Nellie S. Huang


Fidelity funds are renowned for their managers’ stock-picking prowess. We rate Fidelity’s best actively managed funds that are popular in 401(k) plans, including its target-date solutions.

Fidelity is all about good stock picking. The firm’s culture centers on it, and it’s why so many Fidelity funds remain popular among retirement savers.

It stems from the company’s early days, when firm founder Ned Johnson would tell his fund managers, “Here’s your rope. Go ahead and hang yourself with it.” It gave Fidelity’s portfolio managers and analysts the freedom to choose good stocks, whatever their approach. And it worked. The firm is home to some of the industry’s best fund managers ever, past and present, including Peter Lynch and Will Danoff, as well as some of the most popular funds in 401(k) plans across the country.

In this year’s survey of popular 401(k) funds, which comes courtesy of financial data firm BrightScope, 17 funds from Fidelity rank among the top 100. Four are index funds: Fidelity 500 Index (FXAIX), Extended Market Index (FSMAX), International Index (FSPSX) and US Bond Index (FXNAX). But the remaining 13, seven of which are from the firm’s Freedom target-date series, are actively managed.

Read on as we look at some of the best Fidelity funds for your 401(k) plan (and weed out some of the lesser options). We’ll review all of the actively managed funds, including Fidelity’s target-date series, and rate them Buy, Sell or Hold.

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Fidelity Balanced: BUY

Symbol: FBALX
Expense ratio: 0.53%
One-year return: 20.0%
Three-year return: 11.0%
Five-year return: 10.9%
10-year return: 10.3%
Rank among the top 401(k) funds: #50
Best for: Moderate investors who want a stock-bond combination fund and are willing to put up with some volatility

Compared with its peers, Fidelity Balanced is an excellent choice for investors looking for a one-stop fund that holds stocks and bonds. Over the past five and 10 years, Balanced fund’s annualized returns outpace at least 95% of all other so-called balanced funds, which hold roughly 60% of assets in stocks and 40% in bonds.

But investors should be prepared for some added volatility. FBALX is more stock-heavy than its typical peer. At last report, Balanced had 67% of its assets in equities; the typical balanced fund, on the other hand, held an average of 58% of assets in stocks. That adds to the fund’s volatility. Over the past five and 10 years, Fidelity Balanced has had above-average volatility compared with its peers, according to Morningstar.

FBALX has an unconventional setup. Robert Stansky is its lead manager, and he makes the big-picture decisions of how much to put in stocks and how much to put in bonds. He also oversees the fund’s eight stock pickers, who are essentially sector specialists, and four bond pickers. The bond side holds mostly investment-grade bonds and some high-yield corporate debt.

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Fidelity Blue Chip Growth: BUY

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Symbol: FBGRX
Expense ratio: 0.79%
One-year return: 60.9%
Three-year return: 26.5%
Five-year return: 22.4%
10-year return: 19.1%
Rank among the top 401(k) funds: #65
Best for: Aggressively minded investors with long-term time horizons

Fidelity is chock full of good funds that invest in growing companies, and Fidelity Blue Chip Growth is one of its best. Manager Sonu Kalra has run the fund since mid-2009. Over the past 10 years, FBGRX beats 95% of its peers – funds that invest in large, growing companies – with a 19.1% annualized return. It beats the 13.4% annualized gain in the S&P 500, too.

Kalra focuses on companies with above-average earnings growth potential that the market doesn’t recognize. In particular, he looks for events that might kick the business into a higher gear, such as a new product launch, a change in executives at the top or a turnaround strategy.

The fund’s 60.9% gain over the past 12 months is a chart-topping return. Tesla (TSLA), which has soared 721% over that period, was a top contributor by a wide margin thanks to record sales in China and four consecutive profitable quarters.

The fund is peppered, too, with newly issued stocks that have done well of late. Shares in Peloton Interactive (PTON), which went public in September 2019, climbed 461% over the past 12 months. CrowdStrike Holdings (CRWD), a cybersecurity tech company stock that launched in June 2019, has climbed 203% over the past year.

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Fidelity Contrafund: BUY

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Symbol: FCNTX
Expense ratio: 0.85%
One-year return: 37.0%
Three-year return: 18.1%
Five-year return: 17.2%
10-year return: 15.5%
Rank among the top 401(k) funds: #5
Best for: Moderate investors looking for a tamer growth fund

Fidelity Contrafund has been a solid performer for so long that it seems many people don’t pay attention anymore. But manager Will Danoff still delivers market-beating returns. Over the past 12 months, the fund’s 37.0% return trounces the 17.5% gain in the S&P 500.

Tech and communications services stocks helped fuel the fund’s rise, particularly software and services companies such as Adobe (ADBE), Shopify (SHOP), PayPal (PYPL) and (CRM). (AMZN), FCNTX’s top holding, helped, too.

Danoff, who has managed Contrafund for more than 30 years, has been successful in part because he’s adapted his approach as his fund has aged and grown. (Contrafund, with $131 billion in assets, is one of the biggest actively managed stock funds in the country.)

In the mid-1990s, for instance, 700 stocks filled the fund. Today, it holds roughly 330.

But Danoff’s investment methodology is the same as it was in the fund’s early days: He focuses on “best-of-breed” firms with superior earnings growth, proven management teams and sustainable competitive advantages that seem overly beaten down or overlooked. In the first half of 2020, he purchased shares in asset manager BlackRock (BLK) at $420 a share, for only 13 times his estimates for earnings in 2021.

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Fidelity Diversified International: HOLD

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Symbol: FDIVX
Expense ratio: 0.75%
One-year return: 17.3%
Three-year return: 6.9%
Five-year return: 7.7%
10-year return: 7.0%
Rank among the top 401(k) funds: #56
Best for: Foreign stock exposure

Investors have given foreign-stock funds short shrift lately because U.S. stocks have performed so much better in comparison over the past decade. But a well-diversified portfolio should have a stake in international shares.

The issue is finding a good fund.

It might not be Fidelity Diversified International. We want to be gung-ho about this mutual fund, in part because it is the only actively managed Fidelity foreign-stock fund among the top 100 401(k) funds. William Bower, who has run FDIVX since 2001, has decades of experience. He searches for companies in developed countries that have strong balance sheets, a high return on capital (a measure of profitability) and improving earnings-growth potential.

The problem is next to its peers, Diversified International is just average. It has outpaced funds that invest in growing large foreign companies in only five of the past 10 full calendar years beginning in 2010.

That said, this fund beats two major foreign-stock benchmarks. The fund’s 7.0% annualized return over the past decade handily outpaces the MSCI EAFE index, as well as the MSCI ACWI ex USA benchmark, over the past 10 years.

All told, we’re neutral on Diversified International, which explains the fund’s Hold rating. If it’s the only actively managed foreign-stock fund available to you in your 401(k) plan, it isn’t a horrible choice. But you might consider other actively managed foreign-stock funds if any are available in your retirement-savings plan.

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Fidelity Growth Company: BUY

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Symbol: FDGRX
Expense ratio: 0.83%
One-year return: 70.0%
Three-year return: 27.5%
Five-year return: 24.6%
10-year return: 20.5%
Rank among the top 401(k) funds: #25
Best for: Aggressive investors

Fidelity Growth Company is one of the best stock funds in the country. Unfortunately, it has been closed to new investors since 2006. But if your workplace retirement plan offers it, that restriction doesn’t apply to you.

FDGRX’s 15-year annualized return, 15.4%, beats all but five U.S. stock funds. It also beats the S&P 500 by an average of nearly 6 percentage points annually over that period.

Short-term returns are impressive, too. Over the past 12 months, the fund’s whopping 74.5% gain, lifted in part by stakes in Shopify, Wayfair (W) and Moderna (MRNA), is one of the best returns of all diversified U.S. stock funds.

This is a high-risk, high-reward fund. Steven Wymer has run it for nearly a quarter century, looking for companies with resilient business models that will fuel rapid growth over a three-to five-year period, says Morningstar analyst Robby Greengold. That means in addition to established, giant-size firms, such as Nvidia (NVDA) and Netflix (NFLX), he also owns shares in small companies such as Penumbra (PEN), an $8 billion maker of medical instruments.

Some might find the resulting ride thrilling; others, gut-wrenching. FDGRX has been roughly 20% more volatile than the broad U.S. stock market over the past decade. But the rewards have been sublime. A $10,000 investment in the fund 10 years ago would be worth nearly $56,000 today. A similar investment in an S&P 500-stock index fund would amount to just over $36,000.

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Fidelity Low-Priced Stock: BUY

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Symbol: FLPSX
Expense ratio: 0.78%
One-year return: 5.8%
Three-year return: 4.3%
Five-year return: 6.7%
10-year return: 10.0%
Rank among the top 401(k) funds: #60
Best for: Investors looking for a solid value-oriented fund

Critics say Fidelity Low-Priced Stock isn’t what it was 20 years ago, but it’s still impressive. Over the past decade, FLPSX’s 10.0% annualized return beats 89% of its peers – funds that invest in midsize companies trading at a bargain. What works against it, in part, is that the fund used to be considered a small-company fund, and it still uses the Russell 2000 Index, which tracks small-company shares, as its benchmark.

But the fund has always been focused on companies of all sizes. Manager Joel Tillinghast launched the fund 30 years ago to invest in stocks trading at a discount whether they were small and fast growing, or big and underappreciated. The common link: cheap stocks with a share price below $15.

Today, with a bulging $24 billion in assets, FLPSX’s low-price threshold is now $35 a share. And the fund is more international than it was a decades ago. More than 40% of the fund holds foreign stocks, such as Canadian grocer Metro, U.K. property developer Barratt Developments (BTDPY), and Taiwanese electronics contract manufacturer Hon Hai Precision Industry.

Tillinghast, a legend in the business, now manages 95% of the fund’s assets. Five co-managers handle the rest. Some focus on specific sectors; others are generalists who invest across the market. Together they still apply Tillinghast’s investing philosophy, focusing on companies with solid balance sheets, that are run by good, honest executives, have stable earnings growth and trade at a discount to their view of a fair price. The stocks that suit that approach generally have been out of favor in recent years. But the fund’s 5.9% return over the past 12 months beats 95% of its peers.

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Fidelity Puritan: HOLD

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Symbol: FPURX
Expense ratio: 0.53%
One-year return: 21.0%
Three-year return: 11.0%
Five-year return: 10.8%
10-year return: 10.4%
Rank among the top 401(k) funds: #74
Best for: Moderate investors who want an all-in-one stock-and-bond fund

Fidelity has two balanced funds on the roster of top 401(k) funds: Fidelity Puritan and the aforementioned Fidelity Balanced. Both funds devote roughly 60% of assets to stocks and 40% to bonds, but the similarities end there.

For starters, Puritan has just one manager: Daniel Kelley, who started in July 2018. (Balanced, as we’ve mentioned, has specialists on the bond and stock sides of the fund, and a lead manager who makes the big-picture calls.)

Kelley is relatively new at Puritan, which is the main reason we have a Hold rating on the fund. Things look promising so far, though. Since he started in July 2018, the fund has returned 11.9% since he took over, better than the typical balanced fund annualized gain of 6.7%.

FPURX holds 65% of assets in stocks, a bigger equity stake than its peer, which holds 58%. Most of the roughly 200 stocks are in U.S. shares, primarily in tech and health care. Kelley favors a growth-at-a-reasonable price approach, focusing on stocks he thinks are attractive priced relative to their earnings-growth prospects. Microsoft (MSFT), and Apple (AAPL) are the fund’s top holdings.

On the bond side, Kelley holds mostly investment-grade corporate bonds – primarily financials and industrials – and securities-backed debt and Treasuries. Those holdings helped the fund in 2020, but a 5% stake in high-yield funds were a modest drag on relative performance.

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Fidelity Freedom Target-Date Series: BUY

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Rank among the top 401(k) funds: #29 (FFFDX, 2020); #28 (FFTWX, 2025); #23 (FFFEX, 2030); #36 (FFTHX, 2035); #34 (FFFFX, 2040); #54 (FFFGX, 2045); #61 (FFFHX, 2050)
Best for: Investors who want help with their retirement investment plan
Choose a fund with the year closest to when you plan to retire. Stash all of your retirement savings in the fund and then let the experts do the investing work for you. They’ll decide how much to hold in stock, bonds and cash and adjust the portfolio to a more conservative mix as you grow older.

Fidelity’s Freedom funds are the firm’s flagship target-date series. The fund company has a relatively newer index-based series, called Freedom Index. But the actively managed target-date funds are immensely popular, and many rank among the top half of BrightScope’s roster of funds with the most 401(k) assets.

The series was retooled several years ago, including a tweak to the funds in the plan and the allocation of the glidepath – the way the blend of stocks and bonds changes over time. A Freedom fund geared to a 25-year-old saver just starting out would hold a portfolio comprised of 54% U.S. stocks, 36% foreign stocks and 10% bonds. The Freedom portfolio for a 60-year-old holds 36% in U.S. stocks, 23% in foreign shares, 37% in bonds and 4% in cash.

Author: Nellie S. Huang

Source: Kiplinger: The Best Fidelity Funds for 401(k) Retirement Savers

The Kiplinger 25 list of our favorite no-load mutual funds dates back to 2004, and our coverage of mutual funds goes all the way back to the 1950s. We believe in holding funds rather than trading them, so we focus on promising mutual funds with solid long-term records – and managers with tenures to match.

A good garden will feature a mix of tall evergreens, midsize perennial flowering plants, fast-growing ground covers and maybe a showy piece such as a sculpted topiary. Some require regular tending, while others can be left alone. Some might flower in the spring; others blaze with richly hued foliage in the fall. Each plant is chosen for its individual merits, but together they form a beautiful garden.

Assembling a portfolio of mutual funds is much the same. We consider several variables and a mix of strategies when we select our favorite actively managed no-load funds. We think the “Kip 25” represents the cream of the crop, although a fund here and a fund there might not be appropriate for your specific portfolio needs and investing horizon. The group is a diverse collection that ranges across large- and small-cap funds, international and U.S. holdings, and bonds of all sorts. Just like a mix of plant varieties, they thrive at different times and in different conditions.

Dodge & Cox Stock


1-YEAR RETURN: 24.8%

3-YEAR RETURN: 11.1%


10-YEAR RETURN: 12.6%

YIELD: 1.7%


The focus: Large U.S. companies trading at bargain prices.

The process: Ten managers work together to find large firms with good growth prospects that trade at discount prices, then they invest for the long term. Foreign stocks constitute 12% of the fund.

The track record: DODGX’s value bent requires patience. But a $10,000 investment in the fund 20 years ago would be worth about $57,000 today – 79% more than what the same outlay in a Standard & Poor’s 500-stock index fund would be worth.

Mairs & Power Growth


1-YEAR RETURN: 28.4%

3-YEAR RETURN: 12.7%


10-YEAR RETURN: 13.0%

YIELD: 1.2%


The focus: Growing firms of any size trading at reasonable prices.

The process: The Minnesota-based fund focuses first on firms in the upper Midwest with a competitive edge.

The track record: Mairs & Power Growth typically underperforms in up markets and outperforms in down markets. During the late 2018 swoon, Growth beat the index, thanks to health-care stocks Abbott Laboratories (ABT), Medtronic (MDT) and Bio-Techne (TECH). Over the past decade, the fund outpaced one-third of its peers.

Primecap Odyssey Growth


1-YEAR RETURN: 24.0%

3-YEAR RETURN: 16.1%

5-YEAR RETURN: 12.5%

10-YEAR RETURN: 14.2%

YIELD: 0.5%


The focus: Fast-growing big and midsize firms trading at sensible prices.

The process: Five managers each run a slice of the fund’s assets independently. But they all focus on firms with shares under pressure that have a catalyst for growth, such as a new product or a new CEO. POGRX’s typical holding period is roughly 15 years.

The track record: The past year wasn’t a standout, but over the past decade, Primecap Odyssey Growth’s 14.2% annualized return beat the S&P 500. Big gainers over the past year include Insulet (PODD), which is best known for Omnipod, a continuous insulin delivery system; and Micron Technology (MU), a computer memory-chip maker.

T. Rowe Price Blue Chip Growth


1-YEAR RETURN: 30.0%

3-YEAR RETURN: 21.9%

5-YEAR RETURN: 15.2%

10-YEAR RETURN: 16.0%

YIELD: 0.1%


The focus: High-quality, growing firms that lead their industry.

The process: Manager Larry Puglia favors established firms with above-average earnings growth, strong free cash flow (cash profits after capital outlays), and executives who reinvest wisely. A chunk of assets sits in tech, health care and consumer-oriented firms. “These sectors offer the most fertile ground for innovation and growth,” Puglia says.

The track record: Large growth stocks have led the market lately. (AMZN) and Alphabet (GOOGL) are among the fund’s top holdings. Blue Chip Growth’s 10-year annualized 16.0% return sails past the S&P 500 and the typical large-growth fund.

T. Rowe Price Dividend Growth


1-YEAR RETURN: 31.0%

3-YEAR RETURN: 15.7%

5-YEAR RETURN: 12.1%

10-YEAR RETURN: 13.3%

YIELD: 1.2%


The focus: Dividend-paying firms with the intention to raise payouts over time.

The process: Manager Tom Huber homes in on stocks with durable, sustainable growth. Gains in Microsoft (MSFT), Visa (V) and UnitedHealth Group (UNH) helped the fund over the past few years.

The track record: A dividend-oriented fund tends to lag when the market is soaring. Over the past decade, Dividend Growth has returned a respectable 13.3% annualized. That beats its peers (funds that invest in large firms with growth and value features), but it lags the S&P 500 by an average of 0.3 percentage points per year.

T. Rowe Price Value


1-YEAR RETURN: 26.2%

3-YEAR RETURN: 10.8%


10-YEAR RETURN: 12.1%

YIELD: 1.7%


The focus: Deeply discounted large-company stocks.

The process: When sentiment sours on a firm, manager Mark Finn sees a prospect. In late 2018, he scooped up shares in General Electric (GE) as the conglomerate cut dividends to a penny. “GE still has a collection of good businesses,” he says.

The track record: The fund has had a few lackluster years recently thanks to its contrarian tilt. But Value beat the S&P 500 by 2.5 percentage points during the 2018 selloff. In 2019, Finn shored up the fund with defensive health care and utilities stocks. “I try to build a portfolio that will participate in up markets but won’t hurt clients in down markets,” he says.

Vanguard Equity-Income


1-YEAR RETURN: 25.2%

3-YEAR RETURN: 11.8%

5-YEAR RETURN: 10.1%

10-YEAR RETURN: 12.9%

YIELD: 2.6%


The focus: A low-volatility portfolio of dividend-paying stocks.

The process: Two subadvisers run the fund. Wellington Management’s Michael Reckmeyer manages 64% of the fund’s assets, seeking stocks that pay above-average dividend yields with good potential for future payout hikes. A Vanguard team runs the rest, using computer models to find dividend stocks with a mix of qualities, including attractive prices and growth prospects.

The track record: Over the past five and 10 years, Equity-Income has delivered well-above-average returns over its peers with below-average volatility.

DF Dent Midcap Growth


1-YEAR RETURN: 40.1%

3-YEAR RETURN: 22.4%

5-YEAR RETURN: 14.0%


YIELD: 0.0%


The focus: Growing mid-cap stocks that trade at a fair or undervalued price.

The process: Four managers work as a team with seven analysts to find 30 to 40 firms that have solid, growing businesses that generate large amounts of cash, dominate a niche in their industry and have talented executives who invest wisely, with their shareholders in mind. If the share price isn’t attractive relative to a stock’s expected return, they’ll wait for the right price to buy it.

The team does detailed analysis, visiting companies on their turf and talking to customers and suppliers. When company representatives visit DF Dent’s offices, they’re asked how they got there (commercial airline or private jet). “We look for frugal firms. A company’s money is the shareholders’ capital, not their own,” says comanager Bruce Kennedy.

When the portfolio managers buy a stock, they tend to hold it. DFDMX’s typical holding period is three years, which is nearly double the holding period of the typical midsize-company fund. They’ll hold on even as some firms grow into large-cap names, such as gene-sequencing giant Illumina (ILMN), as long as those companies are still fast-growing.

The track record: Over the past one, three and five years, DF Dent Midcap Growth has outpaced its benchmark, the Russell Midcap Growth Index, as well as its peers (funds that invest in midsize, growing companies). The firm’s five-year annualized return stands among the top 7% of its category.

Parnassus Mid Cap


1-YEAR RETURN: 28.8%

3-YEAR RETURN: 11.7%


10-YEAR RETURN: 12.8%

YIELD: 0.5%


The focus: Midsize firms with sturdy, growing businesses that meet environmental, social and corporate governance (ESG) standards.

The process: Two managers favor firms with solid balance sheets and a product or service that is in demand. The duo are price-conscious. When mid-cap stocks dropped 20% in late 2018, the managers bought more shares of their favorite companies.

The track record: PARMX tends to hold up well in tough times but lag in good times. Over the past decade, it outpaced 88% of similar funds, but it squeezed past the S&P MidCap 400 Index over the same stretch, by 0.04 percentage points.

T. Rowe Price Small-Cap Value


1-YEAR RETURN: 25.8%



10-YEAR RETURN: 11.7%

YIELD: 0.6%


The focus: Unloved, under-the-radar small companies.

The process: Manager David Wagner looks for small-cap companies – those with market values of less than $4 billion – that have stumbled but have a catalyst that could turn things around.

The track record: Despite an impressive 25.5% gain in 2019, the Russell 2000 small-cap index lagged its bigger brother, the S&P 500, for the third calendar year in a row. Within the small-cap benchmark, meanwhile, value shares have lagged their growth-oriented counterparts in nine of the past 10 calendar years. The mutual fund’s 7.9% annualized return since Wagner took over in mid-2014 beats its benchmark, the Russell 2000 Value Index, and the traditional Russell 2000.

T. Rowe Price QM U.S. Small-Cap Growth


1-YEAR RETURN: 32.8%

3-YEAR RETURN: 14.7%

5-YEAR RETURN: 11.5%

10-YEAR RETURN: 15.3%

YIELD: 0.0%


The focus: Profitable, growing small firms with reasonably priced stocks.

The process: “We prefer cheaper growth stocks with a high-quality tilt,” says manager Sudhir Nanda, who uses computer models to find firms with strong free cash flow and steady earnings, among other things.

The track record: Nanda’s models steer clear of pricey growth stocks, which led the market in recent years. As a result, the fund’s three-year annualized return, 14.7%, only ranks among the top 43% of its peer group: funds that invest in growing small firms. But QM U.S. Small-Cap Growth had a glorious 2019, with a 32.8% return that outpaced all but 9% of its peers and beat the Russell 2000 as well as the S&P 500.

Wasatch Small Cap Value


1-YEAR RETURN: 23.6%

3-YEAR RETURN: 10.2%


10-YEAR RETURN: 12.6%

YIELD: 0.5%


The focus: Small, growing companies that have hit a bump in the road.

The process: This fund’s strategy is a blend of growth and value. Small Cap Value snaps up shares in promising growth stocks that have stumbled temporarily. “Stocks are often at their most compelling values when fear is rampant,” says manager Jim Larkins.

The track record: The fund’s three-, five- and 10-year annualized returns rank among the top 13% of its peer group: funds that invest in small, bargain-priced companies) or better.

Fidelity International Growth


1-YEAR RETURN: 34.0%

3-YEAR RETURN: 15.4%


10-YEAR RETURN: 8.8%

YIELD: 1.0%


The focus: Attractively priced, large, growing foreign companies.

The process: Stocks must have good long-term growth prospects, trade at attractive values relative to expected earnings and have pricing power. Companies that can raise or hold prices firm even when demand is sluggish have a competitive edge.

The track record: After below-average performance in 2016 and 2017, International Growth has raced ahead of its peers and has been among the best mutual funds that invest in large, growing foreign firms. FIGFX’s 34.0% return in 2019 ranks among the top 10% of its peer group and beats the MSCI EAFE index of foreign shares in developed countries by nearly 12 percentage points.

Oakmark International


1-YEAR RETURN: 24.2%



10-YEAR RETURN: 7.3%

YIELD: 1.8%


The focus: Low-priced foreign stocks.

The process: Longtime manager David Herro and his comanager are classic bargain hunters. They only buy stocks that trade at least 30% below their assessment of the firm’s value. In late 2018, they snagged previous highfliers ASML Holding (ASML), a chip-equipment maker; Group (TCOM), a Chinese online booking site that was formerly known as Ctrip International; and more.

The track record: Investors who sit tight when the fund underperforms, as it did in 2018, win over time. International beat its benchmark and bested all but 4% of its peers (funds that invest in value-priced foreign stocks) over the past decade. Signs of a turnaround are well underway. In 2019, Oakmark International delivered a 24.2% gain, which beat 80% of its peers and the MSCI EAFE index.

Baron Emerging Markets


1-YEAR RETURN: 18.5%

3-YEAR RETURN: 10.6%



YIELD: 0.2%


The focus: Emerging-markets companies of all sizes.

The process: Manager Michael Kass favors profitable, growing firms with consistent competitive advantages.

The track record: Emerging-markets stocks have struggled in recent years. But they were able to gain some momentum in 2019, after a negative year of returns in 2018. Baron Emerging Markets kept steady with the benchmark on the rebound in 2019, with an 18.5% return that eked past the MSCI Emerging Markets Index, but the fund lagged its peers: mutual funds that invest in emerging-markets companies.

AMG TimesSquare International Small Cap Fund


1-YEAR RETURN: 29.6%

3-YEAR RETURN: 10.7%



YIELD: 1.5%


The focus: Small, growing foreign firms.

The process: The managers favor best-in-class firms with a sustainable competitive edge. They look for a favorable share price in relation to the cash a company generates.

The track record: After a dreary year in 2018, small foreign stocks wowed us in 2019. AMG TimesSquare International Small Cap Fund gained 29.6%, better than 76% of its competition: funds that invest in small, growing foreign stocks. It also tore past the MSCI EAFE Small Cap index, which returned 25.0%.

Vanguard Health Care





10-YEAR RETURN: 14.6%

YIELD: 1.4%


The focus: Health-care stocks.

The process: Manager Jean Hynes and 12 analysts comb the sector – from biotech and drug makers to medical devices and health-care service firms – to find bargain-priced health-care stocks of large firms with good growth prospects.

The track record: Vanguard Health Care has lagged its peers for three consecutive calendar years. The fund tends to focus on high-quality names and the sector’s best performers have been nascent biotech firms. This is a good fund for nervous investors who still want a toe in a long-term growth sector. But we have VGHCX on watch as we consider alternatives.

Vanguard Wellington


1-YEAR RETURN: 22.5%

3-YEAR RETURN: 10.7%


10-YEAR RETURN: 9.9%

YIELD: 2.4%


The focus: A balanced portfolio for growth and income, with 65% of assets in stocks and 35% in bonds.

The process: Manager Ed Bousa picks reasonably priced stocks, favoring dividend-paying firms with strong cash flow and good growth prospects. Over the past year, Verizon (VZ) and Microsoft were bright spots. Three bond pickers run the fixed-income side.

The track record: Vanguard Wellington is a trusty standout. From the start of 2008 through 2018, Wellington trailed the typical balanced fund only in 2009 and 2010. The fund’s 10-year record beats 90% of its peers. New investors must buy fund shares directly from Vanguard.

DoubleLine Total Return Bond






YIELD: 3.2%


The focus: Intermediate-maturity mortgage-backed bonds.

The process: Veteran managers Philip Barach and Jeffrey Gundlach, and the newly named Andrew Hsu, balance government-guaranteed mortgage bonds – which are sensitive to interest-rate moves (bond prices and interest rates move in opposite directions) but have no default risk – with non-agency bonds, which carry some risk of default but little interest-rate risk.

The track record: The fund’s recent returns have been hampered by the securities it doesn’t own: corporate bonds, which soared in 2019. As a result, the fund’s 5.7% gain in 2019, decent in any other year, ranks among the bottom 96% of its peer group, intermediate-term core-plus bond funds. But we still like this fund’s low-volatility strategy. Over the past five years, DoubleLine Total Return has been 25% less volatile than its peer group. The fund yields 3.2%.

Fidelity Intermediate Municipal Income





10-YEAR RETURN: 3.5%

YIELD: 1.4%


The focus: Intermediate-term bonds that pay tax-free income.

The process: Three managers find attractively priced muni bonds with stable finances. Curbing risk is a priority.

The track record: Dependable returns are this fund’s hallmark. Intermediate Muni Income has outpaced its peers over the past three and five years on an annualized basis. The fund yields 1.4%, or 2.2% for those in the 37% income-tax bracket.

Fidelity New Markets Income


1-YEAR RETURN: 10.9%



10-YEAR RETURN: 6.2%

YIELD: 4.8%


The focus: Emerging-markets government bonds issued in U.S. dollars.

The process: Two managers just took over for longtime helmsman John Carlson. They mesh economic and country analysis with nitty-gritty research on individual IOUs.

The track record: The past year was a mixed bag for emerging-markets bonds. Trade tensions and lackluster growth weighed on emerging-markets economies, but interest-rate cuts in the U.S. and other central banks were a bit of a boost. New Markets Income returned 10.9% – impressive, but it lagged 90% of emerging-markets bonds. The fund’s long-term record still stands out. Its 10-year 6.2% annualized return ranks among the top 32% of its peers. Even so, John Carlson recently retired. We are watching this fund closely in light of that.

Metropolitan West Total Return





10-YEAR RETURN: 4.8%

YIELD: 2.1%


The focus: High-quality intermediate-term bonds.

The process: Views on the market and the economy, and a fondness for bargains, guide the fund’s four managers as they select a mix of investment-grade, medium-maturity bonds.

The track record: MWTRX’s defensive posture has helped recently. Over the past 12 months, the fund’s 8.9% return beats the Bloomberg Barclays US Aggregate Bond Index (the “Agg”), albeit by 0.2 percentage points. The fund’s 10-year annualized return beats 88% of its peers. It yields 2.1%.

Fidelity Advisor Strategic Income


1-YEAR RETURN: 11.0%



10-YEAR RETURN: 5.0%

YIELD: 3.1%


The focus: To generate income but keep volatility low by balancing high-quality bonds with junkier debt.

The process: The fund typically has 29% of assets in high-yield bonds; 34% in government debt; 32% in foreign developed and emerging-markets IOUs; and 5% in floating-rate securities. The proportions shift based on the big-picture view of managers Ford O’Neil and Adam Kramer. Specialists in specific fixed-income sectors pick the bonds.

The track record: This mutual fund’s barbell approach was a boon in 2019, as all major bond sectors performed well. In 2019, Advisor Strategic Income’s 11.0% gain outpaced the Agg index by 2.3 percentage points. What’s more, over the past three, five and 10 years, FADMX’s annualized return has beat its peer group (funds that invest in multiple bond sectors).

Vanguard High-Yield Corporate


1-YEAR RETURN: 15.8%



10-YEAR RETURN: 7.1%

YIELD: 4.1%


The focus: High-yield bonds, which are rated between double-B and single-C.

The process: Manager Michael Hong favors the less risky, better-rated end of the high-yield bond spectrum. He prefers firms with strong balance sheets and steady free cash flow.

The track record: VWEHX had a banner year in 2019, posting a 15.8% return, which ranks among the top 12% of its peer group: funds that invest in high-yield bonds.

A strong U.S. economy bodes well for junk bonds. But critics worry that a mounting credit-quality crisis in investment-grade debt could spill into and rattle the high-yield market. We would take some gains off the table, but Hong is not worried. “We might see more downgrades” of investment-grade debt, he says. “But these will be idiosyncratic, company-specific issues, and the high-yield bond market can absorb them.” The fund yields 4.1%.

Vanguard Short-Term Investment Grade





10-YEAR RETURN: 2.7%

YIELD: 2.2%


The focus: Short-maturity government and corporate bonds.

The process: Three Vanguard managers pick the bonds. They currently favor asset-backed securities, such as pooled auto and student loans, and corporate bonds.

The track record: Interest-rate cuts in 2019 were a boon for VFSTX, which delivered a 5.7% return that year, beating 80% of its peers. It was the fund’s best single-calendar year in more than a decade. Over the past 10 years, Short-Term Investment Grade, which yields 2.2%, ranks among the top 23% of its peers.

Author: Nellie S. Huang

Source: Kiplinger: The 25 Best Low-Fee Mutual Funds to Buy in 2020

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