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Fidelity Floating Rate High Income Message Board

  • InvestmentGuru2001 InvestmentGuru2001 Nov 16, 2009 11:03 PM Flag

    Market up -- Fund unchanged

    Christine is back from vacation and see what happens.

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    • I put him on ignore anyway.. I see nothing wrong with this fund

    • The fund is doing exactly what it should be doing and it's not an equity fund and is not correlated with the market. It pays a good yield and is shielded from interest rate risk. Since rates have not yet risen significantly you're just getting your yield and a stable NAV. When rates start rising as they inevitably will, then the NAV will stay fairly stable while the yield will go up accordingly because the yield on the underlying securities will go up. The whole point of this fund is to contrast it from a regular bond fund where when rates go up the NAV will fall and you lose principal.

      Go find the duration on any bond fund . That number tells you for each 1% increase in interest rates you lose that percent of your principal of whatever the duration is. So e.g. if your bond fund has a duration of 5 years then for every 1% interest rates go up you lose 5% of your principle which would be noted when yo see the NAV drop by that 5%. Because of the nature of a floating rate loan portfolio the duration is essentially zero so you've eliminated interest rate risk. In fact you again only benefit because your yield will rise. If you understand what you own some of these comments about going up or down with the market or whatever frankly make no sense.

 
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