For the sake of diversifying, I bought into the intermediate bond fund FXNAX, but it is really lagging with interest rates being bottomed out. What are your thoughts on purchasing bond funds right now? Or should I just continue holding FXNAX although it’s slowly bleeding? The other two funds I’m holding are FZROX and FZILX.
Fidelity Total Bond Fund (FTBFX) has a Morningstar rating of 4 stars. The fund invests in various debt instruments, including government, corporate, and municipal bonds. It’s ideal for investors looking for a low-risk security to generate income.
The Fidelity U.S. Bond Index Fund (FXNAX) is a mutual fund that seeks to match the performance of the Bloomberg Barclays U.S. Aggregate Bond Index. The fund’s portfolio is heavily weighted towards government and corporate bonds.
FXNAX has a relatively low expense ratio of 0.20%, whereas the expense ratio of FTBFX is 0.45%.
When investing in index funds, you want to keep your expenses low so that it doesn’t eat into your return in the long run.
Both mutual funds have some overlapping holdings in their portfolio.
It’s worth noting that FXNAX’s top five holdings account for more than 60% of its total portfolio.
FXNAX Top 5 Holddings
|Company||Total Net Assets|
|GNMA and Other Mtg Backed||30.62%|
|Government Agency Securities||8.65%|
|Asset Backed Securities||0.34%|
FTBFX Top 5 Holddings
|Company||Total Net Assets|
|Government Agency Securities||27.91%|
|GNMA and Other Mtg Backed||22.08%|
|US$ Denominated Fgn. Gvt.||2.85%|
|Asset Backed Securities||1.38%|
|Funds||Fidelity® Total Bond Fund||Fidelity® U.S. Bond Index Fund|
There is no definitive answer to this question. It depends on several factors, including risk tolerance and investment goals.
Both funds may be a good choice for investors who are looking for a conservative investment option.
FTBFX and FXNAX are identical bond funds, meaning they track similar benchmarks. As a result, you only need one fund in your portfolio.
What makes FNAX attractive is its lower expense ratio. Other than that, they are similar.
If you don’t care about risk right now and you’re holding long term I would stick with growth stocks instead of bonds.
I think most folks are going to tell you that bonds are not a great investment right now. Think about a reputable, diversified stock mutual fund.
Personally I don’t like bonds. To me volatility isn’t risk. Risk is what I may potentially not earn by having money in bonds. But I’m only 35 years old and I’ve got a high tolerance for volatility and I have time others may not have.
I recently dumped my treasury bond funds, I had a short term and intermediate, bought them to preserve capital as part of a multi-tiered emergency fund, which sounded like a good idea until I got tired of ‘safety losing money’ now I just keep cash and equities.
I’ve had a brokerage account for a month now, and I’m in the process of dollar cost averaging until I hit the sum of money I want to start out with. I currently have 25% of my money in the account, but plan to get up to around 60% in January.
I think my next step is bonds. I’m looking at FTBFX (total bond) & FXNAX (US bonds). I only want 10% of my portfolio to be bonds when it’s all said and done.
It is a bad bond market currently with the Fed . Those YTD returns are most likely Q1 2020. See how bonds have been performing since pandemic. However 10% is reasonable. I decreased my bond exposure to 0% recently.
Like many, I have removed all bonds from my portfolio. I’d rather hold cash than hold bond funds. Current portfolio and their returns.
FTEC is +49% and FSMAX +35%. Time is on your side.
I traded FTBFX and bought FXNAX instead. The 0.45% expense ratio is not high but it will add up over time. So I went with the lower expense ratio of FXNAX.
Bonds right now are great if you want to lose money…safely haha.
I am 100% equities. US Total Stock, US Small Cap Value, International Total Stock, US REIT, International REIT, Exponential/Disruptive, and Commodity Stocks.
You need to understand why bonds might be useful in a portfolio. It’s more complicated than just yield. The average maturity is very important, especially with levels of volatility we are seeing…
Depending why you have a non-tax advantaged brokerage account it may not be smart to have any exposure to fixed income — really is key if you are using this for some goal that has a somewhat defined time window. For instance if you want to be able to buy a house in say more than four years but sooner than a decade that is very different than saying I know I need this money when my now infant son / daughter is ready for college in 2037…
If I were going to invest in a bond fund, the other metrics I would look at is weighted average maturity, duration and spread duration, or the price sensitivity of the portfolio to changes in interest and changes in the credit spread. Beyond that, I’d look at issuer concentration and the rating composition of the fund; right now, about 50% of investment grade corporate debt is BBB - that is one step from junk. Hope this helps.
If you’re young and trying to build wealth then don’t hold bonds. If you’re old retiring soon and trying to preserve wealth then hold bonds.