FTBFX Vs. FXNAX: A Detailed Comparative Analysis

Looking for your next big investment?  Let’s dig into FTBFX vs. FXNAX, which you may want to consider as part of your investment strategy.  

In this day and age of multiple investment options, it’s best to learn more about what kind of asset you use to build your savings and retirement account down the line.  

Both FTBFX and FXNAX are categorized as mutual funds.  Mutual funds are very similar to Exchange-Traded Funds (ETFs). They are offered by investment platforms such as Vanguard and Fidelity.

Though the downside for mutual funds is that they can have a high minimum investment requirement especially for new investors. Whereas for ETFs, investing in these funds does not have a minimum requirement as long as you buy a fractional share.

These two mutual funds have several similarities and differences. Let’s compare FTBFX vs. FXNAX.

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FTBFX: Fidelity Total Bond Fund

The Fidelity Total Bond Fund (FTBFX) was launched in October 2002 and is managed by the Fidelity Group. The fund tends to invest 80% of its assets in different debt securities and repurchase agreements.

It follows the Lehman Brothers US Universal Index when allocating high yield, investment-grade, and emerging market classes. It uses the same principle to manage the overall interest rate risk of the fund.

Around 15% of the fund assets are invested in emerging markets and high yield debt securities. However, the fund also invests in domestic as well as foreign issuers. The funds’ assets are allocated across different classes of assets, maturities, and market sectors. Before making an investment decision, it analyses various features of the security structure such as:

  • Trading opportunities
  • Current pricing
  • Issuer’s credit quality
  • The potential success of the issuers
  • The economic, credit, and currency risk 

The fund generally invests in term bond funds. It pays monthly dividends and distributes capital gains.

FXNAX: Fidelity US Bond Index Fund

The Fidelity US Bond Index Fund or FXNAX aims to provide investment results that match the Bloomberg Barclays US Aggregate Bond Index debt’s total price and interest rates securities. 

The Bloomberg Barclays US Aggregate Bond Index is a market value-weighted index for investment-grade debt issues and is denominated in the US dollar. These include asset-backed, government-corporate, and mortgage-backed securities whose maturity is at least one year.

About 80% of the securities are invested in bonds. The mutual fund uses statistical sampling techniques based on:

  • Duration
  • Interest rate sensitivity
  • Maturity
  • Security structure
  • Credit quality.
Man Investing MSN computer working stock market
Image Credit: iwatchwater/Depositphotos.

Using these factors, the fund can replicate the index’s returns. The fund also adjusts its risk exposure by engaging in transactions that enable it to leverage derivatives like swaps (total return, credit default, and interest rate), future contracts, and forward-settling securities.

The mutual fund carries certain risks. There is a level of volatility and interest rate risk associated with fixed-income securities. When there is a rise in interest rates, the price of bonds usually goes down and vice versa. This effect can be seen in long-term securities. There is also an inflation risk and a default and credit risk for the issuers and their counterparties.

Political, economic, and exchange risks are also associated with foreign securities. The fund may invest in securities with leveraging effects. These include the forward-settling securities and derivatives that increase the market exposure, enhance investment risks and enable losses to be gotten fast.

FTBFX Vs. FXNAX: Key Differences

Here’s a summary of the differences between FTBFX and FXNAX:

Mutual FundFTBFXFXNAX
Net Assets$33.1 billion$59.85 billion
Management MethodActivePassive
Dividend Yield2.22%1.80%
Expense Ratio0.45%0.03%

FTBFX Vs. FXNAX: Composition Differences

FTBFX holds around 80% of its assets in investment-grade bonds. The other 20% may be invested in the non-investment-grade debt. The provision of the bond may provide an edge over the alternative options that are more staid and only invest in the highest quality debt.

The top 10 FTBFX holdings are as follows:

NamePercentage
Fidelity Revere Str Tr6.54%
United States Treasury Bonds 1.88%5.18%
United States Treasury Notes 0.12%2.60%
United States Treasury Notes 1.12%2.38%
United States Treasury Notes 1.62%2.15%
United States Treasury Notes 2.5%1.80%
United States Treasury Notes 2.12%1.61%
United States Treasury Notes 0.75%1.59%
United States Treasury Notes 0.38%1.53%
United States Treasury Bonds 3%1.42%

The securities held by FXNAX are those whose asset-weighted average credit rating is high. It also holds assets whose sensitivity to change in interest rates is high as defined by the fund’s effective duration, as per the rating system of Morningstar.

FXNAX doesn’t invest in any individual sector. Its portfolio is made up of:

  • Cash: 1.49%
  • Bonds: 97.60%
  • Convertible: 0.84%

The top 9 holdings which make 8.65% of the fund’s total assets are:

NamePercentage
Federal Home Loan Mortgage Corporation 2%  1.34%
United States Treasury Notes 1.5%1.26%
Fidelity Revere Str Tr1.20%
United States Treasury Notes 2.25%0.96%
United States Treasury Notes 0.625%  0.80%
United States Treasury Notes 0.125%    0.79%
Federal National Mortgage Association  0.78%
United States Treasury Notes 0.875%    0.78%
United States Treasury Notes 0.5%0.74%

FTBFX Vs. FXNAX: Performance Differences

The strategy followed by FTBFX of adding the higher-yielding investment seems to pay off on a 3, 5, and 10-year basis. During these periods, the fund’s performance, less the fees, was better than that of the benchmark. 

Business man pressing high tech type of modern graph
Image credit: jannystockphoto/Depositphotos.

The same is true for FXNAX, wherein you will feel the growth of your investment during the 3, 5, and 10-year returns.  This further shows that these mutual funds are for investors looking to grow their finances in the long term.

In summary, the FTBFX and FNAX returns are as follows:

FTBFXFXNAX
YTD Returns-1.75%-1.95%
1-Month Return-1.59%-1.84 %
3-Month Return-1.22%-1.53%
1-Year Return-1.56%-3.15%
3-Year Return5.30%3.94%
5-Year Return4.35%2.85%
10-Year Return3.61%2.64%

When looking at these returns, it’s important to keep in mind that bonds are a way to hedge the risk that comes with investing in the stock market. Bonds are a great way to achieve when you’re getting closer to retirement age, or you want to take less risk. 

FTBFX Vs. FXNAX: Fees

The expense ratio of FTBX is 0.45%. On the other hand, the expense ratio of FXNAX is 0.03%.

FTBFX Vs. FXNAX: Fund Size Comparison

The number of assets under FTBFX and FXNAX are similar. While the assets under the management of FTBFX are $33.1 billion, FXNAX has assets worth $59.85 billion. The fund’s portfolios are made up of investment-grade bonds issued by US government bonds and US firms. They also have a portfolio in mortgage-backed bonds.

FTBFX Vs. FXNAX: Which One Should You Choose?

Both FTBFX and FXNAX are Total US Bond Market funds, and therefore, you will only need to invest in one but not both of these.  Both bonds have a credit quality and interest rate risk. But since FXNAX invests in high-yield and emerging-market debt, it usually has a higher risk than the US government bonds and investment-grade company bonds. However, FXNAX has higher-quality bonds that may help offset some of this risk.

While index funds aren’t the best bond funds in an environment where interest rates are rising, a low-expense fund like FXNAX is a good choice for long-term investors who like dollar-cost averaging.

On the other hand, FTBFX has continued to perform better than the underlying index. FTBFX has performed better than FXNAX over one, five, and ten years.

Remember that before you can invest in a fund, you should consider its investment objectives, expenses, risks, charges, and expenses. Consider its investment options to have the whole picture as you conduct your due diligence between these two funds.

Always consider that investments are risky.  But the risk is lessened if you have conducted the appropriate research on these assets before you do invest.  Now that you have seen the pros and cons of these two funds, it’s the best time to choose between them to help you and your investment journey.

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