In the aggregate, active mutual funds often charge higher fees, generate more taxable capital gains because of higher portfolio turnover, concentrate assets in a smaller number of stocks, and have an above-average possibility of underperforming a low-cost benchmark over the long term.
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One factor, however, receives far less attention: succession risk. Unlike an index fund, whose methodology is publicly disclosed and changes only occasionally, an actively managed fund depends on the judgment of one or more portfolio managers. Those managers may retire, resign for opportunities elsewhere, or, in some cases, pass away.
Large firms such as Fidelity Investments typically prepare for these transitions by appointing co-managers and developing successors over many years, but there is no guarantee that the next manager will match the skill of the previous one, particularly when replacing a long-tenured star. Few examples illustrate this better than the Fidelity Magellan Fund (ticker: ).
During 13-year tenure, the fund generated an extraordinary 29% annualized return. After Lynch retired in 1990, however, the fund cycled through multiple managers, including Morris Smith, who departed after about two years, and Jeffrey Vinik, whose tenure lasted just under four years.
Later, Fidelity Magellan fund managers, particularly Robert Stansky, faced criticism for “closet indexing,” or constructing portfolios that closely resembled benchmarks while continuing to charge active management fees, contributing to years of persistent underperformance.
Succession risk is now becoming relevant for another of Fidelity’s flagships, Fidelity Contrafund (). William Danoff has managed the fund since 1990 and has consistently outperformed, generating an 18.2% annualized return over the trailing 10 years compared with 15.5% for the S&P 500 and 16.4% for the Morningstar Large Growth category.
In April 2025, Fidelity appointed two co-managers ahead of Danoff’s planned retirement at the end of 2026. The transition was significant enough that Morningstar placed the fund’s Medalist rating under review. Morningstar’s Medalist ratings are forward-looking assessments of a fund’s ability to outperform peers or its benchmark, and a leadership change can materially affect that evaluation.
For buy-and-hold investors who prefer to avoid manager-specific uncertainty altogether, low-cost passive index funds remain the more predictable and consistent long-term choices.
“While it truly depends on each individual investor’s specific goals and objectives, I typically advocate for index funds in the accumulation phase, as these give great broad-market exposure with lower fees than actively managed funds,” says Wes Moss, managing partner and chief investment strategist at Capital Investment Advisors.
Here are seven of the best Fidelity mutual funds to buy today:
| Fund | Expense Ratio |
| Fidelity 500 Index Fund () | 0.015% |
| Fidelity Total Market Index Fund () | 0.015% |
| Fidelity Extended Market Index Fund () | 0.035% |
| Fidelity Mid Cap Index Fund () | 0.025% |
| Fidelity Small Cap Index Fund () | 0.025% |
| Fidelity International Index Fund () | 0.035% |
| Fidelity Emerging Markets Index Fund () | 0.075% |
Fidelity 500 Index Fund ()
Fidelity has offered an since 1988, with the FXAIX share class launching in 2011. Today, it is one of the least expensive ways to track the index, charging a 0.015% expense ratio. On a $10,000 investment, that works out to just $1.50 per year in fees. The fund is also available with no transaction fees or minimum investment on Fidelity’s brokerage platform.
Beyond its low cost, FXAIX has delivered a difficult-to-beat 10-year annualized total return of 15.5%. It is also highly tax efficient because the S&P 500 itself experiences relatively little turnover, around 2% annually. That minimizes capital gains distributions compared with many actively managed funds. For long-term investors, low costs and tax efficiency can help compound returns over time.
Fidelity Total Market Index Fund ()
The S&P 500 intentionally focuses on large-cap companies that meet size, liquidity and profitability requirements, followed by a committee’s subjective review before inclusion. Investors seeking more complete exposure to the U.S. stock market may prefer FSKAX, which tracks the Dow Jones U.S. Total Stock Market Index. The fund charges the same 0.015% expense ratio as FXAIX.
FSKAX holds more than 3,700 stocks, providing exposure to thousands of mid- and small-cap companies alongside the familiar large caps. Even so, its sector allocations remain similar to the S&P 500, with technology representing the largest weighting, and many of its top holdings overlap with FXAIX. Tax efficiency also remains excellent thanks to the benchmark’s roughly 2% turnover rate.
Fidelity Extended Market Index Fund ()
Investors with sizable, unrealized gains in FXAIX may be reluctant to sell and switch into a total market fund. If the goal is broader diversification instead, pairing FXAIX with FSMAX can provide exposure to the parts of the U.S. market missing from the S&P 500. The fund tracks the Dow Jones U.S. Completion Total Stock Market Index, which mostly consists of mid- and small-cap companies excluded from the S&P 500.
One notable inclusion is FSMAX’s largest holding, Space Exploration Technologies Corp. (). SpaceX is currently not included in the S&P 500 because it does not satisfy the index’s eligibility requirements. That makes FSMAX a useful complement rather than a replacement for FXAIX. Combined, the two funds can approximate total U.S. market exposure. FSMAX charges a 0.035% expense ratio.
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Fidelity Mid Cap Index Fund ()
Some investors prefer to slice and dice their U.S. equity allocation. In addition to overweighting sectors such as or , or styles such as value or growth, investors can also tilt their portfolio toward specific company sizes. FSMDX provides targeted exposure to the middle of the market, tracking the Russell Midcap Index with a portfolio of 800 companies underrepresented in or missing from FXAIX.
Mid-cap stocks can occupy a sweet spot between growth and stability. Many have already moved beyond the higher-risk small-cap stage but still have meaningful room to expand before reaching the maturity of large-cap companies. The trade-off is slightly lower tax efficiency, as the Russell Midcap Index has an annual turnover rate of roughly 12% due to companies moving between market-cap tiers.
Fidelity Small Cap Index Fund ()
Investors looking to focus on the smallest publicly traded U.S. companies may find FSSNX appealing. The fund tracks the Russell 2000 Index, one of the most widely followed benchmarks for U.S. small-cap stocks, providing diversified exposure across approximately 2,000 companies. have historically offered higher long-term return potential, but investors should expect greater volatility.
FSSNX also has a much higher turnover rate, around 20%, as companies frequently graduate into the mid-cap universe. In addition, many small-cap companies are not yet consistently profitable, making the fund less suitable for investors seeking a strong emphasis on quality. Thanks to the extra income from securities lending, FSSNX has actually managed to beat the Russell 2000 Index slightly.
Fidelity International Index Fund ()
Home country bias is common among U.S. investors. It refers to the tendency to overweight domestic stocks relative to their actual share of the global market, often because of familiarity, tax efficiency and the strong performance of U.S. equities over the past decade. Even so, most investment professionals recommend maintaining some international exposure, and FSPSX provides one way to do that.
FSPSX tracks the MSCI EAFE Index, which represents developed markets in Europe, Australasia and the Far East. Its portfolio includes countries such as Japan, the United Kingdom, the Netherlands, France, Germany, Denmark, Switzerland and Australia. Compared to FXAIX’s technology-heavy tilt, FSPSX emphasizes the financial and industrial sectors more. The fund charges a low 0.035% expense ratio.
Fidelity Emerging Markets Index Fund ()
International investing is not limited to developed economies. Sitting opposite are , which represent countries that are still developing their financial markets and economies. Investing in emerging markets can offer faster long-term growth potential but also higher volatility, political risk and currency risk. Examples include Brazil, India, China and, depending on the index provider, South Korea.
FPADX complements FSPSX by providing exposure to over 1,200 emerging market equities, which include direct stocks and American depositary receipts. Rather than fully replicating its benchmark, the fund uses representative sampling to hold a subset of securities that closely matches the index. This is done to reduce trading costs and avoid less-liquid stocks. FPADX charges a 0.075% expense ratio.
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Update 07/27/26: This story was published at an earlier date and has been updated with new information.
