Having trouble finding a Diversified Bonds fund? Fidelity Strategic Income (FADMX) is a potential starting point. FADMX has a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.
Objective
FADMX is one of many Diversified Bonds funds to choose from.Diversified Bonds funds give investors exposure to a variety of fixed income types that span across different issuers, maturities, and credit levels. Usually, these funds will have a good amount of exposure to government debt, in addition to modest holdings in the corporate bond market.
History of Fund/Manager
Fidelity is based in Boston, MA, and is the manager of FADMX. The Fidelity Strategic Income made its debut in May of 1998 and FADMX has managed to accumulate roughly $5.52 billion in assets, as of the most recently available information. The fund's current manager is a team of investment professionals.
Performance
Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 3.56%, and is 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 6.83%, 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. FADMX's standard deviation over the past three years is 6.01% compared to the category average of 12.52%. The fund's standard deviation over the past 5 years is 6.11% compared to the category average of 12.05%. 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.
If you believe interest rates will rise, this is an important factor to look at. FADMX has a modified duration of 4.4, which suggests that the fund will decline 4.4% for every hundred-basis-point increase in interest rates.
This fund has a beta of 0.52, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, FADMX has a positive alpha of 3.74, 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, FADMX has 35.06% in high quality bonds rated at least "AA" or higher, while its junk bond component-bonds rated "BB" or below-is at 37.93%. This means that the fund has an average quality of BBB, and focuses on medium quality securities.Expenses
As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, FADMX is a no load fund. It has an expense ratio of 0.65% compared to the category average of 0.94%. FADMX is actually cheaper than its peers when you consider factors like cost.
Investors need to be aware that with this product, the minimum initial investment is $0; 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, Fidelity Strategic Income ( FADMX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, better downside risk, and lower fees, Fidelity Strategic Income ( FADMX ) looks like a great potential choice for investors right now.
This could just be the start of your research on FADMX in the Diversified 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. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
