What Every Fidelity Investor Needs to Know

03/01/2007 12:00 am EST


Jim Lowell

Partner & Chief Investment Officer, Adviser Investments

This book’s title says it all. From his boyhood days, spending his summers across the street from the family that ran Fidelity, to his own investment newsletters profiling Fidelity’s funds and exchange-traded funds (ETFs), Jim Lowell is the expert on Fidelity.

And this book truly does tell investors everything they need to know to be a Fidelity client.

Fidelity is the world’s largest mutual fund company with more than $1.1 trillion fund assets and 19 million shareholders. And that’s how most investors recognize the company. But what they may not know is that Fidelity also offers discount brokerage services, retirement services, estate planning, securities execution and clearance, life insurance, real estate, publishing, venture capital, outsourcing, and even owns a national limousine service (that one was even new to me!).

Lowell’s book is a treat for folks who love history and a good success story. And this one stems from that day in 1943, when 45-year old Edward C. Johnson III took over this 13-year old firm with funds totaling some $3 million. Just three years later, he had more than tripled the company’s total fund assets to $13 million. Just little more than a decade later, in 1956, fund assets topped a whopping $256 million.

Edward’s son Ned picked up the reins and proved himself to be a visionary with a keen knack for product development and pioneering very creative products in a traditional, staid industry.

Some of the company’s firsts; a money market fund that doubled as a checking account, the nation’s first open-end municipal bond fund, automation of back office operations, sophisticated telephone customer service system (back in 1979), the first major mutual fund company to create a home page on the, web, in 1995 (today, Fidelity has more than 6.6 million online accounts, with total assets of more than $500 million), and the first IRS-approved public charity run by a financial services firm.

And if that wasn’t enough, Fidelity also bred the most famous mutual fund manager of them all, Peter Lynch. In his 13-years as manager of the Fidelity Magellan fund, the portfolio gained 2,703% – beating the S&P 500 by 574%! By the time Lynch retired in 1990, Magellan’s assets had grown from $22 million (1977) to $13.1 billion.

Although the company has hit some rough spots, it has always managed to bounce back and take the lead through its innovation and support of its employees. For instance, in 1995, Johnson made an unheard-of move for a mutual fund company, giving his top executives and fund managers a 51% ownership interest in the company, and reducing his stake from 25% to 12%. Additionally, his funds are generally run by a manager, not a team, which gives the manager tremendous autonomy and opportunity.

Those factors help to explain the company’s success. The remaining contributor is the sheer scale of Fidelity’s offerings.

Lowell spends a good portion of the book on investor tips for how to get the most out of using Fidelity’s services. Those tips include; an overview of the company’s statements–pros and cons, exact instructions on trading online using Fidelity’s as well as additional helpful web sites, a primer on retirement planning (retirement assets now constitute 56% of Fidelity’s assets), and a discussion of charitable giving and trusts.

Next, Lowell defines and explains all the different types of funds and ETFs Fidelity offers–what they invest in, minimums, and portfolio details. He goes into in-depth explanations of how to open them, as well as their advantages and disadvantages. He also discusses model portfolios and tells investors how they can create their own funds.

In his concluding chapter, Lowell opines that the future Fidelity will be a firm with an even larger range of product offerings and a powerhouse in several arenas, including 401ks.

And lastly, the book’s appendix is well-worth a look. It offers a listing of; Fidelity’s investor centers, a map of its managers, a delightful interview with Peter Lynch, a glossary of investment terms, and a glossary of Fidelity investment terms.

This book should be high on the list of not only Fidelity’s existing clients, but also investors who are looking for a firm that offers a tremendous range of products at very reasonable prices.

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