The Fed is now talking about significantly accelerating raising interest rates and unwinding its huge balance sheet of Treasuries and MBS.
Last week, for example, FMSDX, an allocation fund with 40% in bond holdings, lost 2.2%. M* still reports that as of 12/31/21 the fund has "extensive interest rate sensitivity" with a duration of 8.5 years.
In light of the Fed's release of the minutes of its March meeting, was last week's poor performance due primarily to the fund's bond holdings? Is it possibly a forerunner of things to come? Is it time to consider selling FMSDX?
Opinions/suggestions are appreciated.
Thanks,
Fred
Comments
FMSDX Commentary
Just read the referenced link from Fidelity, above. Conclusion, from 31 December:
"...Within the equity subportfolio, we're especially interested in opportunities among value stocks, which tend to offer more downside protection and income than growth stocks. On December 31, the fund held sizable overweightings in energy, financials, materials (gold miners) and real estate. Elsewhere, we believe high-yield bonds and bank loans – which are not in the Composite index and together represent more than 20% of the fund's assets – offer attractive risk/reward. The fund ended the period with increased exposure to government debt (about 16% of assets) and convertibles (roughly 6% of assets) and a reduced weighting in emerging-markets debt (about 2% of assets)."
Portfolio Data Portfolio Data Additional Information
30-Day Yield 4
2.62%
3/31/2022
Duration
4.20 Years
3/31/2022
Distribution Yield (Daily)
1.41%
4/7/2022
FMSDX is about 50th out of 512 NTF "Allocation" funds offered by Fido, DOWN ~3% YTD. Not bad for an allocation fund this year.
If you sell it, where do you re-deploy to?
US? We sold ALL of our dedicated bond funds earlier this year except a toe-hold in two closed funds. We also sold a few allocation funds but DID hold onto FMSDX due to its strategy and holdings. We however cut its allocation in half. We still think it's a LT keeper and would NOT want to be closed out of it down the road.
Proceeds were immediately used to replace the equivalent stock %'s using dedicated stock funds instead, and the remainder (bond portion proceeds) are being re-deployed throughout the year into 1-2 yr (the sweet spot) CDs and TNotes.
This is a really worthy strategy this year and has been paying off well now, and expected to continue until such time, if ever, that "bond" is no longer akin to a four-letter word for us.
If you liked FMSDX when you bought it and if those reasons are still pertinent today, I don’t think I’d sell. However, that’s not intended as investment advice. I checked another very good allocation fund, that has in the past been sometimes praised on this forum, PRSIX. It’s down about 6% YTD - almost double what FMSDX is. So they’re doing something right to limit the losses in such a hostile bond environment.
Thanks, stillers, I should have checked Fidelity first instead of taking M*'s stale data for granted. This changes my outlook significantly.
Much appreciated.
Fred
Looking for FMSDX piece in October 18, 2021 Barron's? Check Summary, Part 2 in LINK2.
I am reducing risk in my portfolios by looking at how funds are doing in this volatile, inflationary year. Some funds are up and down and time will tell whether it one should sell.
I have reduced exposure to FMSDX by exchanging some of it for FSRRX, but I still hold FMSDX as core fund.