If you’ve been stuck searching for Sector – Real Estate funds, you might want to consider passing on by Fidelity International Real Estate (FIREX) as a possibility. FIREX has a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on various forecasting factors like size, cost, and past performance.
FIREX is one of many Sector – Real Estate funds to choose from. Sector – Real Estate mutual funds are known to invest in real estate investment trusts (REITs). A popular income vehicle thanks to its taxation rules, a REIT is required to pay out at least 90% of its income annually to avoid double taxation. This technique makes securities in these funds high dividend players, and even bond-like in some instances, though their risk is similar to equities.
FIREX is a part of the Fidelity family of funds, a company based out of Boston, MA. Fidelity International Real Estate debuted in December of 2004. Since then, FIREX has accumulated assets of about $153.23 million, according to the most recently available information. The fund is currently managed by Guillermo De Las Casas who has been in charge of the fund since April of 2010.
Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of 1.24%, and it sits in the bottom third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of -3.26%, which places it in the bottom third during this time-frame.
It is important to note that the product’s returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund’s [%] sale charge. If sales charges were included, total returns would have been lower.
When looking at a fund’s performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. Compared to the category average of 14.71%, the standard deviation of FIREX over the past three years is 18.03%. The standard deviation of the fund over the past 5 years is 16.38% compared to the category average of 14.19%. This makes the fund more volatile than its peers over the past half-decade.
Investors should not forget about beta, an important way to measure a mutual fund’s risk compared to the market as a whole. FIREX has a 5-year beta of 0.75, which means it is likely to be less volatile than the market average. Another factor to consider is alpha, as it reflects a portfolio’s performance on a risk-adjusted basis relative to a benchmark-in this case, the S&P 500. Over the past 5 years, the fund has a negative alpha of -9.82. This means that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, FIREX is a no load fund. It has an expense ratio of 0.88% compared to the category average of 0.96%. So, FIREX is actually cheaper than its peers from a cost perspective.
Investors should also note that the minimum initial investment for the product is $0 and that each subsequent investment has no minimum amount.
Fees charged by investment advisors have not been taken into considiration. Returns would be less if those were included.
Overall, Fidelity International Real Estate ( FIREX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, average downside risk, and lower fees, Fidelity International Real Estate ( FIREX ) looks like a somewhat weak choice for investors right now.
For additional information on this product, or to compare it to other mutual funds in the Sector – Real Estate, make sure to go to www.zacks.com/funds/mutual-funds for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.
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This article originally published on Zacks Investment Research (zacks.com).