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The Best Fidelity Funds for 401(k) Retirement Savers

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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.

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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 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........

© Kiplinger

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