Is FCBFX a Strong Bond Fund Right Now?

Having trouble finding an Investment Grade Bond - Intermediate fund? Well, Fidelity Corporate Bond Fund (FCBFX) would not be a good potential starting point right now. FCBFX carries a Zacks Mutual Fund Rank of 4 (Sell), which is based on various forecasting factors like size, cost, and past performance.

Objective

We classify FCBFX in the Investment Grade Bond - Intermediate category, an area rife with potential choices. Investment Grade Bond - Intermediate funds target the middle part of the curve, typically by investing in bonds that mature in more than three years but less than 15 years. At these maturity levels, fixed income instruments have medium duration risk--but they compensate investors with a respectable yield compared to shorter maturity options. Finally, a focus on investment grade ensures that these funds are safer, but yields will be lower than in the junk bond category.

History of Fund/Manager

Fidelity is responsible for FCBFX, and the company is based out of Boston, MA. The Fidelity Corporate Bond Fund made its debut in May of 2010 and FCBFX has managed to accumulate roughly $959.49 million in assets, as of the most recently available information. A team of investment professionals is the fund's current manager.

Performance

Of course, investors look for strong performance in funds. This fund has delivered a 5-year annualized total return of 0.18%, and is in the bottom third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 2.86%, which places it in the middle third during this time-frame.

It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. Over the past three years, FCBFX's standard deviation comes in at 8.69%, compared to the category average of 12.83%. Over the past 5 years, the standard deviation of the fund is 7.93% compared to the category average of 12.45%. This makes the fund less volatile than its peers over the past half-decade.

Bond Duration

Modified duration is a measure of a specific bond's interest rate sensitivity, and is an excellent way to judge how fixed income securities will respond to a shifting rate environment.

For investors who think interest rates will rise, this is an important factor to consider. FCBFX has a modified duration of 6.82, which suggests that the fund will decline 6.82% for every hundred-basis-point increase in interest rates.

Income

Since income is, of course, a big reason for purchasing a fixed income security, it is always important to consider the fund's average coupon. This metric calculates the fund's average payout in a given year. For example, this fund's average coupon of 4.53% means that a $10,000 investment should result in a yearly payout of $453.

While a higher coupon is good for when you want a strong level of current income, it could present a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond.

Since income is just one part of the bond picture, investors need to consider risk relative to broad benchmarks. FCBFX carries a beta of 0.98, meaning that the fund is less volatile than a broad market index of fixed income securities. With this in mind, it has a positive alpha of 2.02, which measures performance on a risk-adjusted basis.

Expenses

For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, FCBFX is a no load fund. It has an expense ratio of 0.45% compared to the category average of 0.88%. So, FCBFX is actually cheaper than its peers from a cost perspective.

This fund requires a minimum initial investment of $0, while there is no minimum for each subsequent investment.

Fees charged by investment advisors have not been taken into considiration. Returns would be less if those were included.

Bottom Line

Overall, even with its comparatively weak performance, average downside risk, and lower fees, Fidelity Corporate Bond Fund ( FCBFX ) has a low Zacks Mutual Fund rank, and therefore looks a somewhat weak choice for investors right now.

Don't stop here for your research on Investment Grade Bond - Intermediate funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare FCBFX to its peers as well for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.

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This article originally published on Zacks Investment Research (zacks.com).

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