Fidelity FDMMX Bond Fund Thoughts/Risks

[panhead]

So, I inherited this fund a while back, it's a Massachusetts Municipal Bond Fund. It's weighted average maturity is 6.9 years. I've been trying to get my fixed income side of my portfolio in order and I've (stupidly) kind of let this fund ride. Luckily it's been doing well for me, but I'm wondering if I should get out of this and into something a bit more diversified. Problem is I'll owe taxes on the sale, but yeah, that's part of making money sometimes. I'll only owe about $1500 so it's not the end of the world, and I don't have any losers to sell right now to balance it off (again, good problem to have).

It's the interest rate risk I am most concerned about, but clearly there is some diversification risk as well. Then of course, is the other problem: If I sell it, where do I put the $$? Intermediate term bond?

Anyway, I guess I'm just wondering how others would view this fund, and what others are doing with their long term bond funds, if you have any.

-Pan

EDIT: Need to include some more relevant info...I live in Mass, and I am still working and have a pretty high income

 

[panacea]

If you like Fidelity, you could consider the Fidelty Short-Intermediate Term Municipal bond fund (FSTFX) with an average duration of 2.9 years. Not a bad choice if you're concerned about interest rate risk. Vanguard also has some good tax-exempt bond funds (short-term, ltd-term, intermediate term). Or you could take a different approach and invest in stock funds. If you don't want to shake up your asset allocation you could exchange an equal amount of stocks for taxable bonds in your IRAs or other retirement accounts.

 

[pb4uski]

The duration of 7.3 would scare me. I would get into something shorter but I don;t sense and need to rush.

 

[panhead]

pb4uski: I agree, I think I have time to do this, but the duration scares me as well

panacea: Good suggestion on FSTFX I have looked at that as well. I'm leaning toward your suggestion of selling the FDMMX and allocating that money toward stock funds, and then increasing my fixed income in my tax advantaged accounts.