Have some cash I have to do something with, this is a Fidelity no load
Municipal fund? Modest return. Good-Bad. If you have the time?
You also have a really great forum here, love reading all the opinions
and insight. Thanks
If you think the interest rate on municipal bonds may go up during the
period you plan to hold the fund you need to consider that FHIGX has a
duration of 8 years. That means that for every 1% increase in the
interest rate the price of your fund shares will drop 8%.
I subscribe to an independent newsletter, Fidelity Monitor. He rates
FHIGX as "hold", i.e. don't buy.
The only two municipal bond funds rated buy are FLTMX and FSTFX; the
first is intermediate term and the second is short term.
Whoa. That is a whole lot bigger question than can be answered on Usenet.
The fact that you got there from a simple question about a single mutual fund
tells me that you don't have much in the way of a financial plan in place. If
you did, you won't be asking, at least in those terms.
I suggest you find yourself a fee-only financial planner to help figure out
where you are financially and where you need to be. Start by reading Personal
Finance for Dummies
In my humble opinion no one on a newsgroup can make an intelligent
suggestion because there is no way they can know enough about your
personal financial situation to do so.
signifigance of duration for a bond or bond fund. If that is the case
you should not be doing your own planning or making your own investment
decisions. Douglas's suggestion to find a fee only financial planner is
appropriate but, based on my experience, comes with a very large caveat.
The financial planning industry is totally unregulated. There is no
standard of competence comparable to the CPA licensing exam for
accountants. In addition, financial planning, and, in particular,
investment advice, are much more subjective than accounting. There are
many theories on investing ranging from modern portfolio theory to
value investing to throwing darts at the Wall Street Journal to trying
to emulate Warren Buffet.
In my case I have made two careful (I think) thorough (I think) efforts
to find a good financial planner and have found two turkeys. I have an
MBA and my wife is a CPA so we are not completely ignorant yet we
failed both times. If you decide to find a planner the best place to
start is with other high net worth individuals that you know. If you
find someone whose judgement you respect and who has a planner that
they recommend you are more likely to be satisfied with the service you
There are four fee schemes in the financial planning industry. Listed
from worst to best, from your point of view, they are:
A fee based planner derives his income from a fixed fee that he charges
you plus the commissions he earns on the products (funds, annuities,
etc.) that he sells you. A commission base planner derives all of his
income from commision on the products he sells you. Do NOT use a
planner that derives any income from commissions since his vested
interest is served by selling you products that pay the highest
commission, not products that are most appropriate for you.
I endorse Douglas's suggestion that you do some reading. If you don't
understand the basics it will be difficult to converse intelligently
with a planner and impossible to tell if you are getting bad advice.
For example, interest rates are currently at the lowest levels in
decades so they have no where to go but up. If you understand that when
interest rates go up the price of bonds and bond funds go down you
should be very concerned if your planner recommends buying bonds or
bond funds now. If your planner suggests something that you do not
understand or that does not make sense ask a lot of questions before
That's my two cents worth for whatever it's worth.
Here's an idea from 3 seconds of thought. Folks here will HATE it, but
worthwhile to expand your horizons once in a while, at least as a
thought experiment. Staying within the fidelity bondfund family, try
something a bit wilder but less sensitive to interest rate hikes, such
as a basket of:
Their value is graphed against the 10 year interest rate, which shows
them at their worst when this spiked down. Normally their share prices
are relatively stable, aside from recovery "up" periods like now. The
key thing not shown is they tend to just firehose interest money at
you; enough to make up for most share price instability. One overseas
(a recent Greek inspired sag at least shows you are diversified), and
another domestic junk (thus insensitve to hikes which are small in
comparison), and the last having floating rates that quickly adapt to
Let me start by concurring with the recommendation that the original
poster seek professional advice. Investing $800K is a BIG deal.
I suspect the original poster is retired and therefore an income
oriented investor looking for something that will pay him enough to
live on. Times are tough for investors like that because rates are so
low. So many are looking at bond funds they wouldn't ordinarily
consider, just because they have a good yield.
This is a really bad idea. The share price of most bond funds is not
fixed. Typically, when interest rates go up, the share price goes
down. So it is possible to LOSE PRINCIPAL. The greater the bond fund's
"duration," the more sensitive the share price will be to interest
rate changes. If the original poster cannot accept the risk of LOSING
PRINCIPAL he has no business investing in FHIGX, or any other bond
fund. He needs to be in Treasuries or CDs or some other safe vehicle
and learn to live with the paltry rate of return.
We also don't know what the original poster's tax situation is. Munis
can be good for income oriented investors with a high marginal rate.
But if this guy's marginal rate is low (or he doesn't know what a
marginal rate is) he doesn't belong in munis.
ASSUMING the original poster is an income oriented retiree, and
further assuming he has a high marginal rate, munis are an option, But
he has to be careful to protect himself against losing principal when
rates go back up. (And they will, sooner or later.)
He can do this two ways. First, he can divide the money into four or
five funds with durations varying from short to long. He'll have to
live with some risk to his principal as the share prices fluctuate,
however. But if he keeps his average duration low, the value of
principal won't change all that much month to month.
Second, he could buy actual bonds instead of bond funds and set up a
"ladder." With $800K he has enough dough to build a diversified bond
portfolio, but he'll ned a pro do manage it for him. That kind of
advice is going to cost. He pay either a percentage of assets, or
he'll pay via bid/ask spreads when he trades the bonds. But if he
finds a good bond guy he can probably expect three to four percent
with not much risk to his nest egg.
1st-If this post is not appropriate because of a couple of statements of
mine, please delete-I won't get offended.
Thanks to all for your replies. Sometimes I need a lot of prodding.
Yes, I do know the correlation of bonds & interest rates, having had
bonds before, but looking at the fund I DID miss the duration on it.
I'm 61, wife 56, & I'm one of the baby boomers mentioned in a post
thread below. I feel fortunate enough for grand parents who came
through the great depression, gave their knowledge to my parents, (my
dad was also a B24 pilot over Germany-ah really gave him some things to
think about-absolutely helped shape his life afterwards), and they in
turn gave me their knowledge. Dad & I never had a hard time talking
finance. So my wife and I have a few years to go.
That's the problem, not being able to talk to dad, I need prodding
again, from someone other than me. (Ha) I'm an ex-e-trader. Not
day-trader, just was with E-trade for a long-long time, until the man
came out an said that Etrade did not have a problem with their
mortgages, it would not affect the company. I left for Fidelity. We
had built up the figure mentioned while at etrade.
I feel really good in that I have lost no money. Not during the dot.com
bust, or the housing bust last year or so. I was just to skeptical on
both occasions that I was in all cash before each. Maybe I didn't make
as much as some, but I have not lost anything either. Took a few years
after the dot.com before I did anything major again.
So here I am again, except this time I've got it worse than before about
doing anything, because of where (my opinion) I think this country is
heading because a lot of people at the top seem like they don't want to
do what's right for this country or it's people. I'm probably wrong,
This is a great board that I've been reading that has a lot of wisdom,
just can't seem yet to take that money sitting in the mm's, as you know
which is doing absolutely nothing, and do something else with it right
now. I know there are safe things out there, geez, I just sit here
though, doing nothing. Bad, I know.
Thanks--felt really good just writing that out.
Staying even across 10 years isn't really even. White collar inflation
is much higher than blue collar inflation due to more % dependence on
local premium services vs imports of basics from China. And this
business of sudden total liquidations has risks of bad timing. While
it might not have the risk profile you want, look at a fidelity graph
of 10 year total returns of fnmix that I mentioned... fairly steady
path to more than tripling in 10 years besides 6% current interest
(and IIRC similarly good record earlier). Just an example.
It seems to me that you are paralyzed because you don't have a plan. I'll
repeat my advice: do some reading about financial planning, particularly asset
allocation, and find someone to help you build and execute an allocation that
makes sense for you.
As Bill says, there are a lot of salesman out there posing as planners. You
don't want them. You want someone paid to serve you, not paid to push products.
A fee-only Certified Financial Planner is at least a first pass at sorting out
Again, I am not pushing this bond fund, but just making an example to
broaden views. Typical bond fund prospects have rarely been worse
unless you expect armegeddon and S&P indexing has been shown as a non
security blanket. But lesser known options like emerging bonds (among
others) have been working for me for decades.
FNMIX was a spectacular performer thru all 17 years of it's existence
(12.32% yearly return) and shows no signs of changing. Look at it's
performance graph throughout the period, and 15 years ago is the same
as today - a miraculous march upward uncorrelated to vagaries of
typical bond yields or stock returns (except for brief sharp dips and
recoveries in 3 world crises, as I disclosed on my posted link).
Something may well sour it's future in the new decade, but like any
investment you simply watch and bail out if its pattern fundamentally
It's not based on some transient manager or tactics; you can buy the
same thing as a sleepwalking index etf like EMB. Its overachievement
is based on is the prejudice of the developed world which undervalues
the economies of striving, work-ethic countries and overvalues aging,
entitlement-minded economies. So not only do the undeveloped countries
have to firehose interest to you in FNMIX, but the lagging recognition
of their strength also means their interest rate differential shrinks
and you reap cap gains as well. Maybe you have to be a traveler to
feel the reality of things like this.