The Fidelity Report

Citibank e-Savings account

2006-05-18T11:09:00.000-05:00

I recently wrote about the savings rates on various on-line banks versus the Fidelity money market funds. At the time, the Fidelity rates were better than all the popular on-line banks.

As a quick update, I came across a new offer from Citibank today for an "e-savings" account with a rate of 4.75%. There are no minimum balances.

Although the rate is slighly higher, we are only talking about 0.13% versus FDRXX. On $10,000, this difference only equals about $1 per month. Hardly worth opening another account if your money is already in Fidelity, but might be worth it if your looking for a new account.

Ouch!

2006-05-17T16:08:00.000-05:00

Another down day, this time due to higher than expected headline and core CPI numbers (0.6% and 0.3%, respectively, versus 0.5% and 0.2%, respectively forecasted). The Dow ended the day 4.3% below it's 52 week high set within the past couple of weeks, The Nasdaq and S&P are 7.5% and 4.3% below their 52 week highs.

As you can see, the Nasdaq and S&P are now both oversold -

The Dow remains slightly above oversold territory -

Meanwhile, the VIX hit it's highest levels since October 2005.

So what next? Although I believe in the near-term, we could be bottoming out, I continue to be less optimistic about the longer-term prospects. Be careful out there, and I'll see you tomorrow.

Fund Focus - Fidelity Floating Rate High Income Fund (FFRHX)

2006-05-17T11:04:00.000-05:00

The Fidelity Floating Rate High Income Fund (FFRHX) inception date was August 16, 2000. Since that date, the Fund has averaged an annual rate of return of 4.5%.

Fund Summary - This High Yield Bond Fund invests in Corporate floating rate loans. These loans do not have fixed interest rates, but rather, have fluctuating rates based on set benchmarks (i.e. an example of the rate would be LIBOR + 4%). These loans are often lower-quality debt securities.

Returns - 5.53%, 4.86%, 4.32%, 4.5% (1 yr, 3 yr, 5 yr, life). YTD return for 2006 is 2.16%. 30 day yield is 5.76%.

Holdings - As of March 31, 2006, the Fund has 391 holdings diversified across numerous sectors (the largest being Cable TV - 13%). 99% of the loans were rated BB or lower.

Fund Manager - Christine McConnell. Over 5 years managing this fund.

Expenses - 0.82% versus peer average of 1.20%. There is a short term trading fee associated with this fund of 1% for a redemption within 60 days.

Morningstar Rating - 2 stars

Minimum Investment - $2,500

Conclusion - BUY. Unlike normal bond funds, whose price decreases as rates increase, FFRHX consists of floating rate loans. The value of these loans do not fluctuate with changes in interest rate since the underlying interest rate associated with the loan also fluctuates. Potential investors should be cautioned that the fund invests in lower quality debt. These type investments carry an increased risk of default. We believe the manager of the fund has shown consistent performance in balancing this risk, limiting the overall exposure through diversification. With the 30 day yield currently 5.76%, we believe this is an attractive investment for a small portion of your overall bond allocation.

Recent Fidelity Money Market yields

2006-05-15T18:27:00.000-05:00

If there is any benefit about the Fed's 16 rate hikes since June 2004, it is that money market rates are finally worth noting. Here are a few examples of Fidelity money market rates as of today -

Fidelity Cash Reserves (FDRXX) - 4.6%
Select Money Market Portfolio (FSLXX) - 4.66%

These rates compare to the following savings rate by some popular on-line banks -

ING Direct - 4.15%
CapitalOne Savings - 4.55%
Emigrant Direct - 4.5%

As you can see, the Fidelity fund rates have all surpassed the most popular online banks. If you are currently earning less than 4%, please do yourself a favor and at least transfer your cash to one of the online banks. The Fidelity funds each have minimum deposit requirements of $2,500. The online banks do not have any minimum requirements.

Extending the losses...

2006-05-12T14:55:00.000-05:00

Not one of the better weeks for the markets. Dow, Nasdaq and S&P all ended down (1.7%, 4.3%, and 2.6%, respectively) for the week. Recent market leaders such as metals, industrials and energy all struggled today. Looking forward to next week, there is a significant amount of economic data being released, including Housing Starts (Tues), PPI (Tues) and CPI (Wed). This data will be the first since the Fed's last interest rate decision, and will hopefully add some clarity on future Fed moves (although, given the recent data, I would be betting on a mixed picture).

On another note, it's been raining here in the Northeast for most of the week. I was hoping that with all the rain during the week, the weekend would at least turn out nice. But based on the following 10 day forecast, it doesn't look like I'll be so lucky.

Have a great weekend. If you're in the Northeast, it might be best to see a new movie. Whatever you do, enjoy yourself, and I'll see you on Monday.

Fidelity Magellan distribution

2006-05-12T10:56:00.000-05:00

I have seen a lot of news out there over the past couple of days regarding Fidelity Magellan's whopping distribution of $22.36 / share on May 5, 2006. As you can tell by the chart above, the NAV took quite a hit. If you were unaware of the distribution, you probably had a mild heart attack when you viewed your Fidelity account.

According the Fidelity's website, a 'vast-majority' of Magellan's assets are held in tax-advantaged retirement accounts such as an IRA, 401k or 403b. If you are in the vast majority, the good news is this distribution has no impact on you since all distributions are tax deferred. If you are in the minority, the bad news is that you will be taxed on the distribution.

Although an 18% distribution is rare, potential mutual fund buyers should always check the list of upcoming distributions prior to buying a mutual fund (especially if the purchase is not for a retirement account). Such quick homework could save yourself a hefty tax bill soon after the purchase of a new mutual fund.

Healthly sell-off?

2006-05-11T15:30:00.000-05:00

Unless you were long a select list of sectors (mainly energy and commodities), it was an ugly day out there. Dow finished down 142 or roughly 1.2%. Nasdaq ended worse, down 48 or just over 2%. Concerns over inflation were once again in focus for traders. Precious metals, including gold, silver and copper continued to climb to new highs (did you notice coppers intraday high to over $4 a pound?).

So the question of the day - was this a healthy sell-off, a shaking out the weak hands, before another move to the upside? Or is this the beginning of a longer down trend? Unfortunately, I tend to believe we are in the latter. Traders are unsure about future Fed moves, and as long as energy and commodity prices remain at elevated levels, worries about inflation will continue to persist.

Have a great night.

Legal Info

2006-05-11T09:06:00.000-05:00

This site is for informational purposes only. Before investing, you should consult your financial advisor. Past performance does not guarantee future results.

Welcome!

2006-05-10T21:34:00.000-05:00

5,810,000. That is the number of hits returned when performing a Google search for 'Fidelity Newsletters'. Most of these links are obviously not true newsletters, but as of the date of this posting, there are about a dozen well known Fidelity newsletters that are being printed on a monthly basis.

So you may be asking yourself, why do we need another? My answer is this - the cost! This blog and related information will be free.

So what makes me qualified to write a newsletter, and even more importantly, why should you take any of my advice seriously? My answer is, you shouldn't, at least not yet. But hopefully, my record and written commentary on this site will speak for itself.

The content of this blog will include the following -

Fidelity mutual fund stock recommendations (with performance comparisons to the respective benchmarks)
Fidelity mutual fund news and my thoughts
Overall market commentary

So please come back and visit. And once again, welcome!