In the depths of the recession, some workers gave up on 401k contributions just as many businesses stopped matching their contributions. Now that the economy has improved, it's time to get serious about making the most of your retirement plan.
So let's take a look at the top five Fidelity funds that are widely available in 401k's.
With many different options and criteria to consider, making the right retirement plan choices can be complicated. To help take out the guesswork, here's where I'd start:
1. Fidelity Low-Priced Stock Fund
Buying bargain stocks -- that is, shares priced at $35 or less -- proved very profitable for the Fidelity Low-Priced Stock Fund (FLPSX) in 2009, generating returns of more than 39% on the year. With many great stocks still at very reasonable prices, fund manager Joel Tillinghast has a great set of choices and a proven record of snatching up some real treasures before shares get pricey.It's important to draw the distinction between low-priced stocks and stocks with a tiny market share. This fund's top holdings include grocery chain Safeway (SWY, news, msgs), which operates nearly 1,800 stores in the U.S. and Canada, and software giant Oracle (ORCL, news, msgs), which has a market cap -- that's the total value of all outstanding shares -- upward of $123 billion.
Click chart for latest price
Fidelity Low-Priced Stock Fund
Low-Priced Stock had been closed to new investors, but it reopened Dec. 16. That provides a great opportunity to share in the success of this Fidelity mutual fund.
2. Fidelity Select Health Care Fund
Even amid all the wrangling about health care reform in Washington during 2009, the Fidelity Select Health Care Fund (FSPHX) moved steadily upward. Though you don't want too much of your nest egg in a single sector, this relatively low-risk 401k option tallied 32% gains in 2009 and could very well top that this year.Click chart for latest price
Fidelity Select Health Care Fund
Fund manager Eddie Yoon has managed Select Health Care since October 2008 and is currently running the Fidelity Select Medical Equipment and Systems Fund (FSMEX) with success. This gives Yoon the know-how to find innovative up-and-coming device makers while still flavoring Select Health Care with old favorites such as Pfizer (PFE, news, msgs) and Merck (MRK, news, msgs) to keep gains steady and risks low.
Health care remains a tremendous opportunity, because President Barack Obama has gotten the ball rolling again for medical reform. While there would certainly be a few companies adversely affected by any changes in policy, the bottom line is that broader coverage provides access to bigger sales for many health care companies. Fidelity Select Health Care has a track record of being ahead of the sector trends, so it's likely to focus on the opportunities and avoid the pitfalls in the months ahead.
3. Fidelity Mega Cap Stock Fund
After a rough run in 2008 that took a bite out of many nest eggs, there has been increased demand for the bluest of the blue-chip stocks. Similarly, the Fidelity Mega Cap Stock Fund (FGRTX) has returned to favor as a low-risk way to provide for your retirement without settling for the meager returns of money market accounts or your local bank.Click chart for latest price
Fidelity Mega Cap Stock Fund
What's more, the Mega Cap fund has proved that low risk doesn't always mean low returns. With a very impressive return of 28% in 2009, thanks to the guidance of fund manager Matthew Fruhan, conservative 401k investors saw their portfolios bounce back nicely. Top holdings include familiar names such as Wells Fargo (WFC, news, msgs), Exxon Mobil (XOM, news, msgs) and Apple (AAPL, news, msgs), but Fruhan moves in and out of the best opportunities with a skill that few individual investors have if they wanted to play the market on their own.
Mega Cap is a great way to "buy the market" with an active management twist. Consider it a great hybrid between the low-risk tactic of investing in broad indexes and the flair of a managed fund that makes strong sector plays when the time is right. This is a great conservative fund that should not just track the market but beat it this year.
4. Fidelity China Region Fund
Even casual investors know that China was red-hot in 2009, and there's every reason to expect this region to remain the leading opportunity for many months to come. That makes the Fidelity China Region Fund (FHKCX) a no-brainer for 401k participants who have this mutual fund as an option.Click chart for latest price
Fidelity China Region Fund
Some 401k administrators are leery of letting participants play emerging markets because of the risk, but the explosive growth in China has made China Region popular among even buttoned-up 401k overseers. Whether your company is restarting its match or adding options, find out whether China Region is a choice -- because it's a powerful way to brighten your retirement prospects.
How powerful? Well, in 2009, this fund delivered a whopping 66% return -- more than double the gains posted by the Wilshire 5000 stock index -- without risky plays on little-known startups.
Though there are some aggressive small-cap plays, the fund's top holdings include Chinese blue chips such as China Life Insurance (LFC, news, msgs) and China Mobile (CHL, news, msgs), companies that are essentially the Wal-Marts of the Far East.
Investors in 401k's can bank on another great year in Asia and another great run for this fund in the months ahead.
5. Fidelity New Markets Income Fund
If for some reason you don't have access to Fidelity's China fund, the next-best choice is the slightly more conservative Fidelity New Markets Income Fund (FNMIX). This is a great way to play emerging markets without getting too aggressive or risky, because the fund involves a portfolio of bonds and other debt instead of investing directly in shares of companies based overseas.Click chart for latest price
Fidelity New Markets Income Fund
Fund manager John Carlson normally invests at least 80% this way, spicing things up with some equity securities or even some debt from developed economies and the West just to keep things low-risk. Carlson has been at the helm since 1995 with a long track record of success, including an impressive 45% return for New Markets last year.
This is another great combination of great returns with low risk. For instance, top FNMIX plays right now include Mexican government bonds, with a hefty 8.5% return, and Brazilian debt, with a great 11% return. Though you're not going to double your money with plays like that, you have a great chance of generating bigger returns than the Dow Jones industrials ($INDU) with just a fraction of the risk.
Everyone should have a footprint in emerging markets, because these regions are leading the global economic recovery. Fidelity's FNMIX is a great way to capitalize on this opportunity without exposing your nest egg to a lot of risk.
Continued: How to put these picks to work
