Domestic Equity - Fidelity Investments

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Domestic Equity

Fundamentals for investors

Equity mutual funds provide growth potential often necessary for you to achieve your long-term investment goals. And, if you don't own equities, your portfolio may be missing out.

Not FDIC Insured ? May Lose Value ? No Bank Guarantee 2

Opportunities for Building Wealth

Historically, equities have been one of the best ways to build wealth, outpacing bonds or shortterm investments, albeit with greater price volatility. Yet many investors are wary of equities, either underinvesting in the asset class or jumping in and out of the market--often at the wrong time. In either case, investors may be missing opportunities.

Understanding equities can help you maintain an appropriate exposure in your portfolio and help you achieve your long-term investment goals.

EQUITIES: MORE GROWTH THAN BONDS OR CASH OVER THE LONG TERM

$1,200,000 $1,000,000

$800,000

Stocks

? Bonds ? 30-Day T-Bill ?? Inflation

$600,000

$400,000

$200,000

0 12/81 12/86 12/91 12/96 12/01 12/06 12/11 12/16 12/21

Morningstar, as of 12/31/21. Hypothetical growth of $10,000. Bonds are represented by the IA SBBI U.S. Intermediate-Term Government Bond Index. IA SBBI U.S. Intermediate-Term Government Bond Index is a custom index designed to measure the performance of intermediate-term U.S. government bonds. Inflation is measured by the Consumer Price Index, an inflationary indicator that measures the change in the cost of a fixed basket of products and services, including housing, electricity, food, and transportation. 30-day Treasury Bills are represented by the IA SBBI U.S. 30-day Treasury Bill Index, a custom unmanaged index designed to measure the performance of U.S. 30-day Treasury Bills. Stocks are represented by the S&P 500? Index, a market capitalization-weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance.

Stick with stocks for long-term growth potential. The market doesn't go up in a straight line. Corrections and bear markets are normal. The challenge for investors is to ride out setbacks and remember that over time, the market has gone up.

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Equities and Equity Mutual Funds--How They Work

Equities--also known as stocks--represent ownership in a public company. When you invest in equities you can benefit from dividends, a portion of the company's profits, and capital appreciation when the price of a company's stock rises. Of course, not all companies pay dividends, and stock prices may decline as well.

Equity mutual funds offer a simple way to invest in stocks, allowing you to pool your money with other investors' money. The price of the mutual fund is its net asset value (NAV). Like the price of a stock, the NAV fluctuates daily based on the value of the securities in the fund. Investors in an equity mutual fund do not actually own the securities; they own shares in the fund itself.

Equity mutual funds can be a smart way to invest because you get:

Diversification

One share in a mutual fund could equal an investment in hundreds of companies. While diversification does not ensure a profit or guarantee against a loss, this diversification can reduce the risk of a loss in any one security from hurting your investment as a whole.

Professional management

Fund managers have the experience and resources to research companies, industries, the markets, and the economy when deciding which stocks to buy or sell.

Liquidity and convenience

Mutual funds allow you to buy or sell fund shares using the NAV at the market close. You can also automatically reinvest income from dividends and capital gains, if any, back into the fund.

It's important to know that some funds charge fees when you buy or sell shares, and all funds charge management fees that cover the expenses incurred by the fund. Fees can impact a fund's performance.

Diversification does not ensure a profit or guarantee against a loss. 2

Equity Fund Categories

Equity mutual funds are often categorized by the size, or market capitalization, of the companies that the fund invests in.

MARKET CAPITALIZATION IS THE VALUE OF ALL OF A COMPANY'S SHARES OF STOCKS.

Outstanding Shares

x Stock Price

For example, a company with 20 million shares

selling at $50 a share

= Market Cap

would have a market cap of $1 billion.

Large Cap Companies

Mid Cap Companies

Market cap: $10 billion or more

Stage: Large cap firms often have a reputation for producing quality goods and services, steady growth, and may also have a history of consistent dividend payments.

Market cap: $2 billion to $10 billion

Stage: Typically, these are established companies experiencing or expected to experience rapid growth.

Less Risk Less Growth

Small Cap Companies Market cap: $300 million to $2 billion Stage: Young companies that can be more sensitive to an upturn or a downturn.

More Risk More Growth

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Which Equity Funds Are Right for You?

Equity mutual funds employ a variety of approaches. Understanding these approaches can help you and your advisor select funds appropriate for your goals.

Value

Core

Value funds typically invest in companies whose stock prices don't necessarily reflect their long-term worth. Ideally, stock prices will appreciate over time as the market recognizes the company's worth and earnings potential.

Core funds usually use a blended approach--investing in both value and growth stocks--seeking attractive dividend income and slow but steady growth. The goal is some appreciation potential.

Who should invest?

Conservative investors seeking low volatility and income Historically, value stocks have been less volatile than the market. In general these stocks come from mature companies that use their earnings to pay dividends, helping investors increase their wealth conservatively.

Investors seeking a stable base for their portfolio Core funds typically have provided more capital appreciation potential than value funds and lower volatility than growth funds.

What's the performance?

Value funds often have trailed the market when stock prices were rising, but have lost less value when markets were declining.

Core funds typically have trended--risen and declined-- with the market.

Less Risk Less Growth Potential

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Growth

Growth funds invest in companies with faster-thanaverage sales and earnings growth. These companies often reinvest profits back into the business and range from fast growers to mature, stable growers. Typically, the market has rewarded growth investors with higher stock values.

Capital Appreciation

Capital appreciation funds invest in companies with the potential for dramatic growth and rapidly appreciating share prices. The managers often have the flexibility to move around the market and exploit opportunities wherever they arise.

Risk-tolerant investors seeking solid growth potential Growth companies have provided greater capital appreciation than value funds, albeit with greater volatility.

Investors seeking to grow their assets quickly who can tolerate high volatility Companies with the potential to grow the fastest have historically provided high capital appreciation potential with more volatility than growth funds.

Growth funds have tended to do better than the overall market when stock prices were rising but underperformed the market when stock prices declined.

Capital appreciation funds have tended to outperform the market and growth funds when markets were rising and have lost more value when prices declined.

More Risk More Growth Potential

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Combinations May Create a Smoother Ride

Over time, diversifying across different types of mutual funds can help you manage risk and potentially boost returns. While diversification can't prevent a loss, it can temper volatility and help you avoid the emotional ups and downs of investing.

YOU CAN'T PREDICT THE BEST AND WORST PERFORMERS. HOWEVER, DIVERSIFYING MAY HELP KEEP YOUR PORTFOLIO FROM COMING IN LAST. Annual returns of key market categories, 2012?2021

2012

Mid Cap Value 18.5%

2013

Small Cap Growth 43.3%

2014

Large Cap Growth 14.9%

2015

Large Cap Growth 5.5%

2016

Small Cap Value 31.7%

2017

Large Cap Growth 27.4%

2018

Large Cap Growth 0.0%

2019

Large Cap Value 31.9%

2020

Small Cap Growth 34.6%

2021

Large Cap Growth 32.0%

Small Cap Value

18.1%

Small Cap 38.8%

Large Cap 13.7%

Mid Cap Growth

2.0%

Mid Cap Value

26.5%

Small Cap Growth

22.2%

Large Cap ?4.4%

Large Cap 31.5%

Large Cap Growth

33.5%

Mid Cap Value

30.7%

Mid Cap 17.9%

Diversified Portfolio

34.9%

Large Cap Value

12.4%

Large Cap 1.4%

Small Cap 21.3%

Large Cap 21.8%

Diversified Portfolio

?8.9%

Large Cap Growth

31.1%

Mid Cap Growth

22.8%

Large Cap 28.7%

Large Cap Value

17.7%

Small Cap Value

34.5%

Mid Cap Value

12.1%

Small Cap Growth

?1.4%

Mid Cap 20.7%

Mid Cap Growth

19.9%

Large Cap Value

?9.0%

Small Cap Growth

28.5%

Small Cap 20.0%

Small Cap Value

28.3%

Mid Cap Growth

17.3%

Mid Cap Value

34.3%

Mid Cap 9.8%

Diversified Portfolio

?1.8%

Diversified Portfolio

18.1%

Diversified Portfolio

17.5%

Small Cap Growth

?9.3%

Diversified Portfolio

27.7%

Large Cap 18.4%

Large Cap Value

24.9%

Diversified Portfolio

16.8%

Mid Cap 33.5%

Diversified Portfolio

9.5%

Mid Cap ?2.2%

Large Cap Value

17.4%

Mid Cap 16.2%

Mid Cap Growth

?10.3%

Mid Cap Growth

26.3%

Diversified Portfolio

17.0%

Mid Cap 24.8%

Small Cap 16.3%

Large Cap Growth

32.8%

Mid Cap Growth

7.6%

Large Cap Value

?3.1%

Mid Cap Growth

14.8%

Large Cap Value

15.4%

Small Cap ?11.0%

Mid Cap 26.2%

Mid Cap 13.7%

Diversified Portfolio

22.9%

Large Cap 16.0%

Mid Cap Growth

32.8%

Small Cap Growth

5.6%

Small Cap ?4.4%

Large Cap 12.0%

Small Cap 14.6%

Mid Cap ?11.1%

Mid Cap Value

26.1%

Small Cap Value

4.6%

Mid Cap Growth

18.9%

Large Cap Growth

14.6%

Large Cap 32.4%

Small Cap 4.9%

Mid Cap Value

?6.7%

Small Cap Growth

11.3%

Mid Cap Value

12.3%

Mid Cap Value

?11.9%

Small Cap 25.5%

Mid Cap Value

3.7%

Small Cap 14.8%

Small Cap Growth

14.6%

Large Cap Value

32.0%

Small Cap Value

4.2%

Small Cap Value

?7.5%

Large Cap Growth

6.9%

Small Cap Value

7.8%

Small Cap Value

?12.9%

Small Cap Value

22.4%

Large Cap Value

1.4%

Small Cap Growth

2.8%

Data from Morningstar, as of 12/31/21. The Diversified Portfolio is an equal-weighted composite of the average annual returns of the market categories (indices) shown above and does not represent any specific index. It is not possible to invest directly in an index. All market indices are unmanaged.

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