Is FCONX a Strong Bond Fund Right Now?
Looking for a Government Mortgage - Short fund? You may want to consider Fidelity Conservative Income Bond (FCONX) as a possible option. FCONX carries a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.
Objective
Zacks categorizes FCONX as Government Mortgage - Short, which is a segment packed with options. Government Mortgage - Short funds focus on the mortgage-backed securities (MBS) market. This market takes mortgages, packages them together, and sells off the pooled securities to investors. This particular category focuses on MBS that usually have less than three years until maturity, giving the funds here a lower yield, but lower interest rate sensitivity as well.
History of Fund/Manager
Fidelity is based in Boston, MA, and is the manager of FCONX. The Fidelity Conservative Income Bond made its debut in March of 2011 and FCONX has managed to accumulate roughly $2.79 billion in assets, as of the most recently available information. The fund's current manager is a team of investment professionals.
Performance
Obviously, what investors are looking for in these funds is strong performance relative to their peers. FCONX has a 5-year annualized total return of 1.29% and is 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 1.81%, which places it in the top third during this time-frame.
Bond Duration
Modified duration is a measure of a given bond's interest rate sensitivity, and is a metric that's a good way to judge how fixed income securities will respond in a shifting rate environment.
For investors who think interest rates will rise, this is an important factor to consider. FCONX has a modified duration of 0.27, which suggests that the fund will decline 0.27% for every hundred-basis-point increase in interest rates.
Income
We must remember to consider the fund's average coupon, as income is traditionally a big reason for purchasing a fixed income security. Average coupon is a look at the average payout by the fund in a given year. For example, this fund's average coupon of 2.88% means that a $10,000 investment should result in a yearly payout of $288.
For those seeking a strong level of current income, a higher coupon is typically good news. However, it could 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. This fund has a beta of 0, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, FCONX has a positive alpha of 0.32, 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, FCONX is a no load fund. It has an expense ratio of 0.35% compared to the category average of 0.54%. Looking at the fund from a cost perspective, FCONX is actually cheaper than its peers.
While the minimum initial investment for the product is $0, investors should also note that there is no minimum for each subsequent investment.
Bottom Line
With a rank of 'hold' we aren't getting a good signal one way or another on FCONX. That is why it might be a good idea to consider other items, such as the fund's expense ratio of 0.35%, and how this compares to other potential options being considered for investment. If cheaper, it might make a decent choice, but a more expensive fund might be worth avoiding. Just make sure to pay attention to its rank in case it shifts in the near future.
Your research on the Government Mortgage - Short segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer as well for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.
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