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

[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]

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.

[xenial]

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.

[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.

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?

[retired@50]

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,

[xenial]

. . .
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.

[alkg19]

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!

[alkg19]

. . .
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!