Principles of Investing

Fidelity's Investment Management Principles

We believe that investing for you or your family's well being starts with a disciplined approach, extensive investment knowledge, and the use of time-tested strategies.

We believe there are 3 principles that people should consider when developing and maintaining an investment strategy. While the way you invest can be adjusted over time as your goals or circumstances change, these principles can be applied to virtually any goal. We can help you better understand these investment management principles and what it takes to apply them to your own financial life.

Historically, there's been a strong connection between where the economy is in the business cycle and the way stocks and bonds perform over time. When managing your own portfolio, it's important to understand where the economy is within the business cycle and how you might invest based on this information.


As the economy moves through the different phases, you may want to add to or remove risk from different areas of your portfolio.


Graphic shows a depiction of the business cycle that is used as a framework for our investment decisions. As the economic cycle goes through recovery, expansion, and contraction, it can be divided into four phases as follows: Early phase, with activity rebounding, which generally lasts about 1 year. Mid phase, with growth peaking, which generally lasts about 3.5 years. Late phase, with growth moderating, which generally lasts about 1.5 years. And Recession phase, with activity falling, which generally lasts less than one year.

*Average annual returns are from 1950–2023, as of 12/31/23. For illustrative purposes only. Business cycle above is a hypothetical illustration of a typical business cycle. There is not always a chronological progression in this order, and there have been cycles when the economy has skipped a phase or retraced an earlier one.  Past performance is no guarantee of future results. Fidelity Investments source: a proprietary analysis of historical asset class performance, which is not indicative of future performance. See Additional important information for indexes representing asset classes and index definitions.
Source: Fidelity Investments (AART), Morningstar, Bloomberg.


While this could mean adjusting your mix of stocks and bonds in response to changes in the business cycle, moving in and out of stocks and bonds alone is often not enough. It's also important to understand how different types of stocks and bonds have performed differently under varying conditions.


For instance, many investors focus on growth-oriented stocks when the economy is expanding, and on value-oriented stocks when it's contracting.


A similar approach may be used with bonds—many investors look to higher-yielding bonds that have historically provided better returns when the economy is expanding, and higher-quality bonds when it's contracting.


You may also want to take into account the size of the companies in which you're investing, as small, medium, and large cap stocks have tended to perform differently throughout the economic cycle.

More information