Best Sector Funds to Buy at Fidelity Investments

List of Top Fidelity Funds That Focus on Sectors

A woman looks at her sector fund investments on her smartphone

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Fidelity funds are among the best, low cost mutual funds available to investors today. And among their top funds to buy are what they call Select Portfolios, which are mutual funds that focus on sectors. Sectors are segments of industry, such as health, technology, retail, and real estate.

Investing in sectors can be a smart way to diversify a portfolio and to increase potential for higher returns in growing industries. The beauty of sector funds is that investors do not need to go out and do their own research to find the best stocks within a given sector; they can simply buy a basket of stocks within a sector by purchasing shares of a sector fund.

Some of the best sector funds are available at Fidelity, who offers over 40 sector funds. So to help make your job easier, and in no particular order, we narrowed down the list of Fidelity sector funds to a more manageable list of what we believe are the 10 best sector funds at Fidelity.

Key Takeaways

  • Sector funds are funds that are focused on one particular sector such as health care, technology, industry, real estate, or retail.
  • Investing in sector funds can diversify your portfolio and increase earning potential.
  • Fidelity has over 40 sector funds to choose from.
  • To add diversity and lessen risk, only invest 5% to 10% in any one specific sector.

1. Best Sector Funds: Fidelity Select Software and IT Services (FSCSX)

Fidelity Select Software and IT Services (FSCSX) invests in technology firms that are primarily engaged in business related to computer software products and information services. This makes FSCSX a promising growth idea for long-term investing as the Information Age continues to drive the present and future economic and social development of the civilized world. FSCSX is a top-rated fund with an expense ratio of 0.71 percent and a minimum initial investment of $0.

2. Best Sector Funds: Fidelity Select Retailing (FSRPX)

Fidelity Select Retailing (FSRPX) holds a portfolio of stocks primarily consisting of large U.S. retail companies like Amazon (AMZN), Home Depot (HD), and Lowe's (LOW), which are stocks within the consumer cyclical sector. These are stocks that tend to do well when consumers have money to spend on products and services that are more in the category of wants than needs. For example, when the economy is relatively healthy, consumers tend to buy more things like electronics and home goods or they may also do more traveling and spend more on vacations, hotels, and entertainment. FSRPX has an expense ratio of 0.74 percent and a minimum initial purchase of $0.

3. Best Sector Funds: Fidelity Select Transportation (FSRFX)

Fidelity Select Transportation (FSRFX) invests in companies that are involved in the transportation services of people and products, as well as the companies that produce the equipment for such services and products. Examples include FedEx (FDX), UPS (UPS), and Air Transport Services Group (ATSG). With the incredible growth of online shopping, the demand for shipping goods has dramatically increased. This gives FSRFX potential for continued outperformance compared the broader stock market indices. FSRFX has an expense ratio of just 0.79 percent and a minimum initial purchase of $0.

4. Best Sector Funds: Fidelity Select Medical and Equipment Systems (FSMEX)

Fidelity Select Medical and Equipment Systems (FSMEX) invests in companies that develop and manufacture medical devices and other related businesses. An aging population in the U.S. and around the world has created unprecedented demand for medical equipment and services. This trend is likely to continue as the "baby-boom" generation continues to age and demand such products. FSMEX is one of the highest rated sector funds at Fidelity with a record of market-beating long-term returns. The expense ratio is 0.71 percent and the minimum initial investment is $0.

5. Best Sector Funds: Fidelity Select Chemicals (FSCHX)

Fidelity Select Chemicals (FSCHX) holds stocks of companies engaged in the chemical process industries, such as Sherman Williams (SHW), DuPont De Nemours Inc. (DD), and PPG Industries (PPG). Among the highest rated Fidelity funds, FSCHX is categorized as a natural resources sector fund. FSCHX also has one of the best lifetime annualized returns, which has averaged over 13 percent since inception in 1985. That's a remarkable long-term return, especially one that stretches more than 30 years. The expense ratio for FSCHX is 0.78 percent and the minimum initial purchase amount is $0.

6. Best Sector Funds: Fidelity Select Telecommunications (FSTCX)

Fidelity Select Telecommunications (FSTCX) concentrates its holdings on the telecommunications industry, which includes stocks like Verizon (VZ), AT&T (T), and T-Mobile (TMUS). With technology, social trends and commerce shifting more and more to mobile devices, the telecom industry will continue to be a benefactor, along with shareholders in sector funds like FSTCX. The expense ratio for FSTCX is 0.83 percent and the minimum initial purchase amount is $0.

7. Best Sector Funds: Fidelity Select Semiconductors (FSELX)

Fidelity Select Semiconductors (FSELX) is a technology sector fund that specializes in companies that manufacture or sale of electronic equipment and components. Therefore you'll see stocks like Nvidia Corp. (NVDA), Qualcomm (QCOM), and Broadcom (AVGO) in the fund's holdings. Being an essential component of electronic devices, semiconductors are sure to be in high demand for the foreseeable future. Therefore the growth of world economies, along with the demands of consumers, will likely be drivers of growth for funds like FSELX for years to come. The expense ratio for FSELX is 0.72 percent and the minimum initial investment is $0.

8. Best Sector Funds: Fidelity Select Insurance (FSPCX)

Fidelity Select Insurance (FSPCX) is a sector fund that focuses primarily on large insurance companies like American International Group (AIG), Metlife (MET), and Travelers Companies Inc. (TRV). If you ever find yourself complaining about the rising cost of insurance or you notice how the tallest buildings in large buildings tend to be those of insurance companies, you may want to play a bit of "if you can't beat 'em, join 'em" game and buy shares of an insurance sector fund like FSPCX, which has an expense ratio of 0.81 percent and a minimum initial investment amount of $0.

9. Best Sector Funds: Fidelity Select Health Care (FSPHX)

Fidelity Select Health Care (FSPHX) invests in a diverse blend of stocks within the broad health care sector, which includes sub-sectors like pharmaceuticals, biotechnology, and medical devices and equipment. So if you want to add health stocks to your portfolio and make a broad long-term bet on the growth of the health sector, FSPHX is a smart choice for you. The expense ratio for FSPHX is 0.70 percent and the minimum initial purchase is $0.

10. Best Sector Funds: Fidelity Select Energy (FSENX)

Fidelity Select Energy (FSENX) focuses on stocks of companies engaged in the energy industries of oil, natural gas, coal and renewable energy. Since commodities like oil and other natural resources have limited supply, prices are expected to generally rise as time passes. This makes the energy sector among the leading industrial sectors of yesterday, today and tomorrow. Top holdings in FSENX are stocks like Chevron (CVX), Baker Hughes (BHI) and Exxon Mobil Corp. (XOM). The expense ratio for FSENX is 0.81 percent and the minimum initial investment amount is $0.

As a final word on investing sectors, remember that while the potential for higher earnings exists, the potential for greater price volatility also exists. In different words, higher potential returns bring with it a greater risk of losing one's investment. Investors should also invest wisely if they choose to use sector funds. In most cases, smaller allocations of 5% to 10% per sector is sufficient to add diversity while increasing potential portfolio returns.

Disclaimer: The information on this site is provided for discussion purposes only, and should not be misconstrued as investment advice. Under no circumstances does this information represent a recommendation to buy or sell securities.

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