Best Fidelity Index Funds for the Easiest Investing Strategy Ever
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Best Fidelity Index Funds for the Easiest Investing Strategy Ever


I’m using just three Fidelity index funds
to create the easiest investment strategy you’ll ever find. Not only will this strategy take the guesswork
out of investing, it’s also going to protect you from some of the worst investing mistakes. I’ll show you how to find the best Fidelity
index funds and how to build your own portfolio. We’re talking index fund investing today
on Let’s Talk Money! Beat debt. Make money. Make your money work for you. Creating the financial future you deserve. Let’s Talk Money! Joseph Hogue with the Let’s Talk Money channel
here on YouTube. I want to send a special shout out to everyone
in the community, thank you for taking a little of your time to be here today. If you’re not part of the community yet,
just click that little red subscribe button. It’s free and you’ll never miss an episode. Working as an equity analyst, one of the lies
I saw first hand was how Wall Street tries to convince investors that you have to be
picking stocks. Turn on CNBC or really anything in the financial
media and all you’re likely to see a long list of stock recommendations for that day. But what the pundits and analysts won’t
tell you is that’s not the best strategy for 99% of investors out there. It’s great for the pundits and analysts. They collect billions in fees and ad dollars
but all that money is just going from your pocket to theirs. That’s why I wanted to do this video, sharing
one of the simplest investing strategies you’ll ever find and the best strategy for anyone
that just wants to see their money grow. Now I’ll be using Fidelity index funds through
the video but honestly, you can put this strategy together with Vanguard or just about any fund
provider. In fact, I’ve got a video on using Vanguard
funds that I’ll link to in the video description so you can compare the two. I’m receiving no compensation from Fidelity
or commissions for the video. I just wanted to show you how easy it is to
build a solid portfolio of stocks, bonds and real estate for a stress-free investing strategy. The problem with the whole stock-picking lie
Wall Street pulls over on investors is that it just leads to bad investing decisions. You end up jumping in and out of stocks, losing
thousands in fees and get nowhere. In fact, Dalbar’s annual study shows the
average investor earned just 2.6% annually over the decade to 2013 versus a stock market
return of 7.4% and even a 4.6% annualized return in bonds. What I’m going to show you right now is
going to protect you from those bad investing decisions and save you thousands in those
stock-picking fees. I’ll first take you through the website
for Fidelity funds, show you how to find the best fidelity funds for your portfolio. I’ll then reveal that simple three-fund
portfolio and even how to combine it with a little stock-picking for extra returns. First though, I want to get your opinion. I’m using Fidelity funds here but I’ve
talked about Vanguard and iShares on the channel as well. Question is, do you have a preference for
funds? Do you prefer Vanguard, Fidelity, Schwab or
some other fund company for your investments and why? Scroll down and let me know in the comments,
which do you use and why. The fund screener on Fidelity is extremely
detailed with over 2,000 ETFs and will actually help you find funds from other companies like
Vanguard and iShares as well. It’s almost a little too detailed and you
kind of need to know what you’re looking for, what filters you want to use to find
a fund, but I’ll take you through a few here. On the left menu, you’ll find over 100 filters
you can use to find funds including filtering by asset class; so stocks, bonds and real
estate, filtering funds by sectors or performance and even analyst ratings. For example if we wanted to find a high yield
bond fund, we would toggle Basic ETF Facts and Asset Class here and fixed income. Then we could scroll down to Investment Philosophy
and toggle this Passively Managed. That’s going to give us mostly index funds
that are going to be a little cheaper compared to actively managed funds. Then down to Fundamentals here and we can
filter on this 30-Day SEC yield for funds paying over 3% dividend yield. That leaves us with 59 funds to choose from
and you can get all the data on each through these tabs at the top. If we click on Income Characteristics, we
can see the dividend yield. This Performance and Risk tab shows returns
as well as some risk measures like Beta. The Analyst Opinions tab here gives you ratings
from FactSet, Morningstar and Ned Davis. Now I’ll be the first to admit the expense
ratios on Fidelity funds surprised me. With most funds from Vanguard and Schwab down
to less than a tenth of a percent, I was surprised to see Fidelity charging around three-tenths
of a percent on most of its funds. The difference is in management. While most fund companies have gone to a passive
indexing model where their funds follow strict rules for the investments, Fidelity is still
largely managing its funds. So when you’ve got that passive indexing
strategy, fees are going to be lower because you don’t need as many portfolio managers
or analysts. When you’re actively managing your funds,
buying and selling to eke out a little higher return, you’ll just naturally have higher
costs. When we look at a comparison of returns between
Fidelity funds and others, and this surprised me as well, it looks like that active management
is paying off for the company and producing returns that make up for the higher costs. We’re going to get to that simple, three
fund strategy using Fidelity index funds now but if you’re liking the video and the info,
do me a favor and tap that thumbs up button below. Now let’s look at that portfolio of Fidelity
funds because I think this is the simplest strategy I’ve ever seen, just these three
exchange traded funds can take care of all your investments. First we’ve got the Fidelity High Dividend
fund, ticker FDVV, for stock market exposure and a solid 4% dividend yield. That’s more than twice the yield paid on
the market and the fund charges a relatively low 0.29% expense ratio. One of my biggest gripes about index funds,
and those of you in the community know this because I complain about it constantly, is
what you actually get in a supposedly diversified fund. For example, a lot of investors just put their
money in an S&P 500 fund to get that whole stock market diversification but what they
don’t realize is that more than a fifth of their money is in one single sector, technology. In fact, we see in this graphic that just
three sectors; IT, health care and financials make up almost half of the S&P fund. Just five of the 11 sectors make up 70% of
the fund. That mean whatever happens in these sectors
of the economy is basically your investment. So sectors like technology and consumer discretionary,
which are extremely volatile around the economy, are going to make the market fund see those
big ups and downs rather than a smoother, safer ride like you’d expect with a diversified
fund. Now the Fidelity fund has it’s own weighting
problems with six sectors accounting for most of the fund, but you’ve got different sectors
in here than in a market fund. So you’ve got consumer staples, energy and
utilities with larger weights. What you can do, to get a little more diversification
and safety, is to split the amount you have in stocks between this dividend fund and maybe
a market fund or some other stock fund. That’s going to give you more even exposure
to those different sectors but you’ll still get the benefit of high dividends from the
Fidelity fund. Looking at the Fidelity dividend fund versus
the SPDR S&P High Dividend fund, ticker SPYD, you see what I was talking about with active
versus passive management. The annual fee on the Fidelity fund is 0.23%
higher than the SPDR fund but Fidelity has managed to make up for it with a 12% return
over the last two years versus 7% on that SPDR fund. We’ll use the Fidelity MSCI Real Estate
Index ETF, ticker FREL, for real estate exposure. The fund charges a 0.08% expense ratio which
is about the lowest you’ll find at Fidelity and pays a 4.74% dividend yield. Now this was really interesting that Fidelity
is only charging 0.08% on its real estate fund but fees on all the other funds are still
so much higher. It really doesn’t make much sense but I
think you’ll start seeing the company lowering fees on other funds as that competition with
Vanguard and Schwab heats up. The Fidelity real estate fund holds shares
of 176 companies in that REIT and property space, just about the same as the Vanguard
REIT fund we talk about on the channel. I like that even the largest holdings here
are less than 5% of the fund so no single company really is going to destroy the returns
if something happens. What really surprised me was the Fidelity
fund versus Vanguard on returns. I’ve made the Vanguard fund, ticker VNQ,
a regular investment on the channel and have it in our 2019 Challenge portfolio but the
Fidelity fund has actually beaten it pretty soundly over the last two years. Our third fund is the Fidelity Total Bond
ETF, ticker FBND, with a 0.36% expense ratio and a 2.9% dividend yield. I’m including this one to round out our
Fidelity portfolio but this is one where I think you could use a different fund like
the Vanguard Long-Term Bond ETF, ticker BLV. There is no reason to pay a 0.36% expense
ratio on a bond fund when other funds like that Vanguard one charge just 0.07% and pay
comparable dividend yields. With the Fidelity fund, you do get a nice
mix of bonds with just under 40% in super-safe US government bonds and the rest mostly in
corporate and mortgage bonds. It really hasn’t helped the fund though
with returns similar to other bond funds like the iShares Core US Bond ETF, ticker AGG,
both with a 0.8% return over the last two years. With just these three funds though, you’re
getting solid diversification across three asset classes; stocks, bonds and real estate. If you want a little more stock-picking, you
can put maybe 70% of your money in these funds and invest the rest in a handful of maybe
10 individual stocks you really like. See how I did this same simple fund portfolio
strategy with Vanguard funds in the video to the right. Click through to compare how the fees and
returns of the Fidelity funds stack up and compare the two. Don’t forget to join the Let’s Talk Money
community by tapping that subscribe button and the bell notification.

12 Comments

  • Let's Talk Money! with Joseph Hogue, CFA

    How do Vanguard funds stack up against Fidelity? Check out this five-fund Vanguard portfolio https://youtu.be/hoh1IhRjlGg

  • Lester De Leon

    I love this freakin channel man..I always learn so much!.. keep up the great work. Follow back!! No reason why it’ll just mean a lot.

  • gen.x dividend.investor

    Nice. How about we double down on simplification and go for just 1 (granted its Vanguard, but I feel they are trustworthy). How about VTI 🙂 Its tough for anyone to beat the market trends.. Though like you said, it can happen… Then again, I've never been a big fan of bonds during my younger years.. though most recommend them.

  • Lawful Evil

    I have most of my funds in Fidelity including my Roths, Small amount in Schwab. I also been playing around in a few other brokers like M1 and Sofi.

  • M Carter

    Enjoyed the live stream on Sunday. I asked about insurance sales as a side job. You gave great advice about starting a web site. Can you suggest any literature I might refer to?

  • Jay Hamilton

    I'm sorry, I must have missed it, you didn't mention anything about Fidelity's 0 cost funds plus no minimum requirement.
    Fidelity Investments is launching a new line ofzero-expense ratio mutual funds for individual investors. Known as Fidelity ZERO IndexFunds, the firm claims these are the first-everzero expense ratio self-indexed funds for individual investors on the market, according a company press release.Jun 25, 2019

  • MINDS in Motion

    I love index funds in my IRA, already own FREL, and also in my additional investing accounts. I personal don't prefer any specific firm I more so pay attention to expense ratios.

  • MINDS in Motion

    I love index funds in my IRA and also in my additional investing accounts. I personal don't prefer any specific firm I more so pay attention to expense ratios

  • TheNumber2Pencil546

    Nice video. I have Fidelity for my IBA. I have FDVV as one of my holdings and like the companies that are the larger holdings within the fund. I also hold DGRO which is free to buy with Fidelity even though it is an iShares ETF. Like you, I was also surprised with the expense ratios when I first opened my account. I will have to check out that Fidelity REIT fund! Thanks for the suggestion.

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