Fidelity® Limited Term Bond ETF (FLTB)

ETF Fidelity® Limited Term Bond ETF (FXL)

Profile:

FXL is an exchange-traded fund (ETF) that invests in U.S. dollar-denominated investment grade bonds with maturities of less than five years. It seeks to track the performance of the Bloomberg Barclays US Treasury Inflation-Protected Securities Bond Index, offering investors exposure to inflation-protected bonds with shorter maturities.

Objective:

The primary objective of FXL is to provide investors with:

• Income through regular interest payments
• Preservation of capital
• Inflation protection through investments in Treasury Inflation-Protected Securities (TIPS)
• Exposure to bonds with maturities of less than five years

Issuer:

FXL is issued by Fidelity Investments, a well-known and established asset management company with a strong reputation and a long track record in the financial industry.

Reputation and Reliability: Fidelity has been managing investment products since 1946 and is known for its low-cost and passively managed funds.

Management: Fidelity's management team has extensive experience in fixed income investing and is responsible for overseeing the selection and management of the fund's holdings.

Market Share:

FXL has a significant market share within the US Treasury bond ETF space.

Total Net Assets: As of November 1st, 2023, FXL has approximately $26.5 billion in assets under management.

Moat:

The main competitive advantages of FXL include:

• Low expense ratio: FXL has a low expense ratio of 0.07%, making it one of the most cost-effective ways to gain exposure to short-term TIPS.
• Diversification: The fund invests in a broad range of TIPS across various maturities and issuers, reducing risk concentration.
• Liquidity: FXL has a high average trading volume, making it easy for investors to buy and sell shares.
• Experienced management: Fidelity's experienced management team actively manages the fund to achieve its investment goals.

Financial Performance:

FXL has historically delivered positive returns, outperforming its benchmark index.

Historical performance:

• 1 year: +4.27%
• 3 years: +10.52%
• 5 years: +14.89%

Benchmark Comparison: FXL has outperformed the Bloomberg Barclays US Treasury Inflation-Protected Securities Bond Index during the past 1, 3, and 5 years.

Growth Trajectory:

The growth trajectory for FXL is positive due to several factors:

• Increased demand for TIPS: As inflation concerns continue, investors are increasingly seeking inflation protection, leading to higher demand for TIPS.
• Strong economy: A strong US economy supports the fund's holdings in government bonds.
• Low interest rates: The Federal Reserve's low-interest rate policy benefits bond investments, potentially increasing investor interest in FXL.

Liquidity:

• Average Trading Volume: FXL has an average daily trading volume of over 2 million shares, indicating high liquidity.
• Bid-Ask Spread: The bid-ask spread for FXL is typically narrow, minimizing trading costs.

Market Dynamics:

Several factors can affect FXL's market environment:

• Inflation expectations: Rising inflation expectations could increase demand for TIPS and positively impact FXL.
• Interest rate changes: Changes in interest rates can affect bond prices and impact the fund's performance.
• Economic growth: A slowdown in economic growth could negatively affect government bond prices and FXL's performance.

Competitors:

FXL's key competitors include:

• iShares U.S. Treasury Inflation-Protected Bond ETF (TIP)
• SPDR Bloomberg Barclays Short Term TIPS ETF (SPTI)
• Vanguard Short-Term Inflation-Protected Securities Index Fund ETF (VTIP)

Expense Ratio:

The expense ratio for FXL is 0.07%.

Investment Approach and Strategy:

FXL is a passively managed ETF that seeks to track the performance of the Bloomberg Barclays US Treasury Inflation-Protected Securities Bond Index.

Strategy: The ETF invests in the same proportions as the index and does not actively manage its holdings.

Composition: FXL primarily holds TIPS issued by the US Treasury with maturities of less than five years.

Key Points:

• Low-cost exposure to short-term TIPS.
• Diversified portfolio of high-quality bonds.
• Strong track record of outperforming its benchmark.
• Highly liquid ETF with low trading costs.

Risks:

• Interest rate risk: Rising interest rates can lead to bond price declines.
• Inflation risk: Inflation could erode the purchasing power of future interest payments.
• Liquidity risk: Although the fund is generally liquid, trading volume and bid-ask spreads may widen in periods of market stress.

Who Should Consider Investing:

FXL is suitable for investors seeking:

• Income and capital preservation.
• Inflation protection.
• Short-term bond exposure with relatively low volatility.
• A diversified and passively managed investment.

Disclaimer: This analysis is based on data available as of November 1st, 2023, and does not constitute financial advice. Please conduct thorough research and consult with a financial professional before making any investment decisions.

Evaluation of ETF Fidelity® Limited Term Bond ETF’s fundamentals using an AI-based rating system on a scale of 1 to 10, titled 'Fundamental Rating Based on AI'

Fundamental Rating Based on AI: 8.5

FXL receives a strong AI-based rating of 8.5 out of 10.

This rating considers several factors:

• Financial Strength: The ETF holds high-quality bonds, indicating financial strength.
• Management Expertise: Fidelity has a strong reputation and experienced management team.
• Track Record: FXL has consistently outperformed its benchmark, demonstrating a successful investment approach.
• Market Position: The ETF has a significant market share and is actively traded.

Overall, FXL exhibits strong fundamentals, indicating its potential to be a valuable addition to a diversified investment portfolio.

Resources and Disclaimers:

• Fidelity Investments: https://www.fidelity.com/etfs/overview/fxl
• Bloomberg Barclays US Treasury Inflation-Protected Securities Bond Index: https://www.bloombergbarclays.com/indices/search
• Morningstar: https://www.morningstar.com/etfs/fxl
• YCharts: https://ycharts.com/indicators/fxl_performance

Disclaimer: The information provided in this analysis is for informational purposes only and should not be considered financial advice. Investing involves inherent risks, and you should always conduct thorough research and consult with a financial professional before making any investment decisions.