Don Steinmann's Investment Tip of the Week

Don Steinmann's
Investment Tip of the Week

Look Under the Hood of Your Mutual Fund

If you’re buying mutual funds or ETFs, it’s a really good idea to make sure you’re getting what you think you’re getting. An example: The Fidelity Total Bond Fund ETF (symbol FBND) states that they invest in “debt securities of all types”. So you might think “This ETF will give me broad exposure to the bond market.” But what is the reality?

If you look at their holdings, their 15 largest positions are all US Government bonds. None of the other debt they hold accounts for more than 0.70% of the portfolio. It’s a lot more like a government bond fund than a “Total Bond” fund.

There is nothing wrong with holding US Government bonds. But if you were looking for a broad debt market exposure, this fund is probably not it.

When buying a mutual fund or ETF, it pays to look under the hood and see what the fund is actually doing.

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