Fidelity Contrafund (FCNTX) or Fidelity Growth Company (FDGRX)?

Question

Which of these two funds would you recommend for the primary large-cap growth fund in my retirement fund portfolio?

Things I've considered:

-They're both rated 5 starts by Morningstar, so they're equal there.

-Contrafund is significantly larger than Growth Company by almost a 2:1 margin, so I'm a little worried by Contrafund's size. However.....

-Contrafund's 5-year trailing returns are a couple percentage points better than Growth Company's, but will it stay that way?

I'm a finance major, but I'm by no means an investing professional. What is your take on these two funds?

Answer 1

Go on the Fidelity website and look at what companies are included in each fund, if the fees are the same for both (sometimes they are not) and what the price is relative to the NAV. The wider the divergence between the price and the NAV, the more the premium for that particular mutual fund. Conversely, if the NAV is higher than the stock price, the more the discount. Take a look at the longterm history of each, to see how it performed in the down markets of 1998, 2001, etc.

Take a look at how the funds are balanced--is one heavier in a certain market sector than the other--say heavy in financials, or tech, or retail, see if the fund has the kind of mix you are comfortable with- , after that, you still don't have a preference, invest in them both, and see how you fare.  You can always switch out of one you feel is the weaker performer. Don't forget to compare the dividends, too. Also, you can look on Yahoo Finance ( a great website) and compare the two funds.

Best of luck to you.

Answer 2

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Answer 3

People have been worried about Contrafund's size for about 15-20 years now, and it doesn't seem to have hurt its returns.

Really, both funds are excellent - there is no 'wrong' decision here.  Some years Contrafund will do slightly better, and some years it will be Growth Company.  Over the long haul, my guess is that the difference in returns will be negligible.

The important thing is to get your $$ invested, and even more important - add to it on a regular basis (preferably with some money taken from every paycheck).

Also, remember that, whichever decision you make is not set in stone - since it's your retirement fund, you can always switch down the road without any tax consequences.