Fidelity Gets Kudos For Stock Funds, But Its Bond Funds Shine

When investors think of Fidelity Investments, they usually think of the fund giant’s low-cost online brokerage. Or its well-known actively managed stock funds like Contrafund and Blue Chip Growth. Or the Fidelity 401(k) plan they have at work.

At least that’s what Perplexity.ai, an AI tool, says. And you can’t blame that takeaway on an AI hallucination. What Fidelity doesn’t always get enough credit or recognition for is its strong-performing bond funds. A review of IBD’s 2026 Best Mutual Fund Awards winners casts a spotlight on Fidelity market-beating stock funds and its benchmark-topping fixed-income funds.

				    ↑
					X

This video file cannot be played.(Error Code: 102630)

								Expectation Breakers: What To Expect When They Occur And How To Manage Your Portfolio
							

							

								See All Videos
							

						

					
					
						NOW PLAYING
						Expectation Breakers: What To Expect When They Occur And How To Manage Your Portfolio

Only 536, or 14%, of 3,751 eligible mutual funds made IBD’s 2026 best funds list. Fidelity had 67 award-winning funds — more than any other fund family. And 13 of those Fidelity funds that made our list were actively managed bond funds.

IBD’s Best Mutual Fund Awards

The 11th annual IBD Best Mutual Funds Awards — marking more than a decade of identifying winning funds — can help you figure out which funds to buy or sell. We looked at all the mutual funds with at least a 10-year track record.

Each award-winning fund had to outperform its benchmark for the past one, three, five and 10 years. This demonstrates its ability to outperform in both the short term and long haul across bull and bear markets.

Read Our Full 2026 Special Report On The Best Mutual Funds

Fidelity’s 50 Years In The Fixed-Income Market

Robin Foley, head of fixed income at Fidelity, says the company has been investing in fixed-income markets for more than 50 years. The fund giant now runs a $2.3 trillion fixed-income business, says Foley.

Foley says Fidelity’s deep analyst lineup and proprietary research enables its actively managed funds to take advantage of persistent inefficiencies in the bond market and drive returns.

Fidelity’s bond offerings provide investors with the portfolio diversification they need to earn strong risk-adjusted returns.

“We offer a variety of fixed-income investment vehicles designed to support the unique investment goals of our clients over the long term,” said Foley.

IBD spoke with managers of Fidelity funds that made IBD’s 2026 list of best mutual funds to learn more about their approach to bond investing. All IBD’s award-winning bond funds have topped a benchmark index of investment-grade bonds.

Fidelity Investment Grade Bond

Celso Munoz, manager of Fidelity Investment Grade Bond (FBNDX), says bonds play a key role in building a well-rounded portfolio. “A bond allocation can do three things: It provides income, diversification, and it can also provide capital preservation or liquidity,” he said. “Bonds should be the ballast in your portfolio and provide some degree of stability.”

An active approach to bond investing offers investors a chance to earn a little extra income than a fixed-income fund that tracks a fixed-income index can, says Munoz.

One way Fidelity bond pickers can add value, for example, is by having the ability to invest in bonds that are not part of fixed-income benchmarks, says Munoz. Tapping Fidelity’s vast research team, which includes input from both credit analysts and equity analysts, enables bond fund managers to identify opportunities outside of passive indexes.

“That’s one area where we really shine,” says Munoz. “We work really hard to deliver returns that are stronger than the benchmarks.”

Munoz says consistency is the key. His fund looks to provide a steady core bond-fund experience that tracks closely to the benchmark but outperforms over time.

“We’re not a manager who tries to shoot the lights out every single year,” said Munoz, who moved to Fidelity’s fixed-income team in 2012 after starting out as an equity analyst. “That tends to produce an erratic return profile.”

To steady the return stream and minimize volatility, Munoz doesn’t make big interest rate bets. Where Munoz and his research team add value is making good sector allocation decisions and picking good bonds within those sectors. “Ninety percent of our outperformance versus the benchmark has really been driven by that,” said Munoz.

Taking A Contrarian Approach

Munoz’s investing strategy also eschews the use of leverage, or using borrowed money to amplify bets. “That can really magnify the downside,” says Munoz.

The fund takes a contrarian approach to buy and sell bonds based on valuation. “When the market is becoming more attractive, you will see us add risk,” said Munoz. “And when the market is getting richer, you’re going to see us reduce the amount of risk in the portfolio.”

Given today’s high Treasury yields and the small extra yield you earn in more risky corporate bonds, Munoz currently favors Treasuries.

Fidelity High Income Fund

Benjamin Harrison and Jared Beckerman, co-managers of Fidelity High Income Fund (SPHIX) also manage their junk-bond fund in a way to deliver consistent returns to shareholders.

But the duo won’t take big risks to try to outshoot their benchmark by a wide margin.

“What we’re trying to do is produce consistent returns through various market cycles by outyielding the index slightly by diversifying risk across a wide variety of bets, as opposed to swinging for the fences in a few names,” said Beckerman.

If the benchmark yields, say 7%, the fund managers will try to construct a portfolio that yields a quarter or half of a percentage point higher at 7.25% or 7.5%, says Harrison. “We try to have a modest yield advantage,” he said.

The fund managers also benefit from collaboration with the investment-grade bond team as well as equity experts who can add insights into a company’s prospects.

If an investment-grade bond drops down to junk status, Harrison and Beckerman can gain insights into the investment opportunity by picking the brains of the investment-grade bond experts or stock fund managers who might have owned it or passed over it.

High-Yield Bonds With Broad Diversification

In making the case for constructing a fund filled with high-yield bonds with broad diversification, Harrison explains how the return potential of bonds differs from stocks.

Whereas an investment in a stock like Nvidia (NVDA) has the potential to go up 1,000% or 10,000%, the range of performance outcomes for a bond are known ahead of time, says Harrison.

A bond’s return can range from zero if it defaults and the issuer can’t pay back the principal up to its call price, or the price at which an issuer can redeem the bond. Since return outcomes are known for all bonds, there’s little incentive to make big bets on just a few issues, Harrison explains.

It’s more prudent from a risk standpoint to spread bets around.

“We want to make sure the fund’s holdings are distributed across what we think are the best handful of risk-reward names,” said Harrison.

YOU MAY ALSO LIKE:

How the Best-Performing Mutual Funds Deliver Consistent Market-Beating Returns

Best Mutual Funds: Are Value Funds Critical For Diversification?

See The Benchmark-Beating Funds In Every Category

The Four Pillars Of The IBD Methodology For Stock Market Success