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.

Choosing an asset allocation
One of the most important investment decisions you'll make is choosing a mix of investments, or asset allocation. This will likely have the greatest impact on whether you reach your goals.


Start with your financial life
Ask yourself who you are as an investor. When do you need this money? How's your financial health? Are you willing to live with some investment risk in exchange for potentially higher long-term returns? You'll have to factor all these into your decision making.


Turning your preferences into a mix of investments
Here are some sample asset allocations comprised of different proportions of the primary asset classes like stocks (domestic and international), bonds, and short-term investments, as well as corresponding performance return information based on indexes associated with the primary asset classes and weighted based on the allocation to the primary asset classes shown below. Remember that you'll want to be diversified across asset classes. As the graphic shows, a higher allocation of stocks generally corresponds to a greater potential for both gains and losses.



Index-based Returns

Graphic shows the average annual return, highest 1-year return, lowest 1-year return, highest 5-year return, lowest 5-year return, highest 10-year return, lowest 10-year return and risk % (also known as standard deviation) for eight hypothetical asset allocations based on historical performance data of various indexes from 1926 through December 31, 2022, data, available from Morningstar. The hypothetical asset allocations are: Conservative, Moderate with Income, Balanced, Growth with Income, Growth, and Aggressive Growth. Average annual returns are as follows, Conservative 5.78%, Moderate with Income 6.55%, Moderate 7.19%, Balanced 7.80%, Growth with Income 8.38%, Growth 8.84%, Aggressive Growth 9.56% and All Stock 10.09%. The risk % for each asset allocation are: Conservative 4.57%, Moderate with Income 6.23%, Moderate 7.88%, Balanced 9.60%, Growth with Income 11.35%, Growth 13.07%, Aggressive Growth 15.73% and All Stock 18.38%. In general, the more aggressive the portfolio the greater potential for both higher returns and greater losses, in both the short and long term.

It's important to remember that any asset allocation, including the most conservative ones, are subject to the ups and downs of the market and the risk that you may lose money.

Important information about performance returns. Performance cited represents past performance. Past performance, before and after taxes, does not guarantee future results and current performance may be lower or higher than the data quoted. Investment returns and principal will fluctuate with market and economic conditions, and you may have a gain or loss when you sell your assets. Your return may differ significantly from those reported. The underlying investments held in a client’s account may differ from those of the accounts included in the composite. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment.

*The above example (of various asset allocations) is for illustrative purposes only and does not reflect actual PAS data. Asset mix performance figures are based on the weighted average of annual return figures for certain benchmarks for each asset class represented. Historical returns and volatility of the stock, bond, and short-term asset classes are based on the historical performance data of various indexes from 1926 through 12/31/23 data available from Morningstar.

Note: Foreign stock represented by IA SBBI US Large Stock TR USD 1926–1969 (IA SBBI US Large Stock TR USD was used to represent foreign stocks prior to 1970), MSCI EAFE 1970–2000, MSCI ACWI Ex USA 2001–12/31/23. Domestic stocks represented by IA SBBI US Large Stock TR USD Ext 1926–1986, Dow Jones U.S. Total Market 1987–12/31/23. Bonds represented by U.S. Intermediate-Term Government Bond Index 1926–1975, Bloomberg U.S. Aggregate Bond 1976–12/31/23. Short term represented by 30-day U.S. Treasury bills 1926–12/31/23. Although past performance does not guarantee future results, it may be useful in comparing alternative investment strategies over the long term. Performance returns for actual investments will generally be reduced by fees and expenses not reflected in these investments' hypothetical illustrations.

†Standard deviation does not indicate how the securities actually performed but indicates the volatility of their returns over time. A higher standard deviation indicates a wider dispersion of past returns and thus greater historical volatility. The chart does not represent the performance of any Fidelity fund. You cannot invest directly in an index. Stock prices are more volatile than those of other securities. Government bonds and corporate bonds have more moderate short-term price fluctuation than stocks but provide lower potential long-term returns. US Treasury bills maintain a stable value if held to maturity, but returns are generally only slightly above the inflation rate. The purpose of the asset mixes is to show how asset mixes may be created with different risk-and-return characteristics to help meet an investor’s goals. You should choose your own investments based on your particular objectives and situation. Remember that you may change how your account is invested. Be sure to review your decisions periodically to make sure they are still consistent with your goals.

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.

IA SBBI US Large Stock Index tracks the monthly return of S&P 500®. The history data from 1926 to 1969 is calculated by Ibbotson. The S&P 500® Index is a market capitalization–weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance.

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.

MSCI EAFE Index is a market capitalization-weighted index that is designed to measure the investable equity market performance for global investors in developed markets, excluding the US & Canada.

MSCI ACWI (All Country World Index) ex USA Index 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.

Bloomberg US Aggregate Bond Index is a broad-based, market-value-weighted benchmark that measures the performance of the investment grade, US dollar denominated, fixed-rate taxable bond market. Sectors in the index include Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS, and CMBS.


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