On the lookout for a Sector - Finance fund? Starting with Fidelity Select Financial Services (FIDSX - Free Report) is one possibility. FIDSX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
FIDSX is one of many Sector - Finance funds to choose from. Sector - Finance mutual funds provide investors with a diversified and stabilized investment approach focused on the financial space, which is a notoriously large, complex, and heavily-regulated industry. These funds include everything from insurance companies and exchanges to banks and investment giants; interest rates can impact the players of this space as well.
History of Fund/Manager
FIDSX finds itself in the Fidelity family, based out of Boston, MA. The Fidelity Select Financial Services made its debut in December of 1981 and FIDSX has managed to accumulate roughly $1.31 billion in assets, as of the most recently available information. Christopher T. Lee is the fund's current manager and has held that role since May of 2013.
Investors naturally seek funds with strong performance. FIDSX has a 5-year annualized total return of 14.45% and it sits in the top third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 12.11%, 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. FIDSX's standard deviation over the past three years is 13.66% compared to the category average of 15.27%. Looking at the past 5 years, the fund's standard deviation is 12.74% compared to the category average of 14.27%. This makes the fund less volatile than its peers over the past half-decade.
It's always important to be aware of the downsides to any future investment, so one should not discount the risks that come with this segment. In FIDSX's case, the fund lost 68.21% in the most recent bear market and underperformed comparable funds by 7.59%. This makes the fund a possibly worse choice than its peers during a sliding market environment.
Even still, the fund has a 5-year beta of 1.1, so investors should note that it is hypothetically more volatile than the market at large. 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. FIDSX's 5-year performance has produced a negative alpha of -1.28, which means managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
Investigating 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 primarily on equities that are traded in the United States.
As of the last filing date, the mutual fund has 82.71% of its assets in stocks, and these companies have an average market capitalization of $65.45 billion. Turnover is about 84%, so those in charge of the fund make fewer trades than its comparable peers.
As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, FIDSX is a no load fund. It has an expense ratio of 0.77% compared to the category average of 1.44%. Looking at the fund from a cost perspective, FIDSX is actually cheaper than its peers.
Investors need to be aware that with this product, the minimum initial investment is $2,500; each subsequent investment has no minimum amount.
Overall, Fidelity Select Financial Services 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 the Sector - Finance area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into FIDSX too 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.