Boost Retirement Income: Two Low-Cost Fidelity Funds to Own

If you’re saving for retirement, you’re probably concerned about how current economic uncertainty and turbulence may impact your nest egg. But a diversified portfolio should be able to weather any storm.

However, it takes time and a certain degree of acumen to pick stocks that create a winning portfolio. But you can take out the guess work by investing in index funds. These are professionally managed funds that aim to mimic the performance of market indexes that contain hundreds of leading stocks. This offers instant diversification, without the need for stock picking.

Some index funds even pay dividends. These are regular payments made to shareholders from the company’s profits.

And you can easily create a diversified portfolio by combining a total stock market fund with a total bond market fund.

For those saving for retirement, this portfolio could help preserve earnings – while gaining from market upsides.

Here are two Fidelity funds that could help you build this portfolio with low fees.

Fidelity ZERO Total Market Index Fund (FZROX)

The Fidelity ZERO Total Market Index Fund (FZROX) is part of Fidelity’s lineup of zero expense ratio mutual funds. Expense ratios are annual management fees that are automatically deducted from the share price. But a 0% expense ratio means that management fees won’t eat into this fund’s returns – a rarity for total stock market index funds.

So with FZROX, you can benefit from compound interest with no annual management fees taken out of your returns.

FZROX invests at least 80% of its assets in common stocks included within the Fidelity U.S. Total Investable Market Index. This gives you exposure to small-, mid- and large-cap companies across various sectors.

Instant diversification ensures you are not overly reliant on one particular company, sector or industry. Its holdings include big names like Nvidia (NASDAQ:NVDA | NVDA Price Prediction), Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL), Meta (NASDAQ:META) and Amazon (NASDAQ:AMZN)

The fund currently has $29.51 billion in net assets, and it boasts a healthy one-year average annual return of 15.94%. FZROX also pays annual dividends, which can provide retirees with a steady stream of income regardless of market conditions and inflation.

Fidelity Total Bond ETF (FBND)

The Fidelity Total Bond ETF (FBND) is an actively managed ETF that aims to provide a high level of current income and outperform the Bloomberg U.S. Universal Bond Index. So far, it has been succeeding in that goal.

It invests at least 80 percent of its assets in a broad range of investment-grade and high-yield bonds that spans corporate, government and mortgage-backed securities. This makes it generally safer and less volatile than a stock fund. In fact, bonds have helped stabilize overall portfolio returns 88% of the time when stocks have fallen since 1926, according to research by Fidelity.

Moreover, most of FBND’s holdings are in Treasury securities. These include Treasury bonds and Treasury notes. Treasury securities are considered among the safest investments because they are backed by the full faith of the United States government.

But the FBND offers more than just stability and diversification. As a dividend paying fund, FBND also provides retirees with a steady and monthly stream of income.

FBND has generated a one-year total return of 3.77 percent and it has a yield of 4.57 percent. It holds $20.3 billion in net assets. Plus, Morningstar has given it a ⅘ star rating.

FBND has an expense ratio of 0.36% or $36 per $10,000.

Which should you choose?

If you’re far from retirement, you may have the risk tolerance to invest more aggressively in growth-oriented securities like stocks. FZROX can suit you as it invests in various stocks across different market capitalizations and industries.

But if you’re near or in retirement, your goal may be to preserve what you’ve accumulated over the years and take on less risk. A fixed-income fund can help here. And the FBND can give you exposure to the greater bond market, while also paying dividends.

Nonetheless, it can help to have both FZROX and FBND in your portfolio. These two funds can give you access to returns from both the greater stock and bond markets. Combined, these two funds can provide you with instant diversification without the need to carefully analyze and pick different stocks and bonds to build your portfolio with. Plus, you’d be receiving regular dividend payments as retirement income from each fund.