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If you have been looking for Diversified Bonds fund category, a potential starting could be Fidelity Total Bond (FTBFX - Free Report) . FTBFX bears a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.
Objective
We classify FTBFX in the Diversified Bonds category, an area that is rife with potential choices. Diversified Bonds funds offer exposure to a wide variety of fixed income types, stretching across various issuers, credit levels, and maturities. Generally speaking, bond funds here will have sizable exposure to government debt, as well as modest holdings in the corporate bond market too.
History of Fund/Manager
Fidelity is based in Boston, MA, and is the manager of FTBFX. The Fidelity Total Bond made its debut in October of 2002 and FTBFX has managed to accumulate roughly $23.92 billion in assets, as of the most recently available information. The fund's current manager is a team of investment professionals.
Performance
Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 2.51%, and it sits in the middle third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 2.12%, which places it in the middle third during this time-frame.
When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. FTBFX's standard deviation over the past three years is 2.87% compared to the category average of 7.83%. Over the past 5 years, the standard deviation of the fund is 3.1% compared to the category average of 7.78%. This makes the fund less volatile than its peers over the past half-decade.
Bond Duration
Modified duration is a measure of a given bond's interest rate sensitivity, so when judging how fixed income securities will respond in a shifting rate environment, it is an excellent figure to look at.
For those that believe interest rates will rise, this is an important factor to consider. FTBFX has a modified duration of 5.61, which suggests that the fund will decline 5.61% for every hundred-basis-point increase in interest rates.
Income
It is important to consider the fund's average coupon because income is often a big reason for purchasing a fixed income security. This metric calculates the fund's average payout in a given year. For example, this fund's average coupon of 3.03% means that a $10,000 investment should result in a yearly payout of $303.
A higher coupon is good for those seeking a strong level of current income, but it could also pose a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond.
Income is only one part of the bond picture, investors also need to consider risk relative to broad benchmarks. FTBFX carries a beta of 0.92, meaning that the fund is less volatile than a broad market index of fixed income securities. With this in mind, it has a positive alpha of 0.72, which measures performance on a risk-adjusted basis.
Ratings
Investors should also consider a bond's rating, which is a grade ( 'AAA' to 'D' ) given to a bond that indicates its credit quality. With this letter scale in mind, FTBFX has 61.43% in high quality bonds rated at least 'AA' or higher, while 25.26% are of medium quality, with ratings of 'A' to 'BBB'. The fund has an average quality of AA, and focuses on high quality securities.
Expenses
Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, FTBFX is a no load fund. It has an expense ratio of 0.45% compared to the category average of 0.92%. Looking at the fund from a cost perspective, FTBFX is actually cheaper than its peers.
Investors should also note that the minimum initial investment for the product is $2,500 and that each subsequent investment has no minimum amount.
Bottom Line
Overall, Fidelity Total Bond has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, Fidelity Total Bond looks like a somewhat average choice for investors right now.
For additional information on this product, or to compare it to other mutual funds in the Diversified Bonds, make sure to go to www.zacks.com/funds/mutual-funds for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.
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Is FTBFX a Strong Bond Fund Right Now?
If you have been looking for Diversified Bonds fund category, a potential starting could be Fidelity Total Bond (FTBFX - Free Report) . FTBFX bears a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.
Objective
We classify FTBFX in the Diversified Bonds category, an area that is rife with potential choices. Diversified Bonds funds offer exposure to a wide variety of fixed income types, stretching across various issuers, credit levels, and maturities. Generally speaking, bond funds here will have sizable exposure to government debt, as well as modest holdings in the corporate bond market too.
History of Fund/Manager
Fidelity is based in Boston, MA, and is the manager of FTBFX. The Fidelity Total Bond made its debut in October of 2002 and FTBFX has managed to accumulate roughly $23.92 billion in assets, as of the most recently available information. The fund's current manager is a team of investment professionals.
Performance
Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 2.51%, and it sits in the middle third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 2.12%, which places it in the middle third during this time-frame.
When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. FTBFX's standard deviation over the past three years is 2.87% compared to the category average of 7.83%. Over the past 5 years, the standard deviation of the fund is 3.1% compared to the category average of 7.78%. This makes the fund less volatile than its peers over the past half-decade.
Bond Duration
Modified duration is a measure of a given bond's interest rate sensitivity, so when judging how fixed income securities will respond in a shifting rate environment, it is an excellent figure to look at.
For those that believe interest rates will rise, this is an important factor to consider. FTBFX has a modified duration of 5.61, which suggests that the fund will decline 5.61% for every hundred-basis-point increase in interest rates.
Income
It is important to consider the fund's average coupon because income is often a big reason for purchasing a fixed income security. This metric calculates the fund's average payout in a given year. For example, this fund's average coupon of 3.03% means that a $10,000 investment should result in a yearly payout of $303.
A higher coupon is good for those seeking a strong level of current income, but it could also pose a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond.
Income is only one part of the bond picture, investors also need to consider risk relative to broad benchmarks. FTBFX carries a beta of 0.92, meaning that the fund is less volatile than a broad market index of fixed income securities. With this in mind, it has a positive alpha of 0.72, which measures performance on a risk-adjusted basis.
Ratings
Investors should also consider a bond's rating, which is a grade ( 'AAA' to 'D' ) given to a bond that indicates its credit quality. With this letter scale in mind, FTBFX has 61.43% in high quality bonds rated at least 'AA' or higher, while 25.26% are of medium quality, with ratings of 'A' to 'BBB'. The fund has an average quality of AA, and focuses on high quality securities.
Expenses
Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, FTBFX is a no load fund. It has an expense ratio of 0.45% compared to the category average of 0.92%. Looking at the fund from a cost perspective, FTBFX is actually cheaper than its peers.
Investors should also note that the minimum initial investment for the product is $2,500 and that each subsequent investment has no minimum amount.
Bottom Line
Overall, Fidelity Total Bond has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, Fidelity Total Bond looks like a somewhat average choice for investors right now.
For additional information on this product, or to compare it to other mutual funds in the Diversified Bonds, make sure to go to www.zacks.com/funds/mutual-funds for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.