So what should you do with your money? While Fidelity still has plenty of chart toppers and more mutual-fund dollars than any of its competitors, there are today hundreds of other companies running 6,085 funds tailored to every investing whim imaginable. This staggering number of funds--which continues to grow almost daily--is both a blessing and a curse. Let no one ever say he can't find a fund that matches his investing goals. But on the other hand, how in the world do you ever decide which fund to buy?
In the mutual-fund business, biggest is very often best. Not only will well-established outfits like the Vanguard Group, American Funds and broker Merrill Lynch probably still be in business when you retire, but they also offer a plethora of funds and a wide range of services--from retirement planning to checking accounts. Says Dan Wiener, editor of Independent Advisor for Vanguard Investors, which tracks funds managed by the Vanguard Group: "There is a desire to be all things to all people. It's the supermarket approach."
Buying all your funds from a single, giant purveyor has its rewards. It makes coping with taxes and monthly statements easier, for example. But simplifying your life may not be the best strategy if you are looking for top performance. While these industry leaders offer many of the same types of funds, they are by no means cookie-cutter clones. Some are simply better at certain types of investing than others. Therefore, a better strategy might be to select the best funds--and don't go overboard here--from perhaps three different fund companies.
FIDELITY, Boston; 800-544-8888. The biggest in the business is famous for its brainpower, employing more than 300 analysts and portfolio managers to track thousands of stocks. (Fidelity has rightfully been known for its stock funds rather than its bond portfolios.) It would be a mistake not to consider buying some of Fidelity's funds. The company's stock-picking expertise is simply too great to ignore. Stars like Steve Wymer, who manages the $1.3 billion--smallish by Fidelity's standards--Dividend Growth Fund; Will Danoff, who runs the $19 billion Contrafund; and Robert Stansky, who recently took over Magellan, are all folks to invest by. It's still too early to rate Stansky's run at Magellan, but he was a standout at the Growth Company Fund. Fidelity's array of 35 sector funds, each of which invests in specific industries, makes sense for those with a hunch about, say, oil companies or food stocks. For instance, its Select Retailing Portfolio's yield in 1996 to date is 25%; Energy, 19%. The company's technical sophistication lets consumers get at their accounts by phone, personal computer and, soon, the Internet.