volatile, depending on where and when they're invested, but they can also provide a ballast against lower returns at home.

Investing in international funds can be a smart move, especially if you're looking to balance out your portfolio with returns from abroad.

Global funds, on the other hand, can invest anywhere worldwide, but their volatility is still dependent on their investment locations and timing.

International mutual funds can be a great addition to a well-balanced portfolio, providing a safety net against lower returns in your home country.

Sector and theme mutual funds can be a great way to target specific areas of the economy that you think will perform well.

These funds aim to profit from the performance of specific sectors, such as finance, technology, or health care.

For example, a fund focused on a specific sector might have holdings in firms that operate within that sector.

Sector or theme funds can have volatility from low to extreme, which means their value can fluctuate significantly.

A fund focused on AI might have holdings in firms in health care, defense, and other areas employing and building out AI beyond the tech industry.

This can be a drawback, as stocks in these sectors tend to rise and fall together, which can limit diversification.

Socially responsible investing, also known as SRI, focuses on investing in companies and sectors that meet preset criteria.

Some socially responsible funds avoid industries like tobacco, alcoholic beverages, weapons, and nuclear power.

These funds prioritize investments in green technology, such as solar and wind power or recycling.

Sustainable mutual funds often review environmental, social, and governance (ESG) factors when choosing investments.

This approach considers a company's management practices and their tendency to improve the environment and community.

By considering ESG factors, investors can support companies that promote sustainability and social responsibility.

Individual investors traditionally buy mutual funds with A-shares through a broker, which can come with a front-end load of up to 5% or more.

Financial advisors may encourage clients to buy higher-load offerings to generate commissions, but this can increase costs for the investor.

Front-end funds require the investor to pay for expenses as they buy into the fund.

New share classes have been designated to meet fiduciary-rule standards, including "level load" C shares that don't have a front-end load but carry a 12b-1 annual distribution fee of up to 1%.

Class B shares charge management and other fees when investors sell their holdings.

When comparing mutual funds to ETFs, it's clear they have some key differences. Mutual funds and ETFs are both pooled investment funds that offer a stake in a diversified portfolio.

ETFs can be traded anytime during market hours, offering more liquidity and flexibility than mutual funds. This means you can short sell ETFs or engage in other strategies you would use for stocks.

ETF prices fluctuate throughout the day based on supply and demand, unlike mutual funds which are priced only at the end of each trading day. Mutual funds are priced based on the NAV of the underlying portfolio, which can lead to premiums or discounts.

ETFs tend to have tax advantages and are often more cost-efficient compared to mutual funds.

Large Cap Growth funds focus on established companies with a track record of growth. Fidelity Large Cap Growth Index Fund is a great example of this type of fund.

This fund has been around since 2016 and has managed to grow its assets to $27.2 billion. The dividend yield is relatively low at 0.5%, but the expenses are only 0.035%. The fund's methodology is based on the Russell 1000 Index, selecting the top half of companies with the strongest growth metrics.

The result is a portfolio of about 500 tech-heavy companies, with a significant 50% of assets in this sector. This fund is not for those looking for stability, as it ignores other sectors like materials, real estate, energy, and utilities, with less than 3% of assets collectively in these areas.

Over the last five years, Fidelity Large Cap Growth Index Fund has delivered a total return of 137%, outperforming the S&P 500's total return of around 103%.

Investing in mutual funds is relatively straightforward and involves several steps. You should check with your employer if they offer additional mutual fund products since these might come with matching funds or are more beneficial tax-wise.

Before investing, ensure you have a brokerage account with enough deposits and access to buy mutual fund shares. Many platforms offer fund screening and research tools to help you identify mutual funds matching your investing goals for risk, returns, fees, and minimum investments.

To determine how much to invest, establish clear and measurable investment goals to drive effective decision-making. This involves understanding risk tolerance and time horizon to align investments with financial objectives.

Here are some key considerations when investing in mutual funds:

Mutual funds can be bought and sold with relative ease, making them highly liquid investments. Professional management offered by mutual funds ensures that experienced fund managers make investment decisions based on research, analysis, and specific investment strategies to optimize returns for investors.

Investing in mutual funds is a straightforward process that involves several steps. You should check with your employer to see if they offer additional mutual fund products, as these might come with matching funds or be more beneficial tax-wise.

A mutual fund is defined as a portfolio of investments funded by all the investors who have purchased shares in the fund. When you buy shares in a mutual fund, you gain part-ownership of all the underlying assets the fund owns.

The mutual fund manager oversees the portfolio, deciding how to divide money across sectors, industries, companies, etc., based on the strategy of the fund. About half of the mutual funds held by American households are in index equity funds, which have portfolios that comprise and weigh the assets of indexes to mirror the S&P 500 or the Dow Jones Industrial Average (DJIA).

The value of the mutual fund depends on the performance of the securities it invests in. When buying a unit or share of a mutual fund, you get a part of its portfolio value. Investing in a share of a mutual fund differs from investing in stock shares.

Mutual fund share prices come from the net asset value (NAV) per share, sometimes listed on platforms as NAVPS. A fund's NAV is derived by dividing the total value of the securities in the portfolio by the number of shares outstanding.

Here's a breakdown of how earnings are calculated for mutual funds:

Mutual funds typically earn returns from these three sources, and investors can earn returns based on the fund's performance minus any fees or expenses charged.

Income from mutual funds can come in various forms, including dividend/interest income, portfolio distributions, and capital gains distributions.

Dividend/interest income is a straightforward way for investors to earn returns from their mutual fund investments. For example, the Fidelity Investment Grade Bond Fund (FBNDX) distributes dividends on stocks and interest on bonds held in its portfolio.

Portfolio distributions occur when the fund sells securities that have increased in price, realizing a capital gain, which is then passed on to investors in a distribution. This can be a significant source of income for investors in mutual funds.

Capital gains distributions are another way investors can earn returns from their mutual fund investments. If the fund's shares increase in price, investors can sell their shares for a profit in the market.

Income funds, such as the Fidelity Floating Rate High Income Fund (FFRHX), are designed to disburse income on a steady basis and are often seen as a good option for retirement investing. These funds typically invest in government and high-quality corporate debt, holding these bonds until maturity to provide interest streams.

The Fidelity Floating Rate High Income Fund (FFRHX) is a top Fidelity fund that invests in floating-rate loans, which can offer a higher yield than traditional fixed-rate debt. The fund's top holdings include loans to companies such as Great Outdoor Store and Golden Nugget.

The Fidelity Capital & Income Fund (FAGIX) is another option for investors seeking high yields, although it involves a higher level of risk due to its focus on distressed debt securities and junk bonds. The fund's yield is more than four times that of the S&P 500, making it an attractive option for income-seeking investors.

Here's a summary of income funds from Fidelity:

Income from mutual funds can be a reliable source of returns for investors, but it's essential to understand the different types of income and the risks involved. By choosing the right mutual fund and investment strategy, investors can generate steady income and achieve their financial goals.

Mutual funds have been the retail investor's vehicle of choice for many years, with an overwhelming majority of money in employer-sponsored retirement plans invested in mutual funds.

The SEC has long paid close attention to how these funds are run, given their importance to so many Americans and their retirements.

Mutual funds offer several benefits, including liquidity, diversification, minimal investment requirements, professional management, and a variety of offerings.

Here are some of the key pros of mutual funds:

However, mutual funds also have some drawbacks, including high fees, commissions, and other expenses, as well as a lack of FDIC coverage.

Mutual fund investments carry several risks, including market risk, interest rate risk, and management risk. Market risk arises from the potential decline in the value of the securities within the fund.

Investors should carefully review the fund's prospectus and consider their own risk tolerance and investment objectives before investing. Unlike deposits at banks and credit unions, the money invested in mutual funds isn't FDIC or otherwise insured.

To mitigate risk, it's essential to develop sound investment strategies, such as diversification, dollar-cost averaging, and rebalancing. Regularly monitoring the performance of mutual funds and making timely adjustments based on market conditions can also help optimize long-term returns.

Mutual funds are subject to industry regulations meant to ensure accountability and fairness for investors.

These regulations require mutual fund managers to follow the fund's stated mandate and work in the best interest of shareholders. This means that fund managers have a legal obligation to prioritize the needs of investors.

You can research and choose from funds with different management styles and goals, giving you a wide range of options to suit your investment needs.

Are investments safe? The truth is, all investments carry some level of risk. Unlike deposits at banks and credit unions, mutual fund investments aren't FDIC or otherwise insured.

Investors should be aware that the actual risk of a mutual fund depends on its investment strategy, holdings, and manager's competence. This means that some mutual funds are riskier than others.

Mutual funds carry several investment risks, including market, interest rate, and management risk. Market risk arises from the potential decline in the value of the securities within the fund.

Funds holding bonds and other fixed-income securities are affected by interest rate risk, which can lead to a decrease in bond prices when interest rates rise.

You're essentially putting your money in the hands of the fund's management team, so their performance is crucial. Poor investment decisions can negatively impact your returns.

Before investing, it's essential to review the fund's prospectus and consider your own risk tolerance and investment objectives.

Let's take a closer look at FSKAX, a low-cost mutual fund that's a good option for investors looking for broad market exposure. It's one of the largest funds in the world, with nearly $66 billion in net assets as of March 2023.

FSKAX tracks the Dow Jones US Total Stock Market Index, which means it invests in a variety of markets. This includes nearly 4,000 stocks, making it a solid choice for those who want to spread their investments across many different companies.

Here are the primary sectors that FSKAX invests in:

Over the past decade, FSKAX has returned 11.79%, which is a respectable rate of return for a long-term investment.

Let's take a look at two examples of Fidelity mutual funds that are worth considering for a mutual fund only account. FSKAX and FZROX are both low-cost funds with no minimum investment required, making them great options for beginners.

FSKAX tracks the Dow Jones index, while FZROX tracks the US Total Investable Market Index, which means FSKAX is a more diversified fund with around 4,000 holdings, compared to FZROX's 2,800 stocks.

As of March 2023, FSKAX has $66 billion in net assets, whereas FZROX has $12.3 billion, indicating that FSKAX is a more established fund with a longer track record of performance.

Let's take a look at the Magellan Fund, which is one of the most notable mutual funds out there. It's been around since 1963 and has had some impressive success over the years.

The fund's height of success was between 1977 and 1990 when Peter Lynch was its portfolio manager. Under Lynch's tenure, the fund's assets under management increased from $18 million to $14 billion. That's a huge jump in just a few years!

Today, the Magellan Fund has about $33 billion in assets, managed by Sammy Simnegar since 2019. The S&P 500 is the fund's primary benchmark, which means it's trying to match the performance of this index.

Here's a brief comparison of the Magellan Fund with the Fidelity 500 Index Fund:

As you can see, the Fidelity 500 Index Fund has a much larger asset base, but both funds are benchmarked to the S&P 500. This means they're both trying to match the performance of this index, but with different levels of success.

The Fidelity Select Semiconductors Portfolio is a well-established fund with a long history of trading, having been around since 1985. It's a great option for those who are willing to take on a bit more risk and want to invest in the technology sector.

This fund invests in companies that design, manufacture, service, or sell electronic components like semiconductors, circuit boards, and similar goods. Top holdings include Nvidia, NXP Semiconductors, and ON Semiconductor.

The fund has a diversified portfolio of about 40 global industry leaders, making it a good choice for those who don't want to research individual companies.

Assets under management for this fund are a significant $19.7 billion, demonstrating its popularity and success.

The fund's expenses are relatively low at 0.69%, which is a good factor to consider when evaluating its overall performance.

FSKAX and FZROX are both low-cost funds issued by Fidelity with no minimum investment required.

Both funds invest in similar stocks in similar markets, but they track different indexes: FSKAX tracks the Dow Jones, while FZROX tracks the US Total Investable Market Index.

FSKAX has a higher expense ratio than FZROX, but the difference is relatively small.

As of March 2023, FSKAX has $66 billion in net assets, while FZROX has $12.3 billion, making FSKAX a more diversified fund.

FSKAX holds about 4,000 different holdings, whereas FZROX holds about 2,800 stocks.

FSKAX has been around since 2011, providing more data on its performance over the years.

Over the last 10 years, FSKAX has returned 11.79%, but its returns were affected by the bear market of 2022.

In the last three years, the returns of FSKAX and FZROX were very similar, with FZROX having slightly better overall returns.

FSKAX is a better option if you're looking for a more diversified portfolio, while FZROX is a better choice if you're trying to avoid fees.