Q. What do you think of Fidelity Fund in my retirement account?
V.L., via the Internet
A. This Fidelity Investments fund has been around since 1930, launched a few months after the 1929 stock market crash.
It traditionally has been a blue-chip, large-cap growth and value fund. Lately, however, it has tilted more toward growth, with nearly one-fifth of assets in technology. One of the Fidelity’s cheapest actively managed funds, it has a low 0.56 percent annual expense ratio.
But despite its pedigree, performance has been less than historic for some time.
The $7.4 billion Fidelity Fund (FFIDX) increased 15 percent in the last 12 months and had a three-year annualized return of 13 percent. Both results rank around the midpoint of large-growth and value funds.
“Fidelity Fund has done fairly well, but we don’t recommend it because there are significantly better large-cap growth options at Fidelity,” said Jim Lowell, editor of the Fidelity Investor newsletter. “We will have a ‘hold’ on it until we see some change in management because, while portfolio manager John Avery has done a good job, he could do a better job.”
Avery, who has run the fund since 2002, managed Fidelity Advisor Balanced Fund from early 1998 to early 2002 with less-than-spectacular results. His performance had been stronger during a year and a half running Fidelity Advisor Growth & Income Fund.
More Top Picks Best Hammered Dulcimers For Intermediate Players
He looks for firms with management teams that have sensible strategies but trade at a discount, typically making few major bets against the Standard & Poor’s 500 index. Although that approach is logical and fundamentally sound, it decreases the potential for dramatic gains. That’s why it typically places in the middle of the pack.
“It has never greatly underperformed or outperformed the S&P,” said Lowell, explaining his lack of excitement.
Financial services and industrial materials are large concentrations in the portfolio. This “no-load” (no sales charge) fund requires a $2,500 minimum initial investment.
Q. What is the difference between a cash dividend and a stock dividend? Why do companies choose to pay one or the other?
J.A., via the Internet
A. A cash dividend, the type investors are most familiar with, is a cash payout from a stock. It is offered to attract and reward shareholders.
Most brokers offer investors a choice as to whether they wish to reinvest those dividends or take them as cash.
A stock dividend, on the other hand, is comparatively rare. It makes the dividend payment in the form of additional shares, with the distributions generally taking the form of fractions per existing share held.
“Sometimes a company wants to reward its shareholders with a little perk, so it decides to give shareholders a stock dividend,” said Sam Stovall, senior investment strategist with Standard & Poor’s Corp. in New York. “If the investors choose to sell those shares, it’s their business.”
With the latest electronic capabilities, and the fact stocks are commonly held by brokerage firms in computerized accounts for investors, stock dividends have become easier to issue, Stovall said.
“The stock dividend now just basically shows up on your statement,” he said.
———-
Andrew Leckey is a Tribune Media Services columnist. E-mail him at [email protected].