Top Fidelity ETFs to Build a Diverse Investment Portfolio

Fidelity has a reputation for providing a wide range of investment options that cater to investors with different goals and risk levels. Whether you’re just starting your investment journey or looking to refine your portfolio, Fidelity ETFs offer diversified exposure to numerous sectors and asset classes, often at lower costs than traditional funds.

This guide covers some of the best Fidelity ETFs and what sets each one apart in strategy, performance, and suitability for specific investment objectives. By the end, you will have a clearer view of the top Fidelity ETFs that align with both beginner and advanced investor needs.

What Sets Fidelity ETFs Apart?

Several factors distinguish Fidelity’s ETFs: low expense ratios, transparent investment strategies, and a good history of performance. In contrast to mutual funds, which sometimes have higher costs and active management fees, Fidelity’s ETFs generally allow more investors to invest in broad and niche markets at lower price points.

Many Fidelity ETFs are passively managed, tracking well-known indexes to deliver consistent returns. Fidelity also offers sector-specific funds for those interested in investing in a particular industry, alongside broad- diversified funds suitable for portfolio rebalancing.

Top Fidelity ETFs for Different Investment Goals

Fidelity has an ETF for almost any investment objective. Here are some of the best Fidelity ETFs that suit various investment objectives:

Fidelity ZERO Total Market Index Fund (FZROX)

FZROX is unique to Fidelity, tracking the total equity market in the U.S. This fund emerged from Fidelity’s “ZERO” series and does not carry any expense ratio. If your goal is to maintain minimal costs, this is an excellent option.

The fund covers large-, mid-, and small-cap stocks, effectively tracking the entire United States market within one fund. It is well-suited for a diversified long-term portfolio, providing broad exposure that aligns with growth and income-focused strategies.

Fidelity MSCI Information Technology Index ETF (FTEC)

For tech-savvy investors or those who believe in the long-term growth of the technology sector, the Fidelity MSCI Information Technology Index ETF (FTEC) is a strong contender. This ETF seeks to track the performance of the MSCI USA IMI Information Technology Index, encompassing a wide range of tech giants like Apple, Microsoft, and NVIDIA.

With an expense ratio of 0.08%, FTEC is competitively priced for those looking to invest in one of the fastest-growing sectors without overpaying for fees. Thanks to the steady performance of its major holdings, this ETF has demonstrated robust returns and is ideal for growth-oriented investors aiming to capitalize on technological advancements.

Fidelity U.S. Quality Factor ETF (FQAL)

The Fidelity U.S. Quality Factor ETF (FQAL) is tailored for investors seeking companies with high profitability, stable earnings, and a strong track record. This ETF focuses on quality stocks, selecting companies that exhibit lower volatility and reliable earnings growth. FQAL’s methodology involves choosing stocks based on specific quality metrics, offering an alternative to traditional market-cap-weighted ETFs.

With a 0.29% expense ratio, it’s slightly higher than some broad market ETFs but offers a specialized approach for those interested in maintaining stability in volatile markets. This ETF could appeal to those aiming for steady growth rather than high-risk, high-reward investments.

Strategies for Using Fidelity ETFs in Your Portfolio

Fidelity ETFs offer a flexible way to shape a balanced portfolio, whether for broad market exposure or targeting specific sectors. Here are three effective strategies:

Core Holdings for Diversification : Broad-market ETFs like FZROX serve as strong portfolio foundations, covering various sectors and market caps. This diversified approach simplifies investing by eliminating the need for individual stock picks while tracking overall market performance.

Sector-Specific Focus: For those with a particular industry interest, such as technology, ETFs like FTEC provide targeted sector exposure. This strategy is ideal for investors who want to leverage potential growth in specific industries.

Factor Investing: Factor-based ETFs, such as FQAL, focus on stocks with attributes like quality or value. This style helps investors stabilize their portfolios by selecting stocks that perform well in varying market conditions, balancing out high-growth assets.

Benefits and Drawbacks of Investing in Fidelity ETFs

Investing in Fidelity’s Exchange-Traded Funds (ETFs) offers several advantages and potential drawbacks.

Benefits

Fidelity ETFs are appealing due to their affordability, with many offering zero or low-expense ratios, allowing investors to keep more of their returns. The wide variety of sector and asset class options promotes diversification, enabling balanced portfolios with reduced individual stock risk.

Fidelity’s user-friendly platform and commission-free trades make these ETFs easily accessible, especially for new investors who can start without worrying about extra costs. Moreover, Fidelity’s strong historical performance and reputable brand provide added confidence, making their ETFs a solid choice for those seeking reliable, low-cost investment options.

Drawbacks

However, while Fidelity ETFs are generally strong performers, there are some potential drawbacks to consider. First, although the zero-fee funds are attractive, they don’t offer exposure to certain specialized areas that might interest niche investors. Some investors may find that other ETF providers, such as Vanguard or iShares, have more extensive options in certain sectors or international markets.

Another limitation is that Fidelity’s actively managed ETFs are somewhat limited compared to their competitors. While Fidelity’s focus on passive management works well for most investors, those looking for actively managed strategies may find fewer options within the Fidelity ETF lineup.

Conclusion

Fidelity ETFs offer a straightforward, low-cost path to building a diversified portfolio. With choices like FZROX for overall market exposure, FTEC for tech- focused investment, and FQAL for quality-oriented holdings, Fidelity’s range meets various investment goals. While options may be limited for those seeking active management or niche sectors, these ETFs generally provide solid, reliable returns that suit most strategies. For investors aiming to balance risk and adaptability, combining a few of these ETFs can help create a robust portfolio. Understanding each fund’s unique role enables more informed decisions that can support both immediate and future financial objectives.