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Bond Funds: Investment Grade

These funds invest primarily in investment grade bonds issued by governments and corporations, or in bonds backed by assets like home mortgages.

Reasons to consider investment grade bond funds

  • Investment grade bonds are considered to be of higher credit quality than high yield bonds.
  • Funds invest in bonds with a historically lower risk of default.
  • Funds are generally less volatile than high yield bond funds, although the yields tend to be lower.

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Types of investment grade bond funds

Government

Government bond funds invest in bonds issued by the U.S. government and government-sponsored enterprises, as well as mortgage and other asset-backed securities.

Inflation-protected

These funds primarily invest in Treasury Inflation-Protected Securities (TIPS), whose face value adjusts to keep pace with the Consumer Price Index (CPI), typically making them a good hedge against inflation.

Mortgage-backed

These funds invest in securities backed by pools of mortgages issued by government agencies, banks, or other financial institutions.

Corporate

These funds invest in bonds issued by corporations. The yields and risks are generally higher than those offered by government and most municipal bonds, and the income is subject to state and federal taxes.

Broad market

These funds invest in a diversified mix of bonds issued by the U.S. government, government agencies, and corporations, as well as mortgage-backed bonds, which may help mitigate risk.

Additional Resources

Income-Producing Funds in Fidelity Fund Picks®
See our wide range of mutual fund products that can help you generate income.

Behind the Ratings of Fidelity's Medaled Muni Lineup (PDF)
Read about Morningstar's recognition of Fidelity's municipal bond fund lineup.

Questions?

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information.  Read it carefully.

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.)  Fixed income securities also carry inflation risk, liquidity risk, call risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Diversification does not ensure a profit or guarantee against loss.

Increases in real interest rates can cause the price of inflation-protected debt securities to decrease.

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