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Investment Research Since 1978

Fidelity Still the Best

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You should browse Fidelity.com when you have some free time between Christmas and New Year’s. You’ll have an enjoyable experience. That’s because few, if any, investment companies spend as much money on technology as Fidelity Investments. That’s been true for years, a fact I remember well because my first job out of Babson College was with Fidelity.

It’s hard to believe that was almost 16 years ago. At the time, there was no question Fidelity was the leader in technology. Chairman Ned Johnson III made technology a priority, and that explains why the company remains at the top today. I enjoyed working at Fidelity and still keep in touch with my former colleagues. Many of them have been involved in the investment field for over a decade and a half now too.

I recently punched in the symbol for the Vanguard GNMA fund (VFIIX) in the search field at Fidelity.com and was pleasantly surprised by the information I was able to gather in a matter of seconds. First I quickly reviewed the Summary tab, then I checked out the Performance & Risk tab and was comforted by the beta of 0.67, the R2 of 0.72, and the standard deviation of 3.25. Next I moved to the Composition tab to see the option adjusted duration as of 9/30/2010 of 1.92 years.

According to Fidelity.com, “Option adjusted duration estimates how much a bond’s price fluctuates with changes in comparable interest rates. If rates rise 1.00%, for example, a fund with a 5-year duration is likely to lose about 5.00% of its value. Other factors also can influence a bond fund’s performance and share price. A bond fund’s actual performance may differ.” If rates rise 1.00%, for example, VGIIX with a 1.92-year duration is likely to lose about 1.92% of its value.

Fidelity Investments and VFIIX are a good place to start building your fixed-income portfolio. Laddering a substantial group of corporate bonds would be a necessary next step. That’s where the wicket can get a little sticky. Here I suggest you get help from a professional and avoid the frustrations of doing it yourself. You’ll have more time to enjoy the mishaps of others like Clark Griswold.

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E.J. Smith

Editor-in-Chief
E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com.

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