We recently published a list of 8 Worst Performing Mutual Funds in 2024. In this article, we are going to take a look at where Fidelity Select Transportation (FSRFX) stands against other worst performing mutual funds in 2024.
Mutual funds with exposure to large and mid-cap US companies were big winners in 2024 as the overall US equity market remained bullish for the second year in a row. As the artificial intelligence boom drove markets higher, some mutual funds outperformed the overall market, and the S&P 500 gained 24%.
Large-cap growth funds were up by almost 30% for the year. That was the highest gain of all the main fund categories. Small-cap growth funds were up by an average of 14.7%, as mid-cap growth funds surged 16%.
According to LSEG, the average U.S. stock fund increased 17.4% overall in 2024, including a 1.2% gain in the fourth quarter. Even though the 2024 performance didn’t quite match the previous year’s 21% gain, stock funds have now experienced impressive growth for two consecutive years. The main drivers of the gains were the U.S. economy’s recovery and investors’ expectation that the Federal Reserve would cut rates.
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The explosion of artificial intelligence and the technologies supporting its adoption and growth also had a hand in driving stocks, thus helping to improve the performance of funds that finished at the top. Increased holdings from the “Magnificent Seven” technology stocks, such as Nvidia and Meta Platforms, allowed U.S. large-cap growth funds to maintain their dominance in the mutual fund market.
“It’s hard to outperform large-cap when you’re in small-cap and you don’t have the Mag Seven,” says Brian Smoluch, a longtime co-manager of the small-cap growth fund.
On average, foreign stock funds were unable to keep up with their U.S. counterparts. The fourth quarter’s 7.3% thrashing held back the category’s 4.8% gain. On the other hand, bond funds saw a modest increase for the year. Investment-grade debt funds recovered from a nearly 3% drop in the fourth quarter to end the year up 1.8%.
Investors remain bullish on mutual funds focused on bonds and U.S. stock funds. According to estimates, investors pumped a net $177.2 billion into U.S.-stock mutual funds and exchange-traded funds (ETFs) in 2024. Only $11.6 billion was allocated to international stock funds.
Although the frenetic buying that occurred earlier in the year subsided as the year came to a close, bond funds fared better in the flows than stock funds. According to ICI estimates, investors poured a net $488.6 billion into bond funds for the entire year 2024 in anticipation of the Fed’s rate-cutting actions, which started in September. However, the buying slowed, and estimates indicate that December ended as a comparatively weak month for flow data.
Our Methodology
To compile our list of 8 worst performing mutual funds in 2024, we first used Yahoo Finance’s screener to pick out 50 funds with the lowest year-to-date returns. Then, the top 8 funds with the lowest returns were chosen as the worst-performing mutual funds in 2024. Finally, we ranked the funds based on their 2024 returns.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Fidelity Select Transportation (FSRFX)
Mutual Fund’s 2024 Return: 1.8%
Fidelity Select Transportation (FSRFX) is a US-listed mutual fund that invests 80% of its assets in companies that offer transportation services. It also invests in companies that design, manufacture, distribute and sell transportation equipment. While the fund focuses on domestic companies, it invests in foreign insurers as part of its diversification strategy.
The fund specializes in fundamental analysis when looking for investment opportunities in the transportation sector. The strategy entails focusing on the company’s financial conditions, industry position, and overall market condition. The fund is non-diversified as it focuses purely on transportation companies. Even though the mutual fund was up by 1.8% in 2024, it underperformed the broader stock market as the S&P 500 ended the year up 24%
Overall, FSRFX ranks 7th on our list of worst performing mutual funds in 2024. While we acknowledge the potential of FSRFX as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than FSRFX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.