Fidelity Select Fundranker

Fundranker Blog—April 2009 Archive

New Market Rally

The market fell to new multi-year lows on Monday, March 9, 2009. From recent market highs reached on January 6, 2009, the peak of what turned out to be a bear market rally followed by new lows, through March 9, Fundranker’s Top Eight Model Portfolio fell 23.59%, while Fidelity’s Spartan 500 Index Fund (which tracks the S&P 500 Index) fell 27.19%, and Fidelity’s Nasdaq Composite Index Fund (which tracks the Nasdaq Composite Index) fell 23.03%.

Since the market lows on Monday, March 9, Fundranker, the S&P 500 Index, and the Nasdaq Composite Index have come roaring back with gains of 21.36%, 28.41%, and 33.61%, respectively. Is this just another bear market rally, similar to the one that peaked on January 6, with further new lows ahead, or is it the beginning of a real recovery? The Nasdaq Composite Index finally topped its January 6 high as of April 9, on a number of days since then, and again as of April 24. Notice it took a 30% gain to undo a 23% loss--that's because the gain was figured on the March 9 low, while the loss was figured on the January 6 high. The S&P 500 Index and Fundranker still have quite some way to go to remake their January 6 highs. What's next?

See our Spring Rally and March/April Rally posts for newer information on this rally.

Posted 4/26/09 6:05pm ET in Fundranker, Market | Permalink | Comments (0)

Nasdaq Composite vs S&P 500

Here at Fidelity Select Fundranker, we track the Nasdaq Composite and the S&P 500 Indexes so that we can compare their returns to Fundranker Top Eight Model Portfolio returns. We have tracked the S&P 500 Index since January, 1997, using Fidelity’s Spartan 500 Index Fund (FSMKX), and we have tracked the Nasdaq Composit Index since October, 2003, using Fidelity’s Nasdaq Composite Index Fund (FNCMX), which began operations in September, 2003. We began our Nasdaq Composite Index tracking portfolio on September 30, 2003, with the number of shares of FNCMX that gave it the same dollar balance as our S&P 500 tracking portfolio had on September 30, 2003.

As of April 22, for the first time since January, 2004, our Nasdaq Composite Index tracking portfolio’s value surpassed our S&P 500 tracking portfolio’s value. The Nasdaq Composite Index is heavily weighted toward technology stocks, which have been some of the best performers during the recent rally. This strength in technology stocks has propelled several Select technology funds into our Top Eight Model Portfolio, and at this point in April, it looks like another one or two Select technology funds may join the Top Eight Model Portfolio for May. Perhaps this strength in technology will provide the leadership needed to begin our recovery from recession as well as returning the Top Eight Model Portfolio to its customary role of outperforming the indexes.

Posted 4/23/09 1:04pm ET in Fundranker, Market | Permalink | Comments (0)

April 17 Dividends

Fidelity Investments paid dividends on April 17, 2009, the ex-dividend date, for three of the funds in Fundranker’s Top Eight Model Portfolio: Select Electronics, Select Pharmaceuticals, and Select Telecommunications. If you hold any of these funds in taxable accounts, here’s the scoop on how to determine whether your shares in these three funds meet the 61-day holding period test for qualified dividends. Of course, if you purchased or exchange any or all of your shares in these three funds on days other than Fundranker exchange dates, you will have to calculate your 61-day holding periods using those dates. See Select Fund Dividends for more information.

Fundranker’s Top Eight Model Portfolio purchased Select Electronics on April 3, so the underlying shares will not meet the 61-day holding period test until June 3, 2009. If Fidelity Investments reports it on your 2009 Form 1099-DIV as a qualified dividend and Fundranker holds it through June 3, you should report it as a qualified dividend on your 2009 Form 1040. If Fundranker exchanges the fund before June 3, you should not report it as a qualified dividend on your 2009 Form 1040.

Fundranker’s Top Eight Model Portfolio purchased Select Pharmaceuticals on October 2, 2008, so the underlying shares already easily meet the 61-day holding period test for qualified dividends. If Fidelity Investments reports Pharmaceutical’s April 17 dividend on your 2009 Form 1099-DIV as a qualified dividend, you should report it as a qualified dividend on your 2009 Form 1040.

Fundranker’s Top Eight Model Portfolio purchased Select Telecommunications on March 4, so the underlying shares will meet the 61-day holding period test for qualified dividends on May 4, Fundranker’s next exchange date. Even if Fundranker exchanges the fund that day, the underlying shares still will meet the 61-day holding period test for qualified dividends. If Fidelity Investments reports Telecommunications’ April 17 dividend as a qualified dividend, you should report it as a qualified dividend on your 2009 Form 1040.

Posted 4/17/09 9:03pm ET in Fidelity Investments, Fundranker, Tax Tips | Permalink | Comments (0)

Select Fund Dividends

Many of Fidelity Investments’ Select funds will be paying dividends in April. On what is known as the ex-dividend date, the closing NAV of the dividend-paying fund will be adjusted downward by the amount of the dividend. The fund may gain or lose value on that trading day as well, of course, which also will affect that day’s NAV. Essentially, the fund distributes a set amount per share and reduces the closing NAV of each share by that same amount. You end up with the same value, partly as shares and partly as dividend.

If you automatically reinvest your dividends, the dividend amount is used to purchase new shares at the adusted NAV, so you end up with more shares, but with the same value you would have had without the dividend being paid. Fidelity Investments shows pending dividends for your holdings online at www.fidelity.com after 4pm ET on the ex-dividend date. The following morning, your accounts will reflect the new number of shares at the new NAV.

If your Select fund holdings are in a taxable account, Fidelity Investments will send you a Form 1099-DIV shortly after the end of the year that shows dividends distributed during the year. They will be classified as ordinary dividends, qualified dividends, and capital gain distributions. Qualified dividends are included in ordinary dividends, but they are broken out because they may be eligible to receive preferential tax treatment. That is, qualified dividends that fall within the 15% tax bracket are not taxed at all, and qualified dividends that fall in the 25% or higher tax brackets are taxed at only 15%.

Unfortunately, until you receive your Form 1099-DIV, you can’t tell how much of your ordinary dividends is eligible to be treated as qualified dividends. When you do receive your Form 1099-DIV, the qualified dividends it lists really are only potentially qualified dividends. You still have to determine if you held the fund shares which paid the dividends for the required periods. You must hold the dividend-paying fund shares for at least 61 days of the 121-day period beginning 60 days before the ex-dividend date and ending 60 days after the ex-dividend date. When you count the days, include the day you sold shares in a fund, but not the day you acquired them. For example, if you acquired shares 60 days before the ex-dividend date, you could sell them 61 days later on the trading day immediately following the ex-dividend date, or if you acquired shares one day before the ex-dividend date, you could sell them 61 days later, which would be 60 days after the ex-dividend date.

Fundranker held a number of funds in 2008 that paid dividends in April and December. Assuming you made exchanges on Fundranker exchange dates, you held all of the Top Eight Model Portfolio funds that paid dividends in April and December the required 61 days, except for two funds that paid dividends in December, 2008: Select Environmental and Select Utilities (then known as Select Utilities Growth). Qualified dividends reported on your Form 1099-DIV for all other Top Eight Model Portfolio funds can and should be reported as qualified dividends on your 2008 Form 1040, which means they qualify for the preferential tax treatment discussed above.

Posted 4/9/09 1:25pm ET in Fundranker, Investing, Tax Tips | Permalink | Comments (0)

FNINX, FSPFX Close to New Investors

Two of Fidelity Investments’ Select funds, Networking & Infrastructure (FNINX) and Paper & Forest Products (FSPFX), closed to new investors as of March 19, 2009. This means that current investors in the funds can add to their positions, but you cannot open a new position in either fund. This change caught us unaware at Fidelity Select Fundranker and affected the Fundranker system immediately, as it just so happened that Networking & Infrastructure (FNINX), had it still been open, would have made a dramatic move to number three in the Top Eight Model Portfolio for April. We apologize again for the late reissue of the April issue with a corrected listing of the Top Eight Model Portfolio and corrected exchanges for April 3.

The two funds were closed in March pending shareholder votes to merge Networking & Infrastructure (FNINX) into Communications Equipment (FSDCX) and to merge Paper & Forest Products (FSPFX) into Materials (FSDPX). The dates for the votes have not yet been set, and in the meantime, the funds will remain closed to new investors.

If the funds eventually are merged, Networking & Infrastructure and Paper & Forest Products would close permanently and their assets would be rolled into Communications Equipment and Materials. Shareholders of Communications Equipment or Materials would see no effect from the merger; that is, they would still own the same number of shares at the same NAV. Shareholders of Networking & Infrastructure or Paper & Forest Products, on the other hand, would get replacement shares of Communications Equipment or Materials that are equivalent in value to their original Networking & Infrastructure or Paper & Forest Products shares.

Posted 4/4/09 4:35pm ET in Fidelity Investments | Permalink | Comments (0)