Fidelity Total Bond Fund - Buyer Beware?

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Fidelity Total Bond Fund - Buyer Beware?

Postby dwbogle » Wed Aug 15, 2007 12:26 pm

Should one be concerned with the portfolio diversification of Fidelity Total Bond Fund (FTBFX)?

24.8% MBS Passthrough
13.6% ABS
9.2% CMBS
7.7% CMO

This seems like a lot of exposure to risk especially when you look at Vanguard TBM (VBMFX).
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Re: Fidelity Total Bond Fund - Buyer Beware?

Postby stratton » Wed Aug 15, 2007 1:41 pm

dwbogle wrote:Should one be concerned with the portfolio diversification of Fidelity Total Bond Fund (FTBFX)?

24.8% MBS Passthrough
13.6% ABS
9.2% CMBS
7.7% CMO

This seems like a lot of exposure to risk especially when you look at Vanguard TBM (VBMFX).

You can't compare the two. It's an apples to oranges comparison. Fidelity Total Bond Fund is an actively managed bond fund and contains undesirable stuff (ABS, CMBS, CMO). Vanguard's Total Bond Market is based on the Lehman Aggragate Bond Index.

The equivalent Fido fund is US Bond Index (FBIDX).

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The damage may be done already...

Postby 92irish » Wed Aug 15, 2007 2:01 pm

If you look at the past one month chart between VBMFX and FTBFX, FTBFX has fallen off significantly from a historic perspective. Clearly this whole subprime mortgage issues has affected the share price of FTBFX. Prior to the past month, FTBFX and VBMFX had tracked pretty closely and was slightly edging VBMFX. As stated above, FTBFX is an actively managed fund which obviously took a bet on mortgage backed bonds to juice returns a little bit which has come back to bite them.

Where this goes from here...who knows. It is a good lesson to look within actively managed funds to see what risks they might be taking.
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Re: Fidelity Total Bond Fund - Buyer Beware?

Postby dwbogle » Wed Aug 15, 2007 2:25 pm

stratton wrote:The equivalent Fido fund is US Bond Index (FBIDX).

FBIDX is even worse than FTBFX.

33.6% MBS Passthrough
9.7% ABS
7.8% CMBS
6.5% CMO

So VBMFX/BND is a better investment than was Fidelity has to offer based on risk?
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