FNMIX IS A GREAT FUND FOR FOREIGN EXPOSURE AND GOOD RETURNS.
Here is the description from Google Finance - "The investment seeks high current income; capital appreciation is a secondary objective. The fund normally invests at least 80% of assets in securities of issuers in emerging markets (countries that have an emerging stock market as defined by MSCI, countries or markets with low- to middle-income economies as classified by the World Bank, and other countries or markets with similar emerging characteristics) and other investments that are tied economically to emerging markets. It normally invests in debt securities of issuers in emerging markets. The fund potentially invests in other types of securities. It is non-diversified." In addition, the FNMIX has a 4 star Morningstar rating over the past 10 years, has an expense ratio of 0.89%, and assets totaling $4.6 billion.
FNMIX gives you the increased returns of foreign (emerging market) exposure with less volatility than a stock equivalent. Let's take a peek at the numbers and the past performance. FNMIX has an average annual return of 9.5% over the past 18 years. It pays a monthly dividend and the max drawdown over the past 18 years was -43%. The equity curve is fairly linear with a few sizeable drawdowns during market retracements. Below is a chart of the equity curve for FNMIX compared to the equity curve of SPY, a surrogate for the performance of the S&P500. Both curves are dividend adjusted.
This bond fund has done a good job of providing consistent returns comparable with the market, yet with less risk as indicated by the smaller drawdowns. I would say that FNMIX is best used as a way to diversify your portfolio with foreign exposure with the added benefit of adding the cushion of a bond to hedge against some of the stock volatility you can experience during bear markets. It is a good alternative to other foreign investments for the risk-adverse. Below is a chart of the equity curve drawdowns for FNMIX and SPY.
Let's see what you can expect from the fund's historical performance. The one year rolling returns have averaged a return of 13.4%. What this tells me is that had I chose to invest in FNMIX anytime in the past 18 years and held it for one year, I would have averaged about 13.4% returns on that one year investment. Also, 84% of the 4250 rolling one year returns were above 0%, so the odds are good that you will make money on your investment over the course of one year. Below is a chart that shows the one year rolling returns for FNMIX (green) with the average of all these returns in blue.
The rolling one year max drawdowns shows that there have been three substantial (<-20%) drawdowns. The average rolling max drawdown was -4.9%. This tells me I can expect a drawdown of at least -4.9% when I hold this investment for an entire year. Also, 90% of the rolling one year max drawdowns were -15.2% or better, which is much better than the SPY (90% are -22.1% or better). Below is a chart that shows the one year rolling max drawdowns for FGMNX (red) with the average of all these drawdowns in blue.
Now you may be asking why I am focusing on bonds. Bonds are a good way to capture market alpha without all the volatility and noise associated with stocks. The SPY has had a total return of about 288% over the past 18 years because it has been range-bound for most of that time. If you were an exceptional market timer, you could have made much more during this period. For those who like to keep things simple, bonds offer a great way to capture that performance. FNMIX has a total return of 519% over the past 18 years with smaller comparative drawdowns. You would have made almost 10% a year with a buy-and-hold strategy using this bond, which is difficult to imagine for most investments in the current era of market uncertainty.
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