There are plenty of choices in the High Yield - Bonds category, but where should you start your research? Well, one fund that might be worth investigating is Fidelity Advisor High Income Advantage A (FAHDX - Free Report) . FAHDX has a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.
FAHDX is part of the High Yield - Bonds section, which is a segment that boasts many possible options. Often referred to as " junk " bonds, High Yield - Bonds funds sit below investment grade, meaning they are at a high default risk compared to their investment grade peers. However, one advantage to junk bonds is that they generally pay out higher yields while posing similar interest rate risks to their investment grade counterparts.
History of Fund/Manager
Fidelity is based in Boston, MA, and is the manager of FAHDX. Fidelity Advisor High Income Advantage A debuted in January of 1987. Since then, FAHDX has accumulated assets of about $478.98 million, according to the most recently available information. Harley Lank is the fund's current manager and has held that role since September of 2009.
Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 5.62%, and it sits in the top 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 5.25%, which places it in the top 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. FAHDX's standard deviation over the past three years is 6.39% compared to the category average of 7.75%. The standard deviation of the fund over the past 5 years is 5.96% compared to the category average of 7.66%. This makes the fund less volatile than its peers over the past half-decade.
We must remember to consider the fund's average coupon, as income is traditionally 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 7.22% means that a $10,000 investment should result in a yearly payout of $722.
If you are looking for a strong level of current income, a higher coupon is a good choice, though it could pose a reinvestment risk; these risks can occur if rates are lower in the future when compared to the initial purchase date of the bond.
Because income is only one part of the bond picture, investors should also consider risk relative to broad benchmarks. FAHDX carries a beta of 0.42, 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 4.91, which measures performance on a risk-adjusted basis.
However, it is worth noting that 25 % of the bonds in this fund are not ranked, so take the average quality level with a bit of caution.
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, FAHDX is a load fund. It has an expense ratio of 1.01% compared to the category average of 1.03%. Looking at the fund from a cost perspective, FAHDX 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.
Overall, Fidelity Advisor High Income Advantage A has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Fidelity Advisor High Income Advantage A looks like a good potential choice for investors right now.
This could just be the start of your research on FAHDX in the High Yield - Bonds category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.