Fidelity Funds Seek to Make Bigger Bets on Individual Stocks

Risk, Volatility

Most mutual funds elect to be diversified, a status that investors often associate with less risk and volatility. Under those rules, the funds must limit the number of individual investments that equal more than 5% of their net assets — such stakes can’t constitute more than a quarter of total net assets.

Diversified mutual funds held about 92% of the industry’s $24 trillion of total assets as of 2020, the U.S. Securities and Exchange Commission told Congress in February. Yet some growth funds have re-classified themselves as “non-diversified,” freeing them to exceed the 25% ceiling.

T. Rowe Price Group Inc., for example, got shareholder approval last year to reclassify its Blue Chip Growth and Growth Stock funds as non-diversified. Blue Chip Growth held almost half of its assets in stakes of more than 5% at the end of September, while Growth Stock equaled about 32%, according to investor reports.

Fidelity’s board has already approved the re-classification. If shareholders agree, it will take effect May 1.

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