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Two Fidelity Bond Funds for Conservative Income Investors

The two Fidelity Conservative Income bond funds—one taxable, one municipal—aim to provide a combination of income and capital preservation to investors who have an investment time frame of at least 6–12 months.

Reasons to consider Fidelity Conservative Income bond funds

  • Potential for slightly more yield than a money market fund, in exchange for the fluctuation in net asset value (NAV) per share to be expected from an ultrashort bond fund
  • A way to help manage interest rate risk using a bond fund with a very short weighted average maturity (WAM)—normally 9 months or less for the taxable fund, and one year or less for the municipal fund
  • A way to help manage the volatility of a portfolio containing equities and/or riskier types of bonds
  • Potential for tax-exempt income from the municipal fund

Fidelity Conservative Income Bond Fund, which is benchmarked to the Barclays Capital 3–6 Month U.S. Treasury Bills Index, will normally invest at least 80% of the fund's assets in U.S. dollar-denominated money market and high quality investment-grade debt securities of all types, and repurchase agreements for those securities. Up to 5% of the fund's assets can be invested in securities at the lower end of the investment-grade range. The fund may also potentially invest in reverse repurchase agreements. It invests more than 25% of its total assets in the financial services industries. The fund invests in both domestic and foreign issuers. It normally invests in fixed-rate securities with a maximum maturity of two years and floating-rate securities with a maximum maturity of three years. It normally maintains a dollar-weighted average maturity of nine months or less. The fund is not limited to the types of securities in which money market funds invest.

The Fidelity Conservative Income Bond Fund may not be suitable for all investors, and is not designed to be a substitute for a money market fund. In addition, those who have an investing time frame of less than 6–12 months, as well as investors preferring or requiring a stable net asset value per share or a concentration of U.S. Treasury or government debt, may want to consider other investments. The returns of a conservative investment such as this fund may not keep up with inflation. Over time, this could result in the erosion of purchasing power for those who could tolerate greater risk in the search for potentially higher returns from other types of mutual funds.

Key fund facts

Share classes

Initial minimum investment of $2,500: Retail Class (FCONX)

Initial minimum investment of $1 million: Institutional Class (FCNVX)

Fund investments
  • Commercial paper
  • Corporate bonds
  • Certificates of deposit (CDs)
  • Repurchase agreements
  • Reverse repurchase agreements
  • U.S. government agency securities
  • U.S. government securities
  • Securities of foreign as well as domestic issuers

Fidelity fund manager insights

MF_Conservative-Income-Bond_VID Hear Portfolio Manager Kim Miller discuss Fidelity's Conservative Income Bond Fund, and his investment process.

Watch the video. (3:48)

Investment risks of these funds

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 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. Furthermore, changes in government regulation, interest rates and economic downturns can have a significant effect on issuers in the financial services sector, including the price of their securities or their ability to meet their payment obligations.

Prepayment of principal prior to a security's maturity can cause greater price volatility if interest rates change. Also, foreign markets can be more volatile than U.S. markets due to increased risks of adverse issuer, political, regulatory, market or economic developments.

The fund can invest in securities that may have a leveraging effect (such as derivatives and forward-settling securities) which may increase market exposure, magnify investment risks, and cause losses to be realized more quickly.

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Weighted Average Maturity (WAM)

This is a weighted average of all the maturities of the securities held in a fund. WAM can be used as a measure of sensitivity to interest rate changes and markets changes. Generally, the longer the maturity, the greater the sensitivity to such changes. WAM is based on the dollar-weighted average length of time until principal payments must be paid. Depending on the types of securities held in a fund, certain maturity shortening devices (e.g., demand features, interest rate resets, and call options) may be taken into account when calculating the WAM.

Questions?

From our experts

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.
Although bonds generally present less short-term risk and volatility than stocks, the bond market is volatile and investing in bond funds involves interest rate risk; as interest rates rise, bond prices usually fall, and vice versa. Bond funds also entail issuer and counterparty credit risk, and the risk of default (the risk that an issuer or counterparty will be unable to make income or principal payments). Additionally, bond funds and short-term investments generally involve greater inflation risk than stocks, since investment returns may not keep up with increases in the prices of goods and services.
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