Mutual Fund

Fidelity Municipal Bond Fund Analysis

Here are some Fidelity Municipal Bond Funds that we have researched for our portfolio. One major issue with Fidelity municipal bond mutual funds is that they can perform transactions that leverage returns. Leverage can magnify gains, but also intensified losses and volatility. During the credit crisis, the Fidelity funds family owned did not go crazy like some other municipal bond mutual funds. Also see Vanguard Municipal Bond Mutual Funds. Research done 1/12/2012

Also see: Morningstar’s favorite National intermediate term municipal bond fund picks and California intermediate term municipal bond fund picks.

Fidelity California Tax-free Bond funds

Fidelity California Short-Intermediate Term Tax Free Bond Fund (FCSTX)

Average maturity – years. Average duration 3.05 years. Average credit quality A. Expense ratio 0.34%. Morningstar rating 3 stars, Gold.

2011 return: 4.74%

Note: Reasonable duration and expense ratio. Vanguard doesn’t have a California municipal bond mutual fund with this short duration.

Fidelity California Municipal Income Fund (FCTFX)

Average maturity — years. Average duration 7.63 years. Average credit quality A. Expense ratio 0.46%. Morningstar rating 4 stars, Gold.

2011 return: 11.24%
Note: Too long of a duration and lower credit quality and we want.

Comparing Fidelity California tax-free municipal bond mutual funds. We can see the effect of longer duration net asset value fluctuations. The longer term fund does yield more though.

Fidelity National Tax-free Bond funds

Fidelity Short-Intermediate Muni Income Bond Fund (FSTFX)

Average maturity — years. Average duration 2.88 years. Average credit quality A. Expense ratio 0.48%. Morningstar rating 3 stars, Gold.

2011 return: 4.34%

Note: Reasonable duration but slightly high expense ratio. Vanguard doesn’t have a California municipal bond mutual fund with this short duration.

Fidelity Intermediate Municipal Income Fund (FLTMX)

Average maturity — years. Average duration 5.31 years. Average credit quality A. Expense ratio 0.39%. Morningstar rating 4 stars, Gold.

2011 return: 7.97%
Note: Too long of a duration and lower credit quality and we want.

Fidelity Municipal Income Fund (FHIGX)

Average maturity — years. Average duration 8.05 years. Average credit quality A. Expense ratio 0.46%. Morningstar rating 4 stars, Gold.

2011 return: 10.65%
Note: Too long of a duration and lower credit quality and we want.

Fidelity Municipal Income Fund (FTABX)

Average maturity — years. Average duration 8.08 years. Average credit quality A. Expense ratio 0.24%. Morningstar rating 5 stars, Gold.

2011 return: 10.91%

Note: Too long of a duration and lower credit quality and we want.

Comparing shorter term Fidelity national tax-free municipal bond mutual funds. We can see the effect of longer duration net asset value fluctuations. The longer term fund does yield more though. Fidelity Municipal Bond Funds remain some of the better muni bond funds investors should consider due to fairly low cost and decent performance.

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