Fidelity Strategic Income Fund (FSICX) invests assets in securities from four distinct fixed-income markets to which many savvy investors may want exposure: high yield, U.S. Government and investment-grade debt, emerging markets, and foreign developed markets. The fund seeks high current income, but may also seek capital appreciation.
The fund's strategy offers investors the potential for reduced volatility, when compared to an investment in, for example, a strictly high yield or international fund. The four markets respond to different economic factors, and thus changes in their performance have the potential to offset each other and reduce the volatility of the overall portfolio.
The Strategic Income Fund also potentially offers reduced volatility when added to an all-stock portfolio, for similar reasons: the fund's significant sub-portfolios have also historically performed differently from equities.
The fund can also potentially offer higher returns, when compared to investment-grade bond funds with a lower risk and return profile.
Who may want to invest
The Fidelity Strategic Income Fund is appropriate for investors whose primary objective is to pursue high current income through a fund managed by a team of Fidelity portfolio managers and research analysts using a disciplined strategy to invest across multiple categories and global markets.
The fund may also be appropriate for risk-savvy investors seeking to diversify a stock portfolio, or to increase the return potential of an investment-grade bond portfolio using an aggressive bond fund. (Diversification across multiple asset types does not ensure a profit or guarantee against a loss.)
Things to keep in mind
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.
Investments in foreign securities, especially those in emerging markets, involve risks in addition to those of U.S. investments, including increased political and economic risks as well as exposure to currency fluctuations.
Each of the fund's investment categories may experience periods of volatile returns, and it is possible for all investment categories to decline at the same time.