Top Fidelity Funds for 401(k) Retirement Investing | [Year]

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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.

Returns and data are as of Oct. 20, unless otherwise noted, and are gathered for the share class with the lowest required minimum initial investment – typically the investor share class or A share class. The share class available in your 401(k) plan may be different.

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Fidelity Balanced: BUY

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• Symbol: FBALX
• Expense ratio: 0.52%
• One-year return: 20.0%
• Three-year annualized return: 11.0%
• Five-year annualized return: 10.9%
• 10-year annualized 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.

Learn more about FBALX at the Fidelity provider site.

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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 annualized return: 26.5%
• Five-year annualized return: 22.4%
• 10-year annualized 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.

Learn more about FBGRX at the Fidelity provider site.

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Fidelity Contrafund: BUY

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• Symbol: FCNTX
• Expense ratio: 0.85%
• One-year return: 37.0%
• Three-year annualized return: 18.1%
• Five-year annualized return: 17.2%
• 10-year annualized 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 Salesforce.com (CRM). Amazon.com (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.

Learn more about FCNTX at the Fidelity provider site.

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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 annualized return: 6.9%
• Five-year annualized return: 7.7%
• 10-year annualized 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.

Learn more about FDIVX at the Fidelity provider site.

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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 annualized return: 27.5%
• Five-year annualized return: 24.6%
• 10-year annualized 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.

Learn more about FDGRX at the Fidelity provider site.

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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 annualized return: 4.3%
• Five-year annualized return: 6.7%
• 10-year annualized 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.

Learn more about FLPSX at the Fidelity provider site

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Fidelity Puritan: HOLD

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• Symbol: FPURX
• Expense ratio: 0.53%
• One-year return: 21.0%
• Three-year annualized return: 11.0%
• Five-year annualized return: 10.8%
• 10-year annualized 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), Amazon.com 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.

Learn more about FPURX at the Fidelity provider site

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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.

Learn more about Fidelity's Freedom target-date series at the provider site.