Fidelity® Defined Maturity Funds

Defined Maturity Funds (DMFs) are an innovative way to invest in municipal bonds. Like Fidelity's other municipal bond funds, DMFs offer professional management, diversification, and seek to provide federally tax-exempt monthly income. They can also be sold at the end of each business day at their net asset value.

Compare traditional municipal bond funds vs. DMFs

Unlike traditional bond funds, a DMF's price sensitivity to changes in interest rates declines gradually over time, approaching zero near maturity. Furthermore, the fund is designed to distribute its net asset value to shareholders in cash shortly after maturity.


Key Features Defined Maturity Funds Traditional municipal bond funds
Professional management
Diversification
Institutional pricing
Liquidity
Tax-exempt income
Declining interest rate sensitivity
 
Maturity date
 
The table lists various features of municipal bond funds and DMFs. Both provide certain benefits and risks that should be considered before investing.

How DMFs work

A DMF invests primarily in investment-grade municipal bonds whose maturities are roughly the same as the maturity of the fund itself. As these bonds move toward maturity, the fund's overall interest rate sensitivity gradually declines since bonds with shorter maturities tend to be less sensitive to interest rate changes. This feature may make DMFs an attractive option for investors with specific time horizons. To take advantage of this expected decline in price sensitivity, investors should consider holding the funds to maturity. Otherwise they may experience more price, or net asset value uncertainty.

A DMF aims to distribute monthly dividends that are exempt from federal income tax. Investors have the option of reinvesting those dividends or receiving them as income. The fund also distributes its net asset value to shareholders in July of the year it matures.

Potential uses for DMFs

Save for a goal
While DMFs do not guarantee a predetermined amount at maturity, they can be a great way to save for future expenses. For instance, you can buy a DMF or a series of DMFs with maturity dates that coincide with your goal.

Help manage the impact of rising rates
Purchasing multiple DMFs of different maturities can be an effective way to create a fixed income "ladder." For example, if rates are rising, you can reinvest the proceeds of a maturing fund into a fund with a higher yield.

Supplement bonds1
If you purchase individual bonds, you may consider adding a DMF to your existing ladder or asset mix to help increase diversification and improve overall liquidity.

What we offer

  • Fidelity® Municipal Income 2019 Fund (FMCFX)
  • Fidelity® Municipal Income 2021 Fund (FOCFX)
  • Fidelity® Municipal Income 2023 Fund (FCHPX)

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