Inflation protection from Fidelity

Posted Apr 22nd 2009 2:30PM by Steven Halpern
Filed under: International Markets, Newsletters, Mutual Funds, Stocks to Buy, Recession, Financial Crisis

"Inflation protected bonds hold an interesting hybridized place among Fidelity's bond fund lineup," says Jim Lowell in his Fidelity Investor. Here's the fund advisor's look at Fidelity Inflation-Protected Bond Fund (FINPX).

"When fear of recession (and fear while in recession) hold the upper hand, they behave more like longer-term Treasuries.

"When fear of inflation rises, and long term Treasuries go into a tailspin, these bonds benefit from their inflation protected top spin. "Right now, after the strongest general market rally since the Great Depression, things feel less gloomy (even though they still look relatively dicey).

"But the mood of the market is itself a projection of the mood of the underlying investors in it; that mood has clearly changed from abject fear to tentative optimism in, at least, the possibility of and for stabilization of the economy and markets sometime this year.

"Because we're betwixt and between abject fear and tentative optimism, it makes sense to stick to our overall cautious approach.

"It also makes sense to trade into inflation protected bonds in such times; if fear regains the upper hand, they'll far relaqtive well. If fear of inflation, born of proof positive for tentative optimmismi eemerges, they;ll help smooth out the volatile lurchses (i.e., upsurges and downdrafts) toward better days.

"Our spotlight recommend is Fidelity Inflation-Orotectged Bond Fund. This reflects both our confident in the tactic and in the manager of the fund, Bill Irving.

"Irving has been running the fund since the end of 2004, investing at least 80% of the fund's assets in inflation-protected debt investments (current 98%).

"The goal of the fund is to provide a return greater than the inflation rate over the long term. At any given time, the majority of the fund's investments are domestic; currently none of its assests are invested in foreign countries."

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