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There are plenty of choices in the Investment Grade Bond - Short category, but where should you start your research? Well, one fund that may not be worth investigating is Fidelity Short-Term Bond (FSHBX - Free Report) . FSHBX holds a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on various forecasting factors like size, cost, and past performance.
Objective
FSHBX is part of the Investment Grade Bond - Short category, a segment that boasts an array of other possible selections. Investment Grade Bond - Short funds target the short end of the curve by focusing on bonds that mature in less than two years. Fixed income instruments with this maturity level typically have low duration risk and pay out small yields, at least in comparison to their longer-dated peers. Also, these funds tend to be safer because of their focus on investment grade, but yields will be lower than could be found in the junk bond category.
History of Fund/Manager
FSHBX is a part of the Fidelity family of funds, a company based out of Boston, MA. The Fidelity Short-Term Bond made its debut in September of 1986 and FSHBX has managed to accumulate roughly $1.97 billion in assets, as of the most recently available information. The fund is currently managed by a team of investment professionals.
Performance
Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 2.31%, and it sits in the middle third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 4.65%, which places it in the middle third during this time-frame.
It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.
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. Over the past three years, FSHBX's standard deviation comes in at 2.51%, compared to the category average of 9.41%. The standard deviation of the fund over the past 5 years is 2.38% compared to the category average of 10.98%. This makes the fund less volatile than its peers over the past half-decade.
Bond Duration
Modified duration is a measure of a specific bond's interest rate sensitivity, and is an excellent way to judge how fixed income securities will respond to a shifting rate environment.
For investors who think interest rates will rise, this is an important factor to consider. FSHBX has a modified duration of 1.82, which suggests that the fund will decline 1.82% for every hundred-basis-point increase in interest rates.
Income
Income is often a big reason for purchasing a fixed income security, so it is important to consider the fund's average coupon. A fund's average coupon is simply its average payout in a given year. For example, this fund's average coupon of 4.66% means that a $10,000 investment should result in a yearly payout of $466.
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. Since income is just one part of the bond picture, investors need to consider risk relative to broad benchmarks.
FSHBX carries a beta of 0.41, meaning that the fund is less volatile than a broad market index of fixed income securities. With this in mind, it has a negative alpha of -0.63, which measures performance on a risk-adjusted basis.
Expenses
For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, FSHBX is a no load fund. It has an expense ratio of 0.30% compared to the category average of 0.87%. From a cost perspective, FSHBX is actually cheaper than its peers.
Investors should also note that the minimum initial investment for the product is $0 and that each subsequent investment has no minimum amount.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Bottom Line
Overall, even with its comparatively similar performance, better downside risk, and lower fees, Fidelity Short-Term Bond ( FSHBX ) has a low Zacks Mutual Fund rank, and therefore looks a somewhat weak choice for investors right now.
For additional information on this product, or to compare it to other mutual funds in the Investment Grade Bond - Short, 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 FSHBX a Strong Bond Fund Right Now?
There are plenty of choices in the Investment Grade Bond - Short category, but where should you start your research? Well, one fund that may not be worth investigating is Fidelity Short-Term Bond (FSHBX - Free Report) . FSHBX holds a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on various forecasting factors like size, cost, and past performance.
Objective
FSHBX is part of the Investment Grade Bond - Short category, a segment that boasts an array of other possible selections. Investment Grade Bond - Short funds target the short end of the curve by focusing on bonds that mature in less than two years. Fixed income instruments with this maturity level typically have low duration risk and pay out small yields, at least in comparison to their longer-dated peers. Also, these funds tend to be safer because of their focus on investment grade, but yields will be lower than could be found in the junk bond category.
History of Fund/Manager
FSHBX is a part of the Fidelity family of funds, a company based out of Boston, MA. The Fidelity Short-Term Bond made its debut in September of 1986 and FSHBX has managed to accumulate roughly $1.97 billion in assets, as of the most recently available information. The fund is currently managed by a team of investment professionals.
Performance
Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 2.31%, and it sits in the middle third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 4.65%, which places it in the middle third during this time-frame.
It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.
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. Over the past three years, FSHBX's standard deviation comes in at 2.51%, compared to the category average of 9.41%. The standard deviation of the fund over the past 5 years is 2.38% compared to the category average of 10.98%. This makes the fund less volatile than its peers over the past half-decade.
Bond Duration
Modified duration is a measure of a specific bond's interest rate sensitivity, and is an excellent way to judge how fixed income securities will respond to a shifting rate environment.
For investors who think interest rates will rise, this is an important factor to consider. FSHBX has a modified duration of 1.82, which suggests that the fund will decline 1.82% for every hundred-basis-point increase in interest rates.
Income
Income is often a big reason for purchasing a fixed income security, so it is important to consider the fund's average coupon. A fund's average coupon is simply its average payout in a given year. For example, this fund's average coupon of 4.66% means that a $10,000 investment should result in a yearly payout of $466.
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. Since income is just one part of the bond picture, investors need to consider risk relative to broad benchmarks.
FSHBX carries a beta of 0.41, meaning that the fund is less volatile than a broad market index of fixed income securities. With this in mind, it has a negative alpha of -0.63, which measures performance on a risk-adjusted basis.Expenses
For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, FSHBX is a no load fund. It has an expense ratio of 0.30% compared to the category average of 0.87%. From a cost perspective, FSHBX is actually cheaper than its peers.
Investors should also note that the minimum initial investment for the product is $0 and that each subsequent investment has no minimum amount.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Bottom Line
Overall, even with its comparatively similar performance, better downside risk, and lower fees, Fidelity Short-Term Bond ( FSHBX ) has a low Zacks Mutual Fund rank, and therefore looks a somewhat weak choice for investors right now.
For additional information on this product, or to compare it to other mutual funds in the Investment Grade Bond - Short, 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.