Fixed Income Securities Solutions

Document Sample
Fixed Income Securities Solutions Powered By Docstoc
					             Fixed-Income Solutions from Fidelity

                Municipal Bonds
                Looking for a source for tax-exempt income? Are you in a high income tax bracket and
                looking for a way to potentially reduce taxes? Consider municipal bonds.
                What are Municipal Bonds?
                Municipal bonds are debt obligations issued by cities, counties, and states, or agencies of
                states to raise money to build schools, highways, hospitals, and other projects for the public
                good. Tax-exempt municipal bonds are among the most popular types of investments available
                today, and individual investors can purchase from both the new issues and secondary markets.
                Features of Municipal Securities:
                • Yields — Historically offer strong record of interest payments
                • Income — Steady interest income that is generally free from federal and, in some cases,
                  state and local income taxes1
                • Safety — Municipal bonds are generally considered to be one of the safest classes of bonds.
                  Default rates depend on the type of bond and other factors. Insured bonds are also available,
                  which guarantee timely payment of both interest and principal. That guarantee is tied to the
                  credit quality of underlying insurer
                • Diversity — Across states, revenue sources, and maturities
                • Liquidity — Over-the-counter secondary market allows for bonds to be sold prior to maturity.
                  Liquidity can potentially be limited by the size of position being sold or its attractiveness to
                  the marketplace


Considerations When Choosing Municipal Securities

Features                                                                  Match the tax-exempt yield to the tax-equivalent yield for
Maturity:      Longer maturity = more risk                                     your marginal federal ordinary income tax rate
Quality:       Higher quality = less risk
                                                                                                               Tax Rate
Type:          Govt. obligation, revenue, and other                Tax-
Issuer:        States, counties, cities, and any other           Exempt        10%           15%           25%           28%           33%           35%
               governmental entity below the state level
                                                                  Yields
Yields:        Higher yields are typically associated with                                             Tax-Equivalent Yields*
               greater risks
AMT:           Interest income may be subject to the               1%         1.11%         1.18%         1.33%         1.39%         1.49%         1.54%
               federal alternative minimum tax, especially
               if the bond is used to fund a private activity
                                                                   2%         2.22%         2.35%         2.67%         2.78%         2.99%         3.08%
Market Size:   May affect liquidity, which is often correlated
               to the size of the issue
                                                                   3%         3.33%         3.53%         4.00%         4.17%         4.48%         4.62%
Tax            For any given return, the higher the
Bracket:       income tax bracket, the higher the tax
               equivalent yield                                    4%         4.44%         4.71%         5.33%         5.56%         5.97%         6.15%
Insured:       Insurance reduces risk, but may lower yield
                                                                   5%         5.56%         5.88%         6.67%         6.94%         7.46%         7.69%
Risks
Inflation      Yield to call or maturity may not exceed the
Risk:          rate of inflation                                   6%         6.67%         7.06%         8.00%         8.33%         8.96%         9.23%
Default        Influenced by revenue vs. general obligation
Risk:          bonds                                               7%         7.78%         8.24%         9.33%         9.72%        10.45%        10.77%
Call Risk:     As interest rates drop — issuers may call
               bonds or the issue                                *The tax-equivalent yields (TEYs) estimate what you would have to earn on a taxable
                                                                  investment to equal the bond’s tax-exempt yield for a given tax rate. TEYs are calculated
Rate Risk:     As interest rates go up — secondary market         by dividing the bond’s tax-exempt yield by one minus the specified federal tax rate. TEYs
               bond prices usually go down                        do not reflect tax credits, exemptions, limits on itemized deductions, state taxes or local
                                                                  taxes, federal and/or state alternative minimum taxes, or loss of federal tax benefit of
Market         When selling, market value could be less           state and local taxes due to alternative minimum tax.
Risk:          than purchase price
                  Fixed-Income Solutions from Fidelity

                  The Fidelity Advantage
                  • Over 10,000 live and executable bonds to choose from — visit Fidelity.com/bondsearch
                  • Online tools to help you assess and pick a bond that fits your criteria
                  • Innovative provider of unbundled and transparent pricing2
                  • Primary issues available without charge
                  • Low cost — $1/bond online; $1/bond through a representative
                  • Minimum concession — $8 online; $19.95 representative assisted. Maximum
                    concession — $250; for maturities of 1 year or less — $50
                  • Fixed-income specialists to help you with any fixed-income investment needs
                  Innovative Tools and Resources
                                                                                                                             Bonds that match your search criteria          Go to table view
                  Take advantage of our online tools and resources
                                                                                                                    6.53
                  at Fidelity.com/fixedincome where you can:
                                                                                                                    5.60
                  • Review or build your fixed-income portfolio
                                                                                                                    4.66
                  • Try our bond search tool — set your bond selection
                                                                                                                                                                                                Treasury Curve




                                                                                                        Yield (%)
                                                                                                                    3.73
                    criteria and identify the bonds or CDs that match
                                                                                                                    2.80
                    your objectives (see graph to the right)                                                                                                                           Municipal Curve
                                                                                                                    1.87
                  • Sign up for alerts to notify you when taxable and
                                                                                                                    0.93
                    nontaxable new issues are offered, or when your bond
                                                                                                                    0.00
                    is upgraded/downgraded, is called, or matures                                                             8       0      2       4       6          8         0         2           4
                                                                                                                           1/0     1/1    1/1     1/1     1/1        1/1    1/2       1/2         1/2
                  • Compare two bonds side by side                                                                                                  Maturity Date
                  • Sell online at market or limit price
                  • Use our advanced bond analytics tool to help                                    For illustrative purposes only. The fixed-income inventory
                                                                                                    scatter graph is an educational tool developed by Fidelity
                    you make an educated choice                                                     Brokerage Services and Strategic Advisers, Inc., a registered
                                                                                                    investment adviser and a Fidelity Investments company, which
                                                                                                    uses data from a variety of third-party sources.


  To learn more about Fidelity’s fixed-income products, including Fidelity’s
  full range of bond mutual funds, please visit Fidelity.com/fixedincome,
  call 1-800-544-6666, or stop by your local Fidelity Investor Center.




Please carefully consider the fund’s investment objectives, risks, charges, and expenses before investing. For this and
other information, call or write to Fidelity or visit Fidelity.com for a free prospectus. Read it carefully before you invest
or send money.
  Although bonds generally present less short-term risk and volatility than stocks, the bond market is volatile and bond funds do entail interest rate risk (as interest
  rates rise, bond prices usually fall, and vice versa). This effect is usually more pronounced for longer-term securities. Bond funds also entail issuer credit risk, and
  the risk of default, or the risk that an issuer will be unable to make interest or principal payments. Additionally, bond funds and short-term investments entail
  greater inflation risk, or the risk that the return of an investment will not keep up with increases in the prices of goods and services, than stocks. Any fixed-income
  security sold or redeemed prior to maturity may be subject to a substantial gain or loss.
1
  Interest income generated by municipal bonds is generally expected to be exempt from federal income taxes and, if the bonds are held by an investor resident in
  the state of issuance, state and local income taxes. Such interest income may be subject to federal and/or state alternative minimum taxes. Investing in municipal
  bonds for the purpose of generating tax-exempt income may not be appropriate for investors in all tax brackets. Generally, tax-exempt municipal securities are
  not appropriate holdings for tax-advantaged accounts such as IRAs and 401(k)s. Interest income generated by Treasury bonds and certain securities issued by
  U.S. territories, possessions, agencies, and instrumentalities is generally exempt from state income tax but is generally subject to federal income and alternative
  minimum taxes and may be subject to state alternative minimum taxes. Short- and long-term capital gains and gains characterized as market discount recognized
  when bonds are sold or mature are generally taxable at both the state and federal level. Short- and long-term losses recognized when bonds are sold or mature
  may generally offset capital gains and/or ordinary income at both the state and federal level.
  The tax information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. Fidelity
  does not provide legal or tax advice. Fidelity cannot guarantee that such information is accurate, complete, or timely. Laws of a particular state or laws which may
  be applicable to a particular situation may have an impact on the applicability, accuracy, or completeness of such information. Always consult an attorney or tax
  professional regarding your specific legal or tax situation.
2
  The offering broker, which may be our affiliate National Financial Services LLC (“NFS”), may separately mark up or mark down the price of the security and may
  realize a trading profit or loss on the transaction.
  446743.9.0                                                Fidelity Brokerage Services, Member NYSE, SIPC                                               PAFS-MUNI-0410
                                                                  900 Salem Street, Smithfield, RI 02917                                                     1.810023.108

				
DOCUMENT INFO
Description: Fixed Income Securities Solutions document sample