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Selecting Bond Fund/ETF in Fidelity Account
Old 07-19-2016, 11:11 PM   #1
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Selecting Bond Fund/ETF in Fidelity Account

I have an Solo 401K account with Fidelity in which the funds in a money market fund.

I'm inclined to move some of the money into a medium term bond fund. Two options I've looked at so far include Fidelity's FSITX and the Vanguard ETF BIV. If I'm to buy a Vanguard fund, it seems best to buy an ETF due to there being a lower transaction cost than with a Vanguard mutual fund.

I'm interested in getting input from the board as to which of the above (or any other bond fund) is preferable. Opinions as to the timing of a move into bonds are also welcome.

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Old 07-20-2016, 12:31 AM   #2
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I also had some bond fund choices to make in my Fido 401k when I was "jailbreaking" it from the default fund choices. Went with FSITX (Fido US Bond Idx) since it was a Fido account, it didn't look like I'd qualify for the Vanguard Admiralty perks of fund discounted expense ratios. The Vang ETF you mention has an 0.09 ER vs the 0.05 on FSITX. Double check the expense ratios your account lists, but on fees solely the Fido fund is close to half as inexpensive. I'm a Vanguard fan but in the case of my 401k's core bond holding I went with the lower costs.

There is also the matter that BIV is 1) an ETF and 2) a dedicated intermediate bond fund vs FSITX 1) a mutual fund and 2) a cross-duration total US bond fund which happens to average out to intermediate duration. So they're not 100% apples-to-apples. I have heard recently of flash/micro crash intraday volatility concerns with ETFs, though am not versed on that to comment further. The different bond durations held between the two funds also result in a different sensitivity to interest rate increases. This may be a small delta due to their overall similar average duration.

For me, unless there was a reason I wanted the slightly more expensive bond ETF, I'd go with the lower cost total bond fund.

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Old 07-20-2016, 03:19 AM   #3
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FSITX is a total US bond index fund. I used to own it, but own similar funds now (AGG, BND, VBMFX, VBTLX are all similar). It is an intermediate-term bond fund with duration to match that term.

BIV is an intermediate-term bond index fund. It is not total and lacks mortgage-backed securities. Some folks do not like MBS, so this fund is for them. (FSITX will have some MBS).

My rule of thumb is that whenever there are two choices like this that are both fine to own, that whichever one I buy has a worse performance in the the future than the one I didn't buy.

Either one is fine. You can even buy both. You will pay a commission for BIV. If you simply want an ETF bond fund over a mutual fund, then you could probably get AGG commission-free at Fidelity (I'm not sure).
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Old 07-20-2016, 07:12 AM   #4
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When I did a Fidelity Rollover IRA from my old 401k, I wanted to find a bond fund which was roughly similar to the Stable Value fund in the 401k. I ended up choosing Fidelity's Intermediate-term Bond Fund (FTHRX). I have had AAs in my IRA ranging from 55/45 (in favor of stocks) to 50/50.
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Old 07-20-2016, 09:14 AM   #5
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Hoping I can piggy back on this discussion to see if there are any recommendations for a short term bond fund or etf.

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Old 07-20-2016, 10:04 AM   #6
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My favorite short term bond bond is Vanguard's ST Corp ETF (mirrors their mutual fund). To avoid the Fido commission on Vanguard I use the ETF, VCSH. Morningstar gives it 5 star

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