The Fidelity Small Cap Discovery Fund (FSCRX) is guided by its portfolio manager, Chuck Myers. He knows the small cap market and uses the global network of Fidelity professionals to find the best small cap companies for investment.
The approach that is used for this mutual fund is to provide investors the exposure to an often neglected area of the market that has surprising higher rates of return when compared to large cap investments. It is true that as a whole, this sector of the market is more volatile in the short term, but the long term growth potential and capital appreciation are greater.
Most investors and investment companies concentrate on the large cap and large growth funds, so more is known about them and they are priced more closely to their actual value. This does not always happen with the smaller companies. Because of this, the frequency of mispricing occurs more often and potential for profits when discovered are greater.
After a recession, it has always been the smaller companies that help turn the economy around and lead the others out of the bear market. This has occurred every time since 1962 with the stock market by an average of over 12% in the following 12 months of each time the market hit its bottom.
The approach Fidelity uses is to look closely at these smaller companies that include meetings with the financial management groups of these companies. This type of investigative investment is the reason why this fund saw a return last year of 59.83%.
Like with all mutual funds, the Fidelity Small Cap Discovery Fund (FSCRX) has certain inherited risks. But with history on its side, this small cap investment fund has the greatest potential as a solid investment for the next year and a half.