Some trouble in a Fidelity fund can be ill-afforded as the exchange traded fund (ETF) industry gains on mutual funds.

Fidelity is facing subprime losses in a central fund, an internal fund that only other Fidelity funds can invest in. This has taken away from returns in at least 10 mutual funds. Fidelity Ultra Short Central Fund fell 2-3% in the third quarter because of bad investments in subprime linked securities.

Joe Morris of Ignites reports that the funds left holding the bag include:

  • Inflation-Protected Bond
  • Investment Grade Bond
  • Strategic Real Return
  • Short-term Bond
  • U.S. Bond Index

By investing in these funds so widely, the risk of widespread loss is greater, and expenses paid to such funds are hard to understand. Central funds do provide other funds with exposure to investment expertise in individual sectors.

Investors are too often left in the dark about what they own – a great arguments for ETFs and the transparency and ease-of-use that they offer.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.