Published on Mar 25, 2025 5 min read

Fidelity Bond Funds: The Best Options for Steady Returns

Bond funds are an ideal investment choice for those seeking stability, security, and reliable income. Among the many bond fund options available, Fidelity is a leading provider known for offering a variety of well-regarded bond funds. Fidelity’s bond funds cater to different investor needs, from conservative options focused on low-risk, stable returns to more aggressive funds targeting higher income potential.

But with all the options, which Fidelity bond funds are best for your investment plan? In this article, we will discuss some of the best Fidelity bond funds, their characteristics, and how they can match your financial objective and risk profile.

Understanding Bond Funds

Bond funds are mutual funds that invest in bonds, which are loans to governments or companies in return for interest payments. The funds aggregate money from investors to purchase all sorts of bonds, providing access to various sectors, industries, and levels of risk. Although returns on bond funds can be less than those on stocks, their predictability makes them attractive to conservative investors looking for regular income.

Fidelity’s bond funds, specifically, are popular for their good performance and diversified portfolios. They offer a balanced choice for those who want a consistent source of income with reduced risk than other forms of investment.

Why Choose Fidelity Bond Funds?

Fidelity, the largest asset management firm in the world, provides bond funds that are known for being reliable, inexpensive, and possessing strong management plans. Investors select Fidelity bond funds due to the firm's successful history of risk management. Fidelity develops portfolimarket's ups and downslity with a steady income, which makes them appropriate for new and seasoned investors alike.

Whether you need a low-risk, conservative alternative or are interested in adding diversification to your portfolio through riskier investments, Fidelity bond funds offer plenty of options for varying needs and risk appetites, making them the top choice for any bond investor.

The Best Fidelity Bond Funds to Consider

When selecting the best Fidelity bond funds, there are a few factors to consider, such as the type of bonds the fund invests in, the expense ratio, and the fund’s historical performance. Here are some of the top Fidelity bond funds that could potentially fit into your investment strategy:

Fidelity U.S. Bond Index Fund (FXNAX)

The Fidelity U.S. Bond Index Fund (FXNAX) tracks the Bloomberg U.S. Aggregate Bond Index, offering exposure to U.S. Treasury bonds, corporate bonds, and mortgage-backed securities. Known for its low expense ratio and diversification, this fund is ideal for conservative investors seeking broad market exposure without high costs. Its wide diversification helps reduce risk, making it a strong foundation for any fixed-income portfolio, especially for cost-conscious investors aiming for stability.

Fidelity Total Bond Fund (FTBFX)

The Fidelity Total Bond Fund (FTBFX) invests in both U.S. and international bonds, offering greater diversification than many other bond funds. It includes government, corporate, and high-yield bonds, aiming to balance risk and return. While international exposure provides higher potential returns, it introduces additional risks. This fund's relatively low expense ratio makes it appealing to investors seeking a diversified bond portfolio. Still, it may suit those willing to accept some level of risk for enhanced income.

Fidelity Intermediate Municipal Income Fund (FHIGX)

The Fidelity Intermediate Municipal Income Fund (FHIGX) invests in intermediate-term municipal bonds, which offer tax-free income at the federal and sometimes state and local levels. This makes it an excellent choice for higher-tax bracket investors seeking tax-advantaged returns. With a conservative management approach and a low expense ratio, the fund delivers steady, tax-free income. However, it carries some risks related to the creditworthiness of the municipalities that issue the bonds.

Fidelity Investment Grade Bond Fund (FBNDX)

The Fidelity Investment Grade Bond Fund (FBNDX) primarily invests in bonds with a low risk of default, focusing on investment-grade bonds. Its strategy offers stability and reliable income, making it a good option for conservative investors. The fund's broad diversification across sectors like government, corporate, and mortgage-backed bonds provides a balanced approach with minimal risk. Its low expense ratio further enhances its appeal for those seeking a steady income without taking on excessive risk.

Fidelity High Income Fund (SPHIX)

The Fidelity High Income Fund (SPHIX) targets high-yield bonds, also known as junk bonds, which offer higher returns due to their increased risk of default. This fund is ideal for risk-tolerant investors looking for greater income potential. By investing in bonds issued by lower-credit-rated companies, the fund offers the chance for higher returns, though it also comes with higher volatility. If you're willing to take on more risk for the possibility of higher rewards, this fund could be a valuable addition to your portfolio.

Factors to Consider When Choosing a Fidelity Bond Fund

When selecting a bond fund, especially from a provider like Fidelity, it’s essential to consider several factors to ensure it aligns with your investment goals and risk tolerance. Here are a few key aspects to consider:

Risk Tolerance

Consider your risk tolerance when choosing a bond fund. Conservative investors may opt for funds like the Fidelity U.S. Bond Index Fund (FXNAX). At the same time, those seeking higher returns might consider higher-risk options like the Fidelity High Income Fund (SPHIX).

Expense Ratio

The expense ratio impacts the cost of managing a fund. A lower expense ratio means higher returns for investors. Fidelity offers competitive expense ratios across its bond funds, making them an attractive choice for cost-conscious investors.

Investment Strategy

Each Fidelity bond fund has a unique investment strategy. Understanding whether a fund is conservative or aggressive helps ensure it aligns with your portfolio and investment goals, allowing you to make informed decisions based on your needs.

Conclusion

Fidelity offers a diverse selection of bond funds catering to various investor needs, from conservative income seekers to those pursuing higher returns with increased risk. Whether you choose a diversified option like the Fidelity U.S. Bond Index Fund or a higher-risk fund like the Fidelity High Income Fund, these funds provide a strong foundation for your portfolio. By considering your risk tolerance and financial goals, you can select the right Fidelity bond fund to enhance stability, income, and diversification in your investments.