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player ready...Q. In 1999, I invested $25,000 in Fidelity High-Income Fund. It has declined significantly both in terms of income and overall performance. Should I hold or transfer to a better Fidelity fund?
A. This fund really blew it by investing heavily in telecommunications debt at the absolute worst time.
With an enormous $1.53 billion in assets, it had no way to unload all that troubled debt and had to sit back and hope to ride out the storm.
Fidelity High-Income Fund (SPHIX) declined 3 percent over the past 12 months and posted a three-year annualized decline of 6 percent. Both of these results rank in the lowest 15 percent of all junk bond funds.
“I think it’s probably at the point now where there isn’t much more to lose because all the telecom bonds are really cheap and out of favor,” said Jack Bowers, editor of the Fidelity Monitor newsletter (www.fidelitymonitor.com). “If you’re an investor who’s hung on this long, you may as well hang on and see if you can derive some benefit in the next couple of years.”
The Fidelity fund family traditionally has been a savvy investor in the high-yield market, but results here don’t indicate that. It made the same miscalculation on telecom bonds with its Fidelity Capital & Income Fund.
Even in the best of times, this is a fund designed for high-yield investors willing to cope with volatility.
Portfolio manager Fred Hoff, who previously ran the high-yield portions of several other Fidelity funds, has been in charge since mid-2000. This “no-load” (no sales charge) fund requires a $2,500 minimum initial investment.
Q. I am in the process of selling property for $375,000. I understand that sellers can exclude up to $250,000 in capital gains from the sale of their home. Does this mean that I would only pay taxes on $125,000 in gains? How does this exclusion work?
G.F., via the Internet.
A. It must have been your principal residence for two out of the five years prior to the date of sale. However, if you sold it and hadn’t lived there for two years, you might be able to get a partial exclusion if you had to sell because of a job change or for health reasons.
“You compare your cost of the home against the $375,000 sale price to determine what your gain is, so if you paid $125,000 for the home, none of the gain would be taxable,” explained Martin Nissenbaum, national director of personal income tax planning for Ernst & Young in New York. “In determining your cost, you take into account the initial purchase price plus any improvements you made to the actual building and property.”
The likelihood that Americans will owe taxes when they sell their homes decreased dramatically with the 1997 tax bill.
The $250,000 exclusion available to anyone replaced the prior law’s more limited $125,000 exclusion given to those over age 55.
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Andrew Leckey answers questions Sunday in Business and Tuesday in Your Money. Address inquiries to Andrew Leckey, P.M.B. 184, 369-B Third St., San Rafael, Calif. 94901-3581, or by e-mail at [email protected].