Home Adviser Fund Update Is Fidelity’s Newest Fund a Winner? Published June 22, 2012 Fidelity Bets on StockA financial instrument giving the holder a proportion of the ownership and earnings of a company. Selection With the recent launch of Stock Selector Mid Cap, Fidelity has added to its growing family of sector-neutral Stock Selector funds available to individual investors. Like its sibling funds, Stock Selector Mid Cap relies on a team of managers, each of whom independently manages sector-focused sleeves of the portfolio. The fund allocates its assets to each sector based on its benchmark S&P MidCap 400 Index’s weighting (this is where the “sector-neutral” label comes in), with each of the eight managers working within their areas of expertise to identify their best ideas for their sector’s sleeve(s). This contrasts with a top-down approach, where a manager identifies themes or sectors they believe will outperform and allocates accordingly. Stock Selector Mid Cap’s bottom-up approach eliminates the need to make sector rotation and market timing decisions, relying instead on the benchmark (and S&P’s index committee) to make the broad allocation decisions. Why this approach? The Stock Selector funds are based on the premise that superior stock-pickers can outperform the market over time (a theory that we ascribe to at Adviser Investments as well). Fidelity believes that the approach taken by this family of funds removes the potentially negative effects of market timing and sector selection from the portfolios, placing the onus for performance solely on the management team’s selection of stocksA financial instrument giving the holder a proportion of the ownership and earnings of a company.. This is not a new methodology for Fidelity–Stock Selector Mid Cap is essentially a clone of Advisor Stock Selector Mid Cap (the firm’s Advisor-class funds are only available through broker-dealers or for institutional investors), which has been around since February 1996. The same team of sector managers, each of whom currently manages one or more funds for Fidelity, will oversee the new fund’s assets. This includes: • Monty Kori, Industrials and Materials • Rayna Lesser, Telecom Services and Information Technology • Shadman Riaz, Energy • Gordon Scott, Consumer Staples and Consumer Discretionary • Douglas Simmons, Utilities • Pierre Sorel, Financials • Patrick Venanzi, Health Care • Samuel Wald, REITs (real estate investment trustsA legal document that functions as an instruction manual to how you want your money managed and spent in your later years as well as how your assets should be distributed after your death. Assets placed in a trust are generally safe from creditors and can be sold by the trustee in short order, avoiding the lengthy and costly probate process.) Unfortunately, for Fidelity’s theorists and the Advisor fund’s investors, the stockA financial instrument giving the holder a proportion of the ownership and earnings of a company. selection has not lived up to the hype, and long-term performance has lagged the S&P MidCap 400 Index benchmark over various multi-year periods through May 2012, as you can see in the table below. While the fund has outperformed over the last year (which perhaps played a role in the timing of the retail share class’s introduction), the rest of the table tells a different tale. A quick check of the numbers for other Stock Selector funds that follow a similar methodology (All Cap, Large Cap Value and Small Cap) show similarly disappointing results. While we believe that Fidelity’s reasoning–that superior management and stock picking should lead to outperformance–is sound, the Stock Selector funds have not been able to deliver for investors. About Adviser Investments Adviser Investments operates as an independent, professional wealth management firm with expertise in Fidelity and Vanguard funds, actively managed mutual funds, ETFsA type of security which allows investors to indirectly invest in an underlying basket of financial instruments (these may include stocks, bonds, commodities or other types of instruments). Shares in an ETF are publicly traded on an exchange, and the price of an ETF’s shares will fluctuate throughout the trading day (traditional mutual funds trade only once a day). For example, one popular ETF tracks the companies in the S&P 500, so buying a share of the ETF gets an investor exposure to all 500 companies in the index., fixed-income investing, tactical strategies and financial planning. Our investment professionals focus on helping individual investors, trusts, foundations and institutions meet their investment goals. Our minimum account size is $350,000. For the fifth consecutive year, Adviser Investments was named to Barron’s list of the top 100 independent financial advisers nationwide and its list of the top advisory firms in Massachusetts in 2017. We have also been recognized on the Financial Times 300 Top Registered Investment Advisers list in 2014, 2015 and 2016. For more information, please visit www.adviserinvestments.com or call 800-492-6868. Disclaimer: This material is distributed for informational purposes only. The investment ideas and expressions of opinion may contain certain forward-looking statements and should not be viewed as recommendations, personal investment advice or considered an offer to buy or sell specific securities. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed. Our statements and opinions are subject to change without notice and should be considered only as part of a diversified portfolio. You may request a free copy of the firm’s Form ADV Part 2, which describes, among other items, riskThe probability that an investment will decline in value in the short term, along with the magnitude of that decline. Stocks are often considered riskier than bonds because they have a higher probability of losing money, and they tend to lose more than bonds when they do decline. factors, strategies, affiliations, services offered and fees charged. Past performance is not an indication of future returns. The tax information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. 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