Strategic Income Fund

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Strategic Income Fund

Postby archman65 » Tue Nov 19, 2013 5:07 pm

Bogleheads I am thinking about investing in the Fidelity Strategic Income Fund (FSICX). The fund yields 3.67% with an expense ratio of .70%. It invests in various debt instruments including high yield Investments, Developed Market Debt, U.S. Govt, & Emerging Market Investments. The fund is generally 60% US and 40% Foreign. I don't see that Vanguard has a similar fund and I think the fund has done well:

2013 (through 10/31) +0.74%
2012 +10.9%
2011 +4.6%
2010 +9.9%
2009 +31.8%
2008 -11.4%

My core bond holdings are individual municipal bonds and corporate bonds and a short term and limited term Vanguard muni bond fund. This would bring some diversification to my holdings. I am wondering if there are any opinions on this fund? I am also wondering if anybody has another fund that I should look at instead.
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Re: Strategic Income Fund

Postby SpringMan » Tue Nov 19, 2013 6:16 pm

Another multisector bond fund worth looking at is Pimco Income Institutional, PIMIX. It is available through Vanguard/VBS for a $25K minimum investment and has a .45% ER. PONDX is the same fund, different share class and is available at Fidelity NTF, it has a higher .79% ER. PONDX can be promoted if PIMIX for free at Fidelity but only if it reaches $100K. I used to own FSICX a few years ago and also LSBDX/LSBRX, Loomis Sayles Bond but sold them. Currently have a position in PIMIX.
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Re: Strategic Income Fund

Postby cherbob85 » Tue Nov 19, 2013 7:21 pm

I am also in the hunt for a good income fund. The PIMIX fund suggested looks very promising. I'm not an expert on bond funds at all, but I do know to keep costs (ER) down and I know that turnover is an important item to look at when researching equity funds. Is it important for bond funds too?

I raise the question because PIMIX has a 226% turnover which is very high for an equity fund, but not sure if it means much for a bond fund.
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Re: Strategic Income Fund

Postby EternalOptimist » Tue Nov 19, 2013 8:09 pm

I've had this fund for a number of years and am satisfied with it.
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Re: Strategic Income Fund

Postby tibbitts » Tue Nov 19, 2013 8:34 pm

archman65 wrote:Bogleheads I am thinking about investing in the Fidelity Strategic Income Fund (FSICX). The fund yields 3.67% with an expense ratio of .70%. It invests in various debt instruments including high yield Investments, Developed Market Debt, U.S. Govt, & Emerging Market Investments. The fund is generally 60% US and 40% Foreign. I don't see that Vanguard has a similar fund and I think the fund has done well:

2013 (through 10/31) +0.74%
2012 +10.9%
2011 +4.6%
2010 +9.9%
2009 +31.8%
2008 -11.4%

My core bond holdings are individual municipal bonds and corporate bonds and a short term and limited term Vanguard muni bond fund. This would bring some diversification to my holdings. I am wondering if there are any opinions on this fund? I am also wondering if anybody has another fund that I should look at instead.

The problem I have with these funds is that now you can buy essentially all these categories for a lower cost at VG, at least if you can meet all the purchase minimums. Not long ago you couldn't get EM or developed foreign debt at VG (in a VG fund, anyway), for example, but now you can. Even if you feel you'll get some benefit from management in the form of securities selection in EM or HY, it's hard to see where management is going squeeze enough out of treasuries or GNMAs to make up for the added cost.
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Re: Strategic Income Fund

Postby archman65 » Tue Nov 19, 2013 8:57 pm

The PONDX fund and PIMIX fund that was suggested are both 100% invested in financials. Not very diversified. So far I still like the Fidelity Income Fund.
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Re: Strategic Income Fund

Postby Beat The Street » Tue Nov 19, 2013 9:50 pm

I will second the PIMCO income fund, pays the same amount every month. I have a few concerns though. It is a pretty high yield for a duration under 5, so there MUST be credit risk there. It hasn't showed up recently but it will, I would assume the holdings now are much different than 2008. This is basically a "go anywhere" bond fund and has been the best bond fund in the world a few years, but you know what they say about past performance.......
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Re: Strategic Income Fund

Postby SpringMan » Wed Nov 20, 2013 5:18 am

archman65 wrote:The PONDX fund and PIMIX fund that was suggested are both 100% invested in financials. Not very diversified. So far I still like the Fidelity Income Fund.

I don't see where PONDX and PIMIX are 100% financials. PIMIX and PONDX will both be the same because they are the same fund just a different share class. If you key in PIMIX into Morningstar for a quote, then select the portfolio tab, and check out the sector weightings. FSICX is a good fund if that is what you want.
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Re: Strategic Income Fund

Postby archman65 » Wed Nov 20, 2013 10:27 am

See sector weightings below for PONDX. Say's 100% financials.

http://finance.yahoo.com/q/hl?s=PONDX+Holdings
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Re: Strategic Income Fund

Postby SpringMan » Wed Nov 20, 2013 10:45 am

I see what you mean. Not sure why Yahoo and Morningstar differ. In my case PIMIX is not my core bond fund and represents only a small portion of our bonds. Our biggest bond holding is Vanguard's Short Term Investment Grade, and since we hold some of Vanguard's Target Retirement Income we have some total bond, short term TIPS and hedged international. Also we have Vanguard's high yield fund and some hybrids like Wellesley and Wellington. Diversification of PIMIX/PONDX does not matter to us because of all the other bond exposure we have. Your situation may be different. I like FSICX and LSBDX/LSBRX though I currently don't own them, either would be a good choice.
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Re: Strategic Income Fund

Postby Call_Me_Op » Wed Nov 20, 2013 11:05 am

archman65 wrote:Bogleheads I am thinking about investing in the Fidelity Strategic Income Fund (FSICX). The fund yields 3.67% with an expense ratio of .70%. It invests in various debt instruments including high yield Investments, Developed Market Debt, U.S. Govt, & Emerging Market Investments. The fund is generally 60% US and 40% Foreign. I don't see that Vanguard has a similar fund and I think the fund has done well:

2013 (through 10/31) +0.74%
2012 +10.9%
2011 +4.6%
2010 +9.9%
2009 +31.8%
2008 -11.4%

My core bond holdings are individual municipal bonds and corporate bonds and a short term and limited term Vanguard muni bond fund. This would bring some diversification to my holdings. I am wondering if there are any opinions on this fund? I am also wondering if anybody has another fund that I should look at instead.


What do past returns (of any bond/income fund) have to do with future returns. Answer: absolutely nothing.

This fund has a high expense ratio and lacks purity. I prefer lower expenses and higher transparency in my portfolio.
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Re: Strategic Income Fund

Postby SpringMan » Wed Nov 20, 2013 12:55 pm

Call_Me_Op wrote "What do past returns (of any bond/income fund) have to do with future returns. Answer: absolutely nothing.

This fund has a high expense ratio and lacks purity. I prefer lower expenses and higher transparency in my portfolio."

I would not call a .7% expense ratio high for an actively managed fund. In fact, Morningstar's website actually calls it low. Vanguard does not offer a multi-sector bond fund, if they did I am sure it would be at a lower expense. Folks buying multi-sector actively managed bond funds don't expect purity, they want the fund manager to have flexibility.
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Re: Strategic Income Fund

Postby Call_Me_Op » Wed Nov 20, 2013 1:05 pm

SpringMan wrote:Call_Me_Op wrote "What do past returns (of any bond/income fund) have to do with future returns. Answer: absolutely nothing.

This fund has a high expense ratio and lacks purity. I prefer lower expenses and higher transparency in my portfolio."

I would not call a .7% expense ratio high for an actively managed fund. In fact, Morningstar's website actually calls it low. Vanguard does not offer a multi-sector bond fund, if they did I am sure it would be at a lower expense. Folks buying multi-sector actively managed bond funds don't expect purity, they want the fund manager to have flexibility.


It's a bond fund - and 0.7% is high for a bond fund, IMHO. I can hold all of the sectors this fund holds at a much lower expense ratio through Vanguard funds or ETFs.

I don't think that a manager can time sectors of the bond market any better than you or I can. (For example, look at Gross's recent calls on treasuries.) In any case, I prefer to take my risk in equities, and believe in holding fixed allocations to investments that I believe work together synergistically. These views show-through in my previous comments.

If 2008-2009 taught me anything, it is the difference between apparent diversification and strong diversification.
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Re: Strategic Income Fund

Postby SpringMan » Wed Nov 20, 2013 1:24 pm

I can't time bond sectors at all. Generally I use Vanguard bond funds with ER around .1% or bundled inside Target Retirement Income which has .16% ER. Looking at Morningstar rating for risk, FSCIX is average risk, above average return, Vanguard Total Bond is average risk, average return. I don't use FSICX but do use PIMIX which has a .45% ER. PIMIX has below average risk and above average return according to Morningstar. Multi-sector bond funds don't have to be any riskier than index bond funds.
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Re: Strategic Income Fund

Postby midareff » Wed Nov 20, 2013 1:26 pm

It's a bond fund - and 0.7% is high for a bond fund, IMHO. and I would add high for any fund.

There is a reason why Treasuries and Investment Grade Corporates pay X and Y, and why these funds pay Z and ZZ. You will discover the difference one night, in the middle of your sleep. You will waken in a sweat and wonder .. W T F? How did that happen? Take your risk on the equity side and don't chase yield.

If it's play money (<5% of portfolio total) it makes no difference, have some fun. If its a real investment, I'd be shy of it unless I thought I was just smarter than the herd.
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Re: Strategic Income Fund

Postby midareff » Wed Nov 20, 2013 1:30 pm

SpringMan wrote:I can't time bond sectors at all. Generally I use Vanguard bond funds with ER around .1% or bundled inside Target Retirement Income which has .16% ER. Looking at Morningstar rating for risk, FSCIX is average risk, above average return, Vanguard Total Bond is average risk, average return. I don't use FSICX but do use PIMIX which has a .45% ER. PIMIX has below average risk and above average return according to Morningstar. Multi-sector bond funds don't have to be any riskier than index bond funds.



BTW SpringMan, PIMIX is a leveraged fund.. about 50% short cash which makes it 150% leveraged. That is how the return is achieved and .... should (rather, when) that bond Black Swan fly across your bow the fund should decrease in value 150% of it's like brethren. It may be fine for you but I'll get my returns on the equity side, thanks.
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Re: Strategic Income Fund

Postby pkcrafter » Wed Nov 20, 2013 2:23 pm

I wouldn't consider either the Fidelity or PIMCO fund a core bond holding. They are both multisector, but Fidelity is more diversified with lower risk, even though it's rated BB. The PIMCO fund has 50% in securitized mortgage loans and it's leveraged. Because of that, M* doesn't or can't rate it's quality. You don't get a 6% yield without proportional risk.

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Re: Strategic Income Fund

Postby abuss368 » Wed Nov 20, 2013 2:30 pm

Understand the investment before deciding. Understand the placement in your portfolio.

Higher yield almost always means higher risks.
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