Is SPHIX a Strong Bond Fund Right Now?

If investors are looking at the High Yield - Bonds fund category, make sure to pass over Fidelity High Income (SPHIX). SPHIX possesses a Zacks Mutual Fund Rank of 4 (Sell), which is based on various forecasting factors like size, cost, and past performance.

Objective

SPHIX is classified in the High Yield - Bonds segment by Zacks, an area full of investment possibilities. High Yield - Bonds funds come in below investment grade, and are referred to as " junk " bonds for this reason. Compared to their investment grade peers, these funds are at a higher default risk, but typically pay out higher yields while posing similar interest rate risks.

History of Fund/Manager

Fidelity is responsible for SPHIX, and the company is based out of Boston, MA. The Fidelity High Income made its debut in August of 1990 and SPHIX has managed to accumulate roughly $2.58 billion in assets, as of the most recently available information. The fund's current manager, Benjamin Harris, has been in charge of the fund since January of 2022.

Performance

Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 5.05%, and it sits in the bottom third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3 -year annualized total return of 9.52%, which places it in the bottom third during this time-frame.

It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. SPHIX's standard deviation over the past three years is 6.99% compared to the category average of 12.72%. The fund's standard deviation over the past 5 years is 7.56% compared to the category average of 12.23%. This makes the fund less volatile than its peers over the past half-decade.

Bond Duration

Modified duration is a measure of a given bond's interest rate sensitivity, and is a metric that's a good way to judge how fixed income securities will respond in a shifting rate environment.

For investors who think interest rates will rise, this is an important factor to consider. SPHIX has a modified duration of 2.71, which suggests that the fund will decline 2.71% for every hundred-basis-point increase in interest rates.

Income

It is important to consider the fund's average coupon because income is often a big reason for purchasing a fixed income security. Average coupon is a look at the average payout by the fund in a given year. For example, this fund's average coupon of 6.6% means that a $10,000 investment should result in a yearly payout of $660.

If you are looking for a strong level of current income, a higher coupon is a good choice, though it could pose a reinvestment risk; these risks can occur if rates are lower in the future when compared to the initial purchase date of the bond.

Income is only one part of the bond picture, investors also need to consider risk relative to broad benchmarks. This fund has a beta of 0.26, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, SPHIX has a positive alpha of 5.36, which measures performance on a risk-adjusted basis.

Expenses

For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, SPHIX is a no load fund. It has an expense ratio of 0.66% compared to the category average of 0.93%. SPHIX is actually cheaper than its peers when you consider factors like cost.

While the minimum initial investment for the product is $0, investors should also note that there is no minimum for each subsequent investment.

Fees charged by investment advisors have not been taken into considiration. Returns would be less if those were included.

Bottom Line

Overall, even with its comparatively weak performance, average downside risk, and lower fees, Fidelity High Income ( SPHIX ) has a low Zacks Mutual Fund rank, and therefore looks a somewhat weak choice for investors right now.

Want even more information about SPHIX? Then go over to Zacks.com and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis for additional information. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.

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This article originally published on Zacks Investment Research (zacks.com).

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