When you’re looking to diversify your long-term portfolio, Fidelity index funds can be a great choice. These exchange-traded funds (ETFs) track an index of stocks, commodities, or bonds. As an alternative to a traditional diversified portfolio, index funds can help you increase your returns while minimizing risks.
ZERO Large Cap Index Fund
The Fidelity ZERO Large Cap Index Fund tracks the performance of the 500 largest companies in the United States. It excludes stocks with a low capitalization and a small trading volume. This fund offers the opportunity for investors to make money without having to spend a lot of time researching individual stocks.
ZERO funds are low-cost index funds that are generally based on proprietary indexes. This might seem like a gimmick, but the fact is that many index funds cost as little as 10 basis points. So, while Fidelity ZERO funds trail their Fidelity counterparts by a wider margin, this may simply be a marketing gimmick.
The ZERO Large Cap Index Fund invests at least 80% of its assets in common stocks of large U.S. companies. The fund tries to correspond to the total return of large U.S. companies. To do this, it includes stocks of the 500 largest companies.
If you’re looking for an index fund that tracks the S&P 500, look for a fund with a low expense ratio. This fund may post higher or lower returns than the S&P 500 over time, but its performance will generally be close to the index. For example, a hypothetical 0.2 percentage point deviation from the index could mean a difference of $2,000. This difference is not huge, but it is enough to raise concerns about the fund.
ZERO Inflation-Protected Bond Index Fund
The ZERO Inflation-Protection-Protected Bond Index Fund is a mutual fund that invests in U.S. Treasury bonds with remaining maturities of five years or less. The fund seeks investment results that closely reflect the performance of the index. These bonds are inflation-protected and are typically issued by the U.S. Treasury. The purpose of inflation-protected bonds is to reduce the impact of rising prices on money’s purchasing power.
This index is based on the market capitalization of U.S. Treasury bonds with no more than a one percent coupon. The securities must also be investment-grade, denominated in U.S. dollars, and have either a fixed-rate or zero coupon. The index is updated monthly on the last calendar day of the month.
Investors should keep in mind that there is a risk of principal loss when investing in mutual funds. Although these funds generally perform better than the market, there is no guarantee that the principal amount invested will remain the same. A common example of this is interest rate risk, which occurs when interest rates increase and bond prices decline. During periods of falling interest rates, mutual fund income will decrease. Another risk is inflation-indexed investments, which can depreciate in value.
The Fund’s yield is adjusted monthly to reflect changes in the inflation rate. As a result, the yield can vary dramatically. A high yield is due to a rise in inflation while a low yield is due to a fall in inflation. As a result, investors should consider the risks associated with these investments before investing in bond funds.
ZERO Mid Cap Index Fund
Fidelity has many different index funds available to investors. Its ZERO Total Market Index funds are similar to the S&P 500 but have smaller holdings. The ZERO Total Market index tracks more than 2,500 companies. The ZERO Mid Cap index fund follows a smaller number of companies, but the cost of the fund is relatively low at 0.06% per year.
Before investing in a fund, consider your investment objectives. You should also consider the risks and charges. If you want to learn more about a specific fund, contact Fidelity. They will provide you with a prospectus and financial statements. The prospectus will outline the risks and charges of a particular fund.
Fidelity ZERO index funds are among the lowest cost funds on the market, with expenses of as low as 0.10%. These funds track proprietary indexes created by Fidelity. The ZERO Mid Cap index fund tracks the S&P 500, while the ZERO Large Cap index fund does not.
Those looking for more of a diversified approach may be interested in the Fidelity ZERO International Index Fund. Its objective is to mimic the total return of the foreign stock markets. The fund invests at least 80% of its assets in index funds.