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By Russel Kinnel | 12-18-2014 10:00 AM

5 Fund Picks for 2015 (and Beyond)

Morningstar's Russ Kinnel shares three ideas for playing macroeconomic trends, one fund with an interesting fundamental story, and an all-season choice.

Christine Benz: Hi, I'm Christine Benz for With both stocks and bonds performing reasonably well in 2014, investors may be wondering what's next. Joining me to share some ideas is Russ Kinnel; he is director of manager research for Morningstar. Russ, thank you so much for being here.

Russ Kinnel: Good to be here.

Benz: Russ, in your latest issue of Morningstar FundInvestor, you talked about the macroeconomy--some headwinds that could lie ahead for the markets. One idea that you keyed in on is this idea of falling energy prices, which has knocked down stocks and some bonds recently. You think Fidelity High Income (SPHIX), though, is an idea for investors who are looking maybe for a fund that will come back strongly if energy prices rebound. You think that this is potentially one to give a look.

Kinnel: Right. Obviously, falling oil prices are a good thing for a lot of industries, but very obviously not for energy. And energy is a big part of the high-yield market; it's about 15%. So naturally, high-yield funds have been selling off. We're seeing redemption from investors. So, at some point, I think that becomes a buying opportunity. Maybe not Jan. 1. Maybe [you'll want to wait a little longer]. But Fidelity High Income is one of our favorite high-yield funds, so I think it's a good watchlist addition. Fred Hoff doesn't buy a lot of stocks, doesn't buy the junkiest stuff. But he still takes some risk--some credit risk. So, that explains why the five-year returns aren't great on the fund. But if you look at how it has performed when the credit cycle rolls over and lower credit gets hit, it has done really well. It has very good long-term performance. So, it's a good fund to look at during the year, especially if the high-yield sell-off gains momentum.

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