7 Top Fidelity Bond Funds for Steady Income

Introduction

Investing your money wisely is important, especially when you want to earn regular income. Bonds are often seen as a safe way to do that. You lend your money to a government or a company, and they promise to pay you back with some extra cash along the way. But investing in bonds isn't as simple as it sounds. It's like a puzzle with many pieces. Individual bonds can be tricky to buy, and they may not pay out money when you need it. That's where Fidelity bond funds come to the rescue. These funds make bond investing easier, safer, and more convenient. In this article, we'll introduce you to seven of the best Fidelity bond funds to help you earn a steady income.

A fidelity bond fund, also known as a fidelity bond or simply a bond fund, is an investment vehicle that primarily invests in a diversified portfolio of bonds. These bonds can be issued by various entities, including governments, corporations, municipalities, and other organizations. The primary objective of a fidelity bond fund is to generate income for investors while preserving the principal amount invested.

Fidelity bond funds offer investors a way to access the bond market without having to purchase individual bonds. They are suitable for investors seeking income, capital preservation, and diversification within their investment portfolios. It's important for investors to carefully consider their financial goals and risk tolerance before investing in bond funds and to choose funds that align with their objectives. Additionally, consulting with a financial advisor can provide valuable guidance when making investment decisions.

7 of the Best Fidelity Bond Funds

1. Fidelity New Markets Income Fund (FNMIX)

One thing that affects how much money you make from bonds is how reliable the borrower is. For example, U.S. government bonds are very reliable because they rarely fail to pay back. But bonds from countries like Venezuela or Turkey may not be as dependable. To make up for this, these riskier bonds usually offer higher payments.

FNMIX is a Fidelity fund that includes bonds from these countries and others like Colombia and South Africa. It's like a mix of different bonds. Some are very reliable, and others are riskier. On average, this fund pays a 6.4% interest every month. But it comes with a small fee of 0.82%.

2. Fidelity High Income Fund (SPHIX)

If you want more money from your bonds, you might have to accept more risk. SPHIX is a Fidelity fund that invests in riskier bonds, called high-yield bonds. These bonds can also include special kinds of investments like preferred shares and convertible bonds. But because they're riskier, they pay more interest.

Right now, SPHIX has a big part of its money in bonds that are rated BB and B. These are a bit riskier than other bonds, but they offer a high 7.7% interest every month. To be part of this fund, you'll pay a small fee of 0.87%.

3. Fidelity Global High Income Fund (FGHNX)

If you like to mix things up and want bonds from all over the world, FGHNX is for you. It's like a world tour of bonds. It includes bonds from the U.S., Europe, Asia, and emerging markets. These bonds are also riskier, but they pay good interest.

Like SPHIX, FGHNX mostly invests in bonds that are rated BB or B. These bonds offer a 6.9% interest every month. It's a good way to make sure your money is spread out all over the world. And the fee is not too high at 0.8%.

4. Fidelity Short Duration High Income Fund (FSAHX)

When interest rates start to go up, some bonds can lose their value. But not all bonds are the same. FSAHX is a Fidelity fund that focuses on bonds that don't get hurt too much when interest rates rise. It's like a shield for your money.

On average, the bonds in this fund last for only 2.2 years. So, if interest rates go up a little, your bonds won't lose much value. The fund also includes bonds from the U.S. and around the world, but most of them are rated BB and B. It pays a 7.3% interest every month.

5. Fidelity Floating Rate High Income Fund (FFRHX)

Most bonds give you a set amount of money, like a coupon, every few months. But not FFRHX. It's like a special kind of bond that gives you money based on what other people are getting. When interest rates are high, you get more money, and when they're low, you get less.

This fund invests in bonds with short lifespans, so they're less likely to lose value when interest rates go up. Even though they're a bit risky (rated B), you can expect a 9% interest every month. The fee is 0.68%, which is not too bad.

6. Fidelity High Yield Factor ETF (FDHY)

If you like to trade often and want bonds that can keep up with the times, FDHY might be your best friend. It's like a fast-paced bond investment. You can buy and sell it whenever you want during the day.

This ETF invests in high-yield bonds from North America with short lifespans. It's riskier but offers a 7.1% interest every month. Plus, the fee is only 0.45%, which is lower than some other options.

7. Fidelity Sustainable High Yield ETF (FSYD)

If you care about the environment and want your investments to make a positive impact, FSYD is a great choice. It's like a green bond fund. It invests in bonds from companies that are trying to be more sustainable.

Most of the bonds in this fund are from North America and have short lifespans. They also have a higher expense ratio of 0.55%. But they offer a 7.6% interest every month, and you can feel good about helping the planet.

Here are some key points to help you understand fidelity bond funds:

1. Bond Investments: Fidelity bond funds primarily invest in bonds, which are debt securities issued by entities to raise capital. Bondholders lend money to the issuer in exchange for periodic interest payments (coupon payments) and the return of the principal amount when the bond matures.

2. Diversification: Fidelity bond funds typically hold a diversified portfolio of bonds from different issuers, industries, and maturities. This diversification helps spread risk and reduce the impact of a default by any single issuer.

3. Income Generation: One of the primary purposes of bond funds is to provide investors with a steady stream of income in the form of interest payments. Bond funds generally pay out interest income to investors regularly, such as monthly or quarterly.

4. Risk and Return: The risk and return characteristics of fidelity bond funds can vary depending on the types of bonds they hold. Government bond funds tend to have lower risk but also offer lower returns, while corporate bond funds may have higher risk and potentially higher returns.

5. Liquidity: Bond funds are typically more liquid than individual bonds because investors can buy or sell fund shares on any business day. This liquidity can make it easier for investors to access their money when needed.

6. Expense Ratio: Bond funds charge an annual expense ratio, which covers the fund's operating costs. Investors need to be aware of these fees, as they can affect the overall return on investment.

7. Risks: While bond funds are generally considered lower-risk investments compared to stocks, they are not without risks. Some common risks include interest rate risk (bond prices tend to fall when interest rates rise), credit risk (the risk of bond issuers defaulting on payments), and market risk (fluctuations in bond prices due to market conditions).

Conclusion

Investing in bonds can be a great way to earn regular income, but it can also be confusing. That's where Fidelity bond funds come in. They make it easier to invest in bonds and offer options for different risk levels and preferences. Whether you want high yields, international diversification, or sustainable investments, Fidelity has something for you. Just remember to do your research and understand your goals before making any investment decisions. With the right Fidelity bond fund, you can enjoy a steady income and financial peace of mind.