INVESTING IDEAS
Expand diversification with Fidelity Total Bond ETF (FBND)
Investors can help minimize volatility, stabilize returns, and may be better positioned for long-term growth by adding the diversification benefits of a dynamic bond strategy like the Fidelity Total Bond ETF.
Why diversify with bonds?
Diversification is essential for investors as it spreads investments across various asset classes, industries, and regions, reducing dependency on any single area. By balancing exposure, it helps manage risk and can help minimize the impact of underperformance in any one investment. Diversification can also reduce portfolio volatility, aiming for a smoother investment experience during market fluctuations. As shown in the visual to the right, since 1926, when stocks have fallen, bonds have helped stabilize overall portfolio returns 88% of the time.
Bond returns in years when stocks were down
As of December 31, 2024.
Source: Morningstar EnCorr, Fidelity Investments (AART).
Past performance is no guarantee of future results.
For illustrative purposes.
Add stability to your bond exposure
Diversifying your bond exposure manages risk and can offset losses in one asset class with gains in another, targeting stability while minimizing volatility. By allocating to a dynamic bond strategy like FBND, investors have access to a broad array of fixed income sectors, helping capture the benefits of diversification which may position their portfolio for long-term success.
- Dynamic multi-sector strategy
- Competitive risk-adjusted returns
- Contrarian approach
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In general the bond market, especially foreign markets, are volatile, and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. 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, liquidity risk, call 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. Lower-quality bonds can be more volatile and have greater risk of default than higher-quality bonds. Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks, all of which may be magnified in emerging markets. Investments in mortgage securities are subject to the risk that principal will be repaid prior to maturity. Leverage can increase market exposure and magnify investment risk. The fund generally expects to effect its creations and redemptions for cash rather than in-kind securities, and may recognize more capital gains and be less tax-efficient than if it were to redeem in-kind. An ETF may trade at a premium or discount to its Net Asset Value (NAV). There can be no assurance that an active trade market will be maintained and trading may be halted due to market conditions.
Diversification does not ensure a profit or guarantee against a loss.
ETFs are subject to market fluctuation and the risks of their underlying investments. ETFs are subject to management fees and other expenses.