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Is Fidelity 500 Index Adviser (FUSVX) a Strong Mutual Fund Pick Right Now?

Arista Networks (ANET) seems well-positioned for future earnings growth and it is seeing rising earnings estimates as well, coupled with a solid Zacks Rank.

There are plenty of choices in the Large Cap Blend category, but where should you start your research? Well, one fund that might be worth investigating is Fidelity 500 Index Adviser FUSVX. FUSVX possesses a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

FUSVX is part of the Large Cap Blend section, an area that boasts an array of many possible options. Large Cap Blend mutual funds most often invest in firms with a market capitalization of $10 billion or more. By investing in bigger companies, these funds offer more stability, and are often well-suited for investors with a " buy and hold " mindset. Blended funds mix large, established companies into their holdings, which gives investors exposure to both value and growth at the same time.

History of Fund/Manager

Fidelity is responsible for FUSVX, and the company is based out of Boston, MA. Fidelity 500 Index Adviser made its debut in October of 2005, and since then, FUSVX has accumulated about $80.49 billion in assets, per the most up-to-date date available. A team of investment professionals is the fund's current manager.

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Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of 13.08%, and it sits in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 12.48%, which places it in the top third during this time-frame.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. The standard deviation of FUSVX over the past three years is 10.25% compared to the category average of 9.17%. The fund's standard deviation over the past 5 years is 9.71% compared to the category average of 8.95%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should always remember the downsides to a potential investment, and this segment carries some risks one should be aware of. FUSVX lost 50.95% in the most recent bear market and outperformed its peer group by 1.28%. These results could imply that the fund is a better choice than its peers during a sliding market environment.

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. FUSVX has a 5-year beta of 1, which means it is likely to be as volatile as the market average. Because alpha represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. FUSVX has generated a negative alpha over the past five years of -0.03, demonstrating that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Holdings

Examining the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is largely on equities that are traded in the United States.

As of the last filing date, the mutual fund has 91.15% of its assets in stocks, which have an average market capitalization of $210.65 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology

  2. Finance

Turnover is 4%, which means this fund makes fewer trades than comparable funds.

 

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, FUSVX is a no load fund. It has an expense ratio of 0.04% compared to the category average of 1%. FUSVX is actually cheaper than its peers when you consider factors like cost.

While the minimum initial investment for the product is $10,000, investors should also note that there is no minimum for each subsequent investment.

Bottom Line

Overall, Fidelity 500 Index Adviser has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

For additional information on this product, or to compare it to other mutual funds in the Large Cap Blend, make sure to go to www.zacks.com/funds/mutual-funds for additional information. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.


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