Introduction
I often get asked about the best way to grow wealth over the long term while managing risk. One strategy I recommend for investors with a high-risk tolerance is an aggressive diversified Fidelity mutual fund. These funds aim for high returns by investing in a mix of growth-oriented assets, including domestic and international stocks, with minimal exposure to bonds or cash.
Table of Contents
What Is an Aggressive Diversified Fidelity Mutual Fund?
An aggressive diversified mutual fund from Fidelity typically holds a broad range of high-growth assets. Unlike conservative funds, which prioritize stability, these funds seek capital appreciation by taking on more market risk.
Key characteristics include:
- High equity allocation (85-100%) – Mostly stocks, with minimal bonds.
- Global diversification – Exposure to U.S. and international markets.
- Sector variety – Technology, healthcare, consumer discretionary, and emerging markets.
- Active or passive management – Some follow indexes, while others rely on Fidelity’s stock-picking expertise.
Example: Fidelity Diversified International Fund (FDIVX)
This fund invests in non-U.S. companies with strong growth potential. Its top holdings include firms like ASML Holding (semiconductors) and LVMH (luxury goods). Over the past decade, it has delivered an average annual return of around 9.2%, though past performance doesn’t guarantee future results.
Performance Metrics and Risk Assessment
Expected Return vs. Volatility
Aggressive funds tend to have higher standard deviation, a measure of volatility. For instance, if Fund A has an expected return of E(R_a)=12\% and a standard deviation of \sigma_a=18\%, it’s riskier than Fund B with E(R_b)=8\% and \sigma_b=10\%.
The Sharpe Ratio helps compare risk-adjusted returns:
Sharpe\ Ratio = \frac{E(R_p) - R_f}{\sigma_p}Where:
- E(R_p) = Expected portfolio return
- R_f = Risk-free rate (e.g., 10-year Treasury yield)
- \sigma_p = Portfolio standard deviation
A higher Sharpe Ratio means better risk-adjusted performance.
Comparing Fidelity’s Aggressive Funds
| Fund Name | Ticker | 10-Yr Avg Return | Expense Ratio | Sharpe Ratio (5-Yr) |
|---|---|---|---|---|
| Fidelity Blue Chip Growth | FBGRX | 15.3% | 0.69% | 1.02 |
| Fidelity Contrafund | FCNTX | 12.1% | 0.86% | 0.89 |
| Fidelity Total Market Index | FSKAX | 10.8% | 0.015% | 0.92 |
Data as of Q2 2024. Source: Fidelity, Morningstar.
FBGRX, with its tech-heavy portfolio, outperforms but carries more risk. FSKAX, a passive index fund, has lower fees and steadier returns.
Tax Efficiency and Costs
Expense Ratios Matter
Even small differences in fees compound over time. Suppose you invest $100,000 for 30 years with a 7% annual return:
- 0.69% fee (FBGRX): Final value ≈ FV = 100,000 \times (1.07 - 0.0069)^{30} \approx \$669,000
- 0.015% fee (FSKAX): Final value ≈ FV = 100,000 \times (1.07 - 0.00015)^{30} \approx \$761,000
The $92,000 difference shows why low-cost index funds appeal to long-term investors.
Capital Gains Distributions
Actively managed funds like FCNTX frequently trade stocks, triggering taxable events. Index funds (e.g., FSKAX) trade less, making them more tax-efficient.
Who Should Invest in Aggressive Fidelity Funds?
Ideal Investor Profile
- Long time horizon (10+ years) – Can weather short-term volatility.
- High-risk tolerance – Comfortable with 20-30% drawdowns.
- No need for short-term liquidity – Money won’t be needed in <5 years.
Alternatives for Conservative Investors
- Fidelity Balanced Fund (FBALX) – 60% stocks, 40% bonds.
- Target-date funds – Automatically adjust risk as retirement nears.
Final Thoughts
Aggressive diversified Fidelity funds can turbocharge growth, but they’re not for everyone. I suggest pairing them with stable assets (e.g., bonds or real estate) to mitigate risk. Always review fees, past performance, and tax drag before investing.
