Principles of Investing

Fidelity's Investment Management Principles

We believe that investing for you or your family's well being starts with a disciplined approach, extensive investment knowledge, and the use of time-tested strategies.

We believe there are 3 principles that people should consider when developing and maintaining an investment strategy. While the way you invest can be adjusted over time as your goals or circumstances change, these principles can be applied to virtually any goal. We can help you better understand these investment management principles and what it takes to apply them to your own financial life.

Historically, there's been a strong connection between where the economy is in the business cycle and the way stocks and bonds perform over time. When managing your own portfolio, it's important to understand where the economy is within the business cycle and how you might invest based on this information.


As the economy moves through the different phases, you may want to add to or remove risk from different areas of your portfolio.


Graphic shows a depiction of the business cycle that is used as a framework for our investment decisions. As the economic cycle goes through recovery, expansion, and contraction, it can be divided into four phases as follows: Early phase, with activity rebounding, which generally lasts about 1 year. Mid phase, with growth peaking, which generally lasts about 3.5 years. Late phase, with growth moderating, which generally lasts about 1.5 years. And Recession phase, with activity falling, which generally lasts less than one year.

*Asset class total returns are represented by indexes from the following sources: Fidelity Investments, Morningstar, and Bloomberg. Fidelity Investments source: a proprietary analysis of historical asset class performance, which is not indicative of future performance. From 1950 to 2024, as of 12/31/2024. Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment.

†Commodities are zero weighted during the recession part of the business cycle. Please see Important Information for index definitions.

A growth recession is a significant decline in activity relative to a country’s long-term economic potential. Note: The diagram above is a hypothetical illustration of the business cycle—the pattern of cyclical fluctuations in an economy over a few years that can influence asset returns over an intermediate-term horizon. There is not always a chronological, linear progression among the phases of the business cycle, and there have been cycles when the economy has skipped a phase or retraced an earlier one. Source: Fidelity Investments (AART), as of 12/31/2024.

U.S. stocks—Dow Jones U.S. Total Stock Market Index; international stocks—MSCI All Country World ex USA Index (Net MA); high-quality bonds—Bloomberg US Aggregate Bond Index; high-yield bonds—ICE BofA US High Yield Index; short-term investments—Bloomberg 3–6 Month US Treasury Bill Index; commodities—Bloomberg Commodity Index.


While this could mean adjusting your mix of stocks and bonds in response to changes in the business cycle, moving in and out of stocks and bonds alone is often not enough. It's also important to understand how different types of stocks and bonds have performed differently under varying conditions.


For instance, many investors focus on growth-oriented stocks when the economy is expanding, and on value-oriented stocks when it's contracting.


A similar approach may be used with bonds—many investors look to higher-yielding bonds that have historically provided better returns when the economy is expanding, and higher-quality bonds when it's contracting.


You may also want to take into account the size of the companies in which you're investing, as small, medium, and large cap stocks have tended to perform differently throughout the economic cycle.

More information