7 of the best Fidelity bond funds to buy

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With their low volatility, it always makes sense to diversify your portfolio with bonds. The stock market has seen strong returns…

With their low volatility, it always makes sense to diversify your portfolio with bonds.

The stock market has posted strong returns over the past year, but bond investors have not reaped as many rewards. In 2021, the Morningstar Core Bond Index lost 1.61%. According to Dave Sekera, chief U.S. market strategist for Morningstar, this was the index’s first decline since 2013. Sekera says that in 2022, “the outlook is similar to what we expected for (2021)” . Sekera sees bonds continuing to come under “pressure from rising interest rates as the economy moves toward a post-pandemic recovery.” According to Elizabeth Foos, associate director of bond strategies at Morningstar, municipal bonds, which offer tax advantages, “had very strong demand in 2021.” This pushed prices higher despite inflationary pressures. Of course, no one knows yet what 2022 will bring, but with expected volatility in the stock market, investors would do well to hedge against uncertainty with bonds and the income stream they provide. Here are seven of the best Fidelity bond funds.

Fidelity Tax-Free Bond Fund (Ticker: FTABX)

FTABX invests primarily in high quality municipal securities with interest exempt from federal tax. Of course, municipal markets can be volatile and adverse tax, legislative or policy changes at the issuer can sometimes result in poor returns. Not to mention that dividends from this fund may still be subject to certain forms of taxation, depending on your situation. However, Morningstar’s qualitative analysts give this fund a gold rating, which means analysts expect it to outperform its benchmarks over a five-year period. In an analyst note for Morningstar, Foos says the strategy’s “consistent and distinctive approach and attractive price will help it maintain an edge over its peers.” And with a net expense ratio of 0.25%, that’s just $25 in fees for every $10,000 invested per year. This fund has a one-year total return of 1.69%, a three-year total return of 4.95% and a five-year total return of 4.3%.

Fidelity Capital & Income Fund (FAGIX)

Morningstar analyst Sam Kulahan calls FAGIX a “high performer”. Kulahan also warns that FAGIX “may do poorly because it’s a risky strategy during credit selloffs like the 2020 COVID selloff.” FAGIX has approximately 70% of its portfolio weighted in corporate bonds and 20% in equities. The fund has a bronze rating from Morningstar’s qualitative analysts, which means it’s not as strong as a gold-rated fund, but is still expected to outperform over five years. And it’s the only fund with a five-star quantitative rating from Morningstar on this list, meaning it has a strong historical performance. With a net expense ratio of 0.68%, FAGIX has a one-year total return of 9.54%, a three-year total return of 11.59% and a five-year total return of 8.45%. Overall, Kulahan says FAGIX is a “good choice if you’re looking for a more aggressive high-yield fund.”

Fidelity Inflation-Protected Bond Index Fund (FIPDX)

With a four-star quantitative rating from Morningstar, FIPDX is a fixed income fund that links approximately 80% of its holdings to the Bloomberg Barclays US Treasury Inflation-Protected Securities Index. This means that FIPDX attempts to deliver investment results that match the total return of the inflation-protected sector of the US Treasury market. This makes the investment strategy volatile, however, since the usual relationship between bonds and interest rates can produce even more pronounced results with longer-term securities. But this strategy has paid off well for fund managers. The fund has a one-year total return of 5.07%, a three-year total return of 7.54% and a five-year total return of 4.79%. With a net expense ratio of 0.05%, the fund can save you money on fees.

Fidelity Intermediate Municipal Income Fund (FLTMX)

“Municipal funds have been a great asset in 2021, and it will be hard to match that in 2022,” Foos said. However, Morningstar analysts still give FLTMX a silver rating. With a net expense ratio of 0.34%, FLTMX has a one-year total return of 0.38%, a three-year total return of 3.68%, and a five-year total return of 3.3%. Foos considers FLTMX “a solid choice for well-equipped investors.” Like other Fidelity municipal funds, FLTMX invests primarily in high-quality municipal securities whose interest is exempt from federal income tax. However, FLTMX tries to maintain a dollar-weighted average maturity between 3 and 10 years.

Fidelity Floating Rate High Income Fund (FFRHX)

FFRHX owns companies with poor financial conditions. Of course, lower quality bonds like these can be more volatile and have a higher risk of default. But the flip side is that fund managers earned a one-year total return of 5.07%, a three-year total return of 4.53%, and a five-year total return of 3.94%. Additionally, this fund has been around for over 20 years and has net assets of over $11 billion. In fact, FFRHX maintains a four-star quantitative rating and a silver qualitative rating from Morningstar. At 0.67%, FFRHX’s net expense ratio is at the upper end of the funds included here.

Fidelity Municipal Income Fund (FHIGX)

As is the case with the other municipal bond funds on this list, FHIGX has seen its team go through a few recent transitions. However, Foos says investors need not worry. “Investors remain in good hands,” she says. Veteran manager Kevin Ramundo retired from Fidelity in June 2020. However, Cormac Cullen, Elizah McLaughlin and Michael Maka remain as managers. FHIGX maintains a Morningstar Qualitative Analyst Silver Rating. With a net expense ratio of 0.45%, the fund has a one-year total return of 1.71%, a three-year total return of 4.82% and a five-year total return of 4.29% .

Fidelity Focused High Income Fund (FHIFX)

FHIFX invests primarily in income-producing debt securities, preferred stocks and convertible securities, with an emphasis on lower quality debt securities. This includes securities rated BB by S&P, Ba by Moody’s and similar ratings from other national agencies. Investing in these types of securities can be extremely volatile, and they carry a higher risk of default. FHIFX has a three-star quantitative rating from Morningstar. With a net expense ratio of 0.75%, it is the most expensive of the funds included here. However, the fund has been around since September 2004. And the fund managers reported a one-year total return of 2.09%, a three-year total return of 6.02%, and a five-year total return of 4.82%. %.

7 of the best Fidelity bond funds:

— Fidelity Tax-Free Bond Fund (FTABX)

— Fidelity Capital & Income Fund (FAGIX)

— Fidelity Inflation-Protected Bond Index Fund (FIPDX)

— Fidelity Intermediate Municipal Income Fund (FLTMX)

— Fidelity Floating Rate High Income Fund (FFRHX)

— Fidelity Municipal Income Fund (FHIGX)

— Fidelity High Income Focused Fund (FHIFX)

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