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Is Fidelity International Real Estate (FIREX) a Strong Mutual Fund Pick Right Now?

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If investors are looking at the Sector - Real Estate fund category, Fidelity International Real Estate (FIREX - Free Report) could be a potential option. FIREX bears a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

We classify FIREX in the Sector - Real Estate category, an area full of possible choices. Sector - Real Estate mutual funds typically invest in various real estate investment trusts (REIT). A REIT is a popular income vehicle thanks to taxation rules that require REITs to payout at least 90% of their income each year in order to avoid double taxation. This technique makes securities here high dividend payers, and almost bond like in some cases; however, they still carry the risk of equities.

History of Fund/Manager

Fidelity is based in Boston, MA, and is the manager of FIREX. The Fidelity International Real Estate made its debut in December of 2004 and FIREX has managed to accumulate roughly $769.99 million in assets, as of the most recently available information. The fund is currently managed by Guillermo de las Casas who has been in charge of the fund since April of 2010.

Performance

Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 7.15%, and is in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 6.22%, 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. Compared to the category average of 9.44%, the standard deviation of FIREX over the past three years is 10.47%. Looking at the past 5 years, the fund's standard deviation is 10.06% compared to the category average of 9.29%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

One cannot ignore the volatility of this segment, however, as it is always important for investors to remember the downside to any potential investment. In the most recent bear market, FIREX lost 67.51% and underperformed its peer group by 3.59%. This could mean that the fund is a worse choice than comparable funds during a bear market.

Investors should note that the fund has a 5-year beta of 0.7, so it is likely going to be less volatile than the market at large. Alpha is an additional metric to take into consideration, since it represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. With a negative alpha of -1.68, managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

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, FIREX is a no load fund. It has an expense ratio of 1.04% compared to the category average of 1.24%. From a cost perspective, FIREX is actually cheaper than its peers.

Investors should also note that the minimum initial investment for the product is $2,500 and that each subsequent investment has no minimum amount.

Bottom Line

Overall, Fidelity International Real Estate 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 - Real Estate 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 FIREX 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.


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