fidelity 2025 index fund

3 min read 27-11-2024

The Fidelity ZERO™ 2025 Index Fund is a popular choice for investors seeking a low-cost, passively managed approach to investing in a target-date fund (TDF). This article provides a comprehensive overview, exploring its features, benefits, risks, and suitability for different investors. We'll also compare it to similar offerings and discuss how it fits into a broader investment strategy.

What is the Fidelity ZERO™ 2025 Index Fund?

The Fidelity ZERO™ 2025 Index Fund (FXSIX) is a target-date fund designed for investors aiming to retire around 2025. It's a passively managed fund that tracks the performance of a specific index, aiming to mirror its returns. This means the fund manager doesn't actively pick individual stocks, minimizing management fees. The "ZERO" in the name highlights its extremely low expense ratio.

Key Features:

Target Retirement Date: 2025. The fund's asset allocation gradually shifts from a higher stock allocation to a more conservative mix of bonds as the target date approaches. This is designed to reduce risk closer to retirement.
Index Tracking: FXSIX tracks a broad market index, providing diversified exposure across various sectors and asset classes. The specific index tracked may be detailed in the fund's prospectus.
Low Expense Ratio: A significant advantage is its ultra-low expense ratio, which directly impacts investor returns. Lower fees mean more of your money works towards building wealth.
Passive Management: The fund's passive management strategy avoids active trading and the associated costs and potential underperformance.

How Does the Asset Allocation Change Over Time?

A key characteristic of TDFs like the Fidelity ZERO™ 2025 Index Fund is their glide path. As the target date (2025) nears, the fund automatically adjusts its asset allocation to become more conservative. This involves decreasing the percentage invested in stocks (generally considered higher-risk) and increasing the percentage allocated to bonds (generally considered lower-risk). This strategy aims to protect accumulated savings as retirement draws closer. The exact glide path is usually detailed in the fund’s prospectus or on Fidelity's website.

Is the Fidelity ZERO™ 2025 Index Fund Right for You?

The Fidelity ZERO™ 2025 Index Fund is suitable for investors who:

Are approaching retirement: Those targeting retirement around 2025 will find the fund's glide path particularly relevant.
Prefer passive management: Investors who prefer a “set it and forget it” approach will appreciate the passive management strategy.
Seek low costs: The ultra-low expense ratio is a major draw for cost-conscious investors.
Desire diversification: The fund's broad market index tracking provides diversification across various sectors and asset classes.

However, it might not be suitable for investors who:

Have a longer or shorter investment timeframe: If your retirement plans are significantly different from 2025, a different target-date fund may be more appropriate.
Desire active management: If you prefer a fund manager's active stock picking strategy, this isn't the right choice.
Need high-growth potential: While offering diversification, the risk-averse glide path towards retirement means growth potential may be less compared to more aggressively invested funds.

Fees and Expenses

One of the main attractions of the Fidelity ZERO™ 2025 Index Fund is its extremely low expense ratio. This directly affects your returns over time, allowing more of your money to be invested rather than going towards fees. Always check the current expense ratio on Fidelity's website or the fund's prospectus, as these can be subject to minor changes.

Comparing to Similar Funds

Several competitors offer similar target-date funds with varying expense ratios and glide paths. Comparing these funds is crucial for choosing the best fit. Factors to consider include the expense ratio, the specific index tracked, the glide path, and the fund's historical performance (past performance is not indicative of future results, however).

How to Invest

Investing in the Fidelity ZERO™ 2025 Index Fund is straightforward through Fidelity brokerage accounts. You can typically purchase shares directly through their online platform or by contacting a Fidelity representative.

Conclusion

The Fidelity ZERO™ 2025 Index Fund offers a convenient, low-cost way for investors approaching retirement around 2025 to gain diversified market exposure. Its passive management strategy, low expense ratio, and automatic glide path make it attractive to many. However, carefully consider your personal circumstances, risk tolerance, and retirement timeline before investing. Remember to consult a financial advisor for personalized guidance. Always review the fund's prospectus for complete details.