FUMBX short-term bond fund & prospects for recovery [Fidelity Short-Term Treasury Bond]

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
alkg19
Posts: 4
Joined: Thu May 12, 2022 9:09 am

FUMBX short-term bond fund & prospects for recovery [Fidelity Short-Term Treasury Bond]

Post by alkg19 »

I bought FUMBX (Fidelity's short-term bond fund) in January 2021. It's down 7% since then.

I've read that with rising rates, bond funds may take a while to adjust (I realize there's another active thread on this, which I've also read.)

But I thought because this was a short-term bond fund, it would not be impacted as much.

Is there a timeframe in which I should expect this to go to at least break-even, or is this going to only get worse in the near term? I fairly urgently need the cash that I've invested in this fund (within the next 1-2 months) for an emergency, and I'm wondering whether to liquidate it now or liquidate it a month or two from now. Thanks.
mega317
Posts: 4939
Joined: Tue Apr 19, 2016 10:55 am

Re: FUMBX short-term bond fund & prospects for recovery [Fidelity Short-Term Treasury Bond]

Post by mega317 »

No one can predict the future, so there is no answer to your actual question.

It seems you made a mistake holding a fund with a duration much longer than your need for the money. I wouldn't compound the mistake by continuing to do so.
https://www.bogleheads.org/forum/viewtopic.php?t=6212
xenial
Posts: 2790
Joined: Tue Feb 27, 2007 1:36 am
Location: USA

Re: FUMBX short-term bond fund & prospects for recovery [Fidelity Short-Term Treasury Bond]

Post by xenial »

alkg19 wrote: Thu May 12, 2022 9:46 am I bought FUMBX (Fidelity's short-term bond fund) in January 2021. It's down 7% since then.

I've read that with rising rates, bond funds may take a while to adjust (I realize there's another active thread on this, which I've also read.)

But I thought because this was a short-term bond fund, it would not be impacted as much.

Is there a timeframe in which I should expect this to go to at least break-even, or is this going to only get worse in the near term? I fairly urgently need the cash that I've invested in this fund (within the next 1-2 months) for an emergency, and I'm wondering whether to liquidate it now or liquidate it a month or two from now. Thanks.
If you really need the money in 1-2 months, you should probably sell now and move the proceeds to a money market fund or online savings account. Don't beat yourself up too much about the loss. Short term bonds are not a ridiculous place to have put your emergency fund. The recent rise in rates has been unusually steep.
Topic Author
alkg19
Posts: 4
Joined: Thu May 12, 2022 9:09 am

Re: FUMBX short-term bond fund & prospects for recovery [Fidelity Short-Term Treasury Bond]

Post by alkg19 »

xenial wrote: Thu May 12, 2022 2:42 pm
alkg19 wrote: Thu May 12, 2022 9:46 am I bought FUMBX (Fidelity's short-term bond fund) in January 2021. It's down 7% since then.

I've read that with rising rates, bond funds may take a while to adjust (I realize there's another active thread on this, which I've also read.)

But I thought because this was a short-term bond fund, it would not be impacted as much.

Is there a timeframe in which I should expect this to go to at least break-even, or is this going to only get worse in the near term? I fairly urgently need the cash that I've invested in this fund (within the next 1-2 months) for an emergency, and I'm wondering whether to liquidate it now or liquidate it a month or two from now. Thanks.
If you really need the money in 1-2 months, you should probably sell now and move the proceeds to a money market fund or online savings account. Don't beat yourself up too much about the loss. Short term bonds are not a ridiculous place to have put your emergency fund. The recent rise in rates has been unusually steep.
Thank you. For future reference, is there a different type of bond fund I should put money into if I need it in a particular time frame like less than 6 months or less than 1 year?

It seems this bond fund says it holds bonds with maturity < 3 years, so does that mean if I waited two more years, there wouldn't be any losses? :?
User avatar
retired@50
Posts: 8006
Joined: Tue Oct 01, 2019 2:36 pm
Location: Living in the U.S.A.

Re: FUMBX short-term bond fund & prospects for recovery [Fidelity Short-Term Treasury Bond]

Post by retired@50 »

alkg19 wrote: Thu May 12, 2022 6:48 pm
Thank you. For future reference, is there a different type of bond fund I should put money into if I need it in a particular time frame like less than 6 months or less than 1 year?

It seems this bond fund says it holds bonds with maturity < 3 years, so does that mean if I waited two more years, there wouldn't be any losses? :?
I'm not aware of any bond fund with a duration under 1 year (the Vanguard Ultra Short Bond ETF "VUSB" has a 1 year duration). Even then, bond funds don't make promises to investors about if or when they will break even. That's just not how it works. You've learned a lesson here so it's not a mistake you're likely to repeat.

For short time frames you're better off using a savings account with one of the online banks like Marcus, Ally, or Capital One. Not much interest earned, but no loss of funds either.

If you really want to use a bond, then buying a short-term U.S. Treasury bill might work. They have terms as short as 13 weeks, depending on their auction schedule. They don't pay much interest though, so it may not be worth the trouble.

Regards,
This is one person's opinion. Nothing more.
xenial
Posts: 2790
Joined: Tue Feb 27, 2007 1:36 am
Location: USA

Re: FUMBX short-term bond fund & prospects for recovery [Fidelity Short-Term Treasury Bond]

Post by xenial »

alkg19 wrote: Thu May 12, 2022 6:48 pm . . .
For future reference, is there a different type of bond fund I should put money into if I need it in a particular time frame like less than 6 months or less than 1 year?

It seems this bond fund says it holds bonds with maturity < 3 years, so does that mean if I waited two more years, there wouldn't be any losses? :?
Safe and convenient places for an emergency fund might be online savings accounts, no penalty CDs, money market funds, or Treasury bills. High quality ultra-short bond funds or ETFs are just a bit riskier. The Bogleheads Wiki has a good article: Emergency fund

Holding FUMBX for another 3 years would not necessarily eliminate your losses, as interest rates could continue to rise sharply. In contrast, holding an individual newly-issued 3 year Treasury note to maturity would guarantee no losses, but only in nominal terms.
Topic Author
alkg19
Posts: 4
Joined: Thu May 12, 2022 9:09 am

Re: FUMBX short-term bond fund & prospects for recovery [Fidelity Short-Term Treasury Bond]

Post by alkg19 »

retired@50 wrote: Thu May 12, 2022 6:59 pm
alkg19 wrote: Thu May 12, 2022 6:48 pm
Thank you. For future reference, is there a different type of bond fund I should put money into if I need it in a particular time frame like less than 6 months or less than 1 year?

It seems this bond fund says it holds bonds with maturity < 3 years, so does that mean if I waited two more years, there wouldn't be any losses? :?
I'm not aware of any bond fund with a duration under 1 year (the Vanguard Ultra Short Bond ETF "VUSB" has a 1 year duration). Even then, bond funds don't make promises to investors about if or when they will break even. That's just not how it works. You've learned a lesson here so it's not a mistake you're likely to repeat.

For short time frames you're better off using a savings account with one of the online banks like Marcus, Ally, or Capital One. Not much interest earned, but no loss of funds either.

If you really want to use a bond, then buying a short-term U.S. Treasury bill might work. They have terms as short as 13 weeks, depending on their auction schedule. They don't pay much interest though, so it may not be worth the trouble.

Regards,
Thank you!
Topic Author
alkg19
Posts: 4
Joined: Thu May 12, 2022 9:09 am

Re: FUMBX short-term bond fund & prospects for recovery [Fidelity Short-Term Treasury Bond]

Post by alkg19 »

xenial wrote: Thu May 12, 2022 7:10 pm
alkg19 wrote: Thu May 12, 2022 6:48 pm . . .
For future reference, is there a different type of bond fund I should put money into if I need it in a particular time frame like less than 6 months or less than 1 year?

It seems this bond fund says it holds bonds with maturity < 3 years, so does that mean if I waited two more years, there wouldn't be any losses? :?
Safe and convenient places for an emergency fund might be online savings accounts, no penalty CDs, money market funds, or Treasury bills. High quality ultra-short bond funds or ETFs are just a bit riskier. The Bogleheads Wiki has a good article: Emergency fund

Holding FUMBX for another 3 years would not necessarily eliminate your losses, as interest rates could continue to rise sharply. In contrast, holding an individual newly-issued 3 year Treasury note to maturity would guarantee no losses, but only in nominal terms.
Thank you xenial!
Post Reply