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.

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.

*Average annual returns are from 1950–2022, as of 12/31/22. 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 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.

Keep in mind that investing involves risk. The value of your investment will fluctuate over time, and you may gain or lose money.

Past performance is no guarantee of future results.

Diversification and asset allocation do not ensure a profit or guarantee against loss.

Market indexes are included for informational purposes and for context with respect to market conditions. All indexes are unmanaged, and performance of the indexes includes reinvestment of dividends and interest income, unless otherwise noted. Review the definitions of indexes for more information. Please note an investor cannot invest directly into an index. Therefore, the performance of securities indexes do not incorporate or otherwise reflect the fees and expenses typically associated with managed accounts or investment funds.

U.S. Stocks = Dow Jones US Total Stock Market Index is a float-adjusted market capitalization-weighted index of all equity securities of US headquartered companies with readily available price data.

International Stocks = The MSCI All Country World Ex-U.S. Index (Net MA) is a market capitalization–weighted index designed to measure the investable equity market performance for global investors of large- and mid-cap stocks in developed and emerging markets, excluding the United States.

U.S. Bonds = Bloomberg U.S. Aggregate Bond Index is a market value–weighted index of investment-grade fixed rate debt issues, including government, corporate, asset–backed, and mortgage– backed securities, with maturities of one year or more.

High Yield Bonds = ICE BofAUS High Yield Index is market capitalization weighted and is designed to measure the performance of U.S. dollar denominated below investment grade (commonly referred to as “junk”) corporate debt publicly issued in the U.S. domestic market.

Short Term = Bloomberg 1-3 Month U.S. Treasury Bill Index measures the performance of public obligations of the U.S. Treasury that have a remaining maturity of greater than or equal to 1 month and less than 3 months.

Commodities = The Bloomberg Commodity Index Total Return Index measures the performance of the commodities market. It consists of exchange-traded futures contracts on physical commodities that are weighted to account for the economic significance and market liquidity of each commodity.

Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. This material is provided for informational purposes only and should not be used or construed as a recommendation for any security.

In general, the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk, liquidity risk, call risk, and credit and default risks for both issuers and counterparties. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

The commodities industry can be significantly affected by commodity prices, world events, import controls, worldwide competition, government regulations, and economic conditions. The Typical Business Cycle depicts the general pattern of economic cycles throughout history, though each cycle is different. In general, the typical business cycle demonstrates the following:

- During the typical early-cycle phase, the economy bottoms and picks up steam until it exits recession and then begins the recovery as activity accelerates. Inflationary pressures are typically low, monetary policy is accommodative, and the yield curve is steep. Economically sensitive asset classes such as stocks tend to experience their best performance during the early-cycle phase.
- During the typical mid-cycle phase, the economy exits recovery and enters into expansion, characterized by broader and more self-sustaining economic momentum but a more moderate pace of growth. Inflationary pressures typically begin to rise, monetary policy becomes tighter, and the yield curve experiences some flattening. Economically sensitive asset classes tend to continue benefiting from a growing economy, but their relative advantage narrows.
- During the typical late-cycle phase, the economic expansion matures, inflationary pressures continue to rise, and the yield curve may eventually become flat or inverted.
- Eventually, the economy contracts and enters recession, with monetary policy shifting from tightening to easing. Less economically sensitive asset categories tend to hold up better, particularly right before and upon entering recession.

Optional investment management services provided for a fee through Fidelity Personal and Workplace Advisors LLC (FPWA), a registered investment adviser and a Fidelity Investments company. Discretionary portfolio management provided by its affiliate, Strategic Advisers LLC, a registered investment adviser. These services are provided for a fee.

Brokerage services provided by Fidelity Brokerage Services LLC (FBS), and custodial and related services provided by National Financial Services LLC (NFS), each a member NYSE and SIPC.

FPWA, Strategic Advisers, FBS, and NFS are Fidelity Investments companies.

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