Looking for help comparing 2 bond funds

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Info_Hound
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Looking for help comparing 2 bond funds

Post by Info_Hound »

This morning I met with a Fidelity rep to discuss various taxable account options as I am new to taxable accounts. I got the information I needed to address my questions and of course the conversation eventually steered into my existing accounts and their holdings. He was aware I am self-managed so it was easy to deflect most of the conversation he wished to have with me.

I then asked him to identify another US Bond Index that would be better than FXNAX (preferred Boglehead 3 fund bond holding). There wasn't much to offer that did better, given where bonds have been lately. However, he did pull up FTHRX (Fidelity® Intermediate Bond Fund) as doing marginally better than my current FXNAX (Fidelity® U.S. Bond Index Fund). Of course I did nothing but take notes, I make no changes until I thoroughly understand things. So I have a few questions for the sharp minded Bogleheads here. :D

I wish I could put a chart in this post, but I don't know how. So this is what I see:
  • They are both Intermediate Core Bond
    They are both no transaction fee
    They are both the same low risk level (important to me)
    Morning Star overall rating for FTHRX is 5 stars, FXNAX is 3 stars,
    Returns are high for FTHRX, FXNAX returns are average
    Expenses are below average for FTHRX (expense ratio is .44%), low for FXNAX (.025%)
Does the slightly better returns for FTHRX outweigh its much higher expense ratio? What am I missing? What did the rep not say that would have been helpful when comparing the two funds? I don't chase returns, I value stability with steady growth.

TIA for all your insight!
jdibber
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Joined: Mon May 22, 2017 5:32 pm

Re: Looking for help comparing 2 bond funds

Post by jdibber »

I don't think the bonds are comparable. FTHRX ,which I believe is actively managed, has shorter duration, more junk bonds and is riskier. Pull up the 'Composition' tab on Fid's dashboard for these two funds and you'll be able to see the differences.
"I order the food, you cook the food. Then the customer gets the food. We do that for 40 years, and then we die." -Squidward S3E2
rich126
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Joined: Thu Mar 01, 2018 3:56 pm

Re: Looking for help comparing 2 bond funds

Post by rich126 »

FXNAX
3 star rating from Morningstar
6 yr duration
0.025 expense ratio
47% government bonds
25% corporate
26% securitized

73% bonds rated AAA
4% AA
12% A
11% BBB

FTHRX
5 star rating
3.7 yr duration
0.44 expense
39% government
41% corporate
18% securitized

55% AAA
4% AA
19% A
21% BBB

Really depends on what you want. I personally don't own any bond funds. I have individual treasuries (quite a few) and have bonds within a fund such as Fidelity Puritan.
----------------------------- | If you think something is important and it doesn't involve the health of someone, think again. Life goes too fast, enjoy it and be nice.
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Info_Hound
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Re: Looking for help comparing 2 bond funds

Post by Info_Hound »

Now I get it, thank you jdibber and Rich126. Your information added a fuller picture of each of the bonds in question. :beer Knowing the 'ingredients' helped me tremendously.

I have a large holding of CDs already with better interest rates than Fidelity can offer, the rep admitted I should continue to purchase CDs from my Credit Union. Was looking to better my bond holdings, if it was possible. I was genuinely curious what might be suggested in lieu, in case they had introduced something I was unaware of.

Thank You.
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