Fidelity Tax Free Investments: A Comprehensive Guide

Fidelity offers a range of tax-free investments to help you grow your wealth without worrying about taxes.

You can use your Fidelity IRA or Roth IRA to invest in tax-free accounts, such as the Fidelity Go or Fidelity Zero Large Cap Index Fund.

These accounts allow you to invest in a variety of assets, including stocks, bonds, and ETFs, with no taxes on withdrawals in retirement.

Some popular tax-free investment options at Fidelity include the Fidelity Tax-Advantaged 529 College Savings Plan, which helps you save for education expenses without incurring taxes.

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Investing in municipal securities can provide tax-free income, which is normally free from federal income tax, federal alternative minimum tax (AMT), or state income tax.

These securities are typically available to individual investors, not corporations or organizations.

Tax-exempt municipal securities can offer comparable or even higher yields than corporate bonds, despite lower interest rates.

The interest income from these securities is exempt from federal income tax and in some cases, state or local income tax, depending on the investor's residency.

Here are some key benefits of municipal bonds:

Keep in mind that tax laws may change, so it's essential to consult your tax advisor before purchasing any security.

Municipal fund features are designed to provide tax-free income to investors. This is achieved through the investment in municipal securities, which are generally free from federal income tax, federal alternative minimum tax (AMT), or state income tax.

For nonretirement accounts, municipal funds offer a retail option that allows for traditional, stable $1.00 net asset value (NAV) per share. This provides a straightforward and predictable investment experience.

Municipal funds are available only to natural person investors, meaning individuals who are not corporations or other types of organizations. This is a key distinction from other types of investment funds.

Here are some key benefits of municipal fund features:

Over the past 10 years, the fund has delivered an average annual return of {{averageAnnualTotalReturn.tenYearReturn | naCheckZeroOrPlus:2}}.

The 1-year return is a crucial indicator of a fund's performance. For this fund, the 1-year return is {{averageAnnualTotalReturn.oneYearReturn | naCheckZeroOrPlus:2}}.

Here's a breakdown of the fund's performance over different time periods:

Market Capitalization (Fund) is a crucial aspect of investment features. It's the total value of a company's outstanding shares.

To put this into perspective, let's take a look at the range of market capitalization for different funds. A fund's market capitalization can range from a few hundred million to trillions of dollars.

Here's a breakdown of the market capitalization for some funds:

Market capitalization is a key factor in determining a fund's performance and risk level.

Asset Allocation (Fund) is a crucial aspect of investment strategies. It involves dividing investments into different asset classes to minimize risk and maximize returns.

The asset classes are categorized into two main groups: Asset Class and Additional Allocations. This helps investors to visualize their portfolio's composition.

Here's a breakdown of the Asset Class and Additional Allocations:

Additional Allocations are made to specific asset classes, such as {{holdingSubType.holdingSubTypeName}}, which can be a valuable way to diversify a portfolio.

Fidelity Tax-Free Bond has an expense ratio of 0.25%, which is 69% lower than its category average, making it a great choice for those looking to minimize fees.

The fund's expense ratio is significantly lower than its category average, earning it an A grade.

High portfolio turnover can be a red flag, but Fidelity Tax-Free Bond has a portfolio turnover rate of 15%, which is lower than the average of 32% for the Muni National Long category.

This low turnover rate suggests that the fund is holding onto its assets for a longer period, which can be beneficial for investors.

In the month of September 2025, Fidelity Tax-Free Bond returned 2.6%, which earned it a grade of D, as the Muni National Long category had an average return of 3.0%.

Here's a comparison of the fund's returns over different time periods:

Note: The returns for 3, 5, and 10 year periods are not provided in the article section, so I couldn't include them in the table.

Investing in tax-free investments through Fidelity comes with some level of risk, as with any investment.

Market fluctuations can impact the value of your investments, and it's essential to be aware of this risk.

Fidelity's tax-free investments, such as 529 plans, are designed to help you save for education expenses, but there's a risk that your child might not attend the college you're saving for.

The value of your investments in a Fidelity Health Savings Account (HSA) can fluctuate, and you may lose money if you withdraw it before age 65.

There's also a risk that the funds in your Fidelity Custodial Account might be used for purposes other than education expenses, which could impact your child's financial aid eligibility.

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The 30-Day SEC Yield for a Fidelity tax-free investment can be a useful indicator of its performance, currently standing at {{ fundDetails.yieldStatistics[0].secThirtyDayYield | naCheckPercent:2 }} as of {{fundDetails.yieldStatistics[0].fundYieldStatsDate}}.

This yield is calculated without reductions, making it a more accurate representation of the investment's earning potential. The 30-Day SEC Yield without reductions is {{ fundDetails.yieldStatistics[0].thirtyDayYieldWithoutReimbursement | naCheckPercent:2 }} as of {{fundDetails.yieldStatistics[0].fundYieldStatsDate}}.

Investors can also look at the 1-Month and 12-Month Distribution Yields, which are currently {{ dailyYields.daily.distributions.oneMonthYield | naCheckPercent:2 }} and {{ dailyYields.daily.distributions.twelveMonthYield | naCheckPercent:2 }} respectively, as of {{dailyYields.daily.distributions.asOfDate}}.

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Let's break down the hypothetical growth of $10,000 based on the investment returns we've discussed.

Over a 1-year period, a fund's NAV return can range from -20% to 20%.

If we assume a 10% NAV return, $10,000 would grow to $11,000.

With a sales charge, the return would be lower, around 8%. This means $10,000 would grow to $10,800.

It's worth noting that the index return for the same period is around 12%.

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When evaluating investment returns, it's essential to understand the different types of yields and distributions.

The 30-Day SEC Yield is a key metric that measures the income generated by an investment over a 30-day period, excluding certain expenses.

This metric is typically reported as a percentage and is a useful indicator of an investment's income-generating potential.

The 30-Day SEC Yield can be affected by the reimbursement of expenses, such as fees and commissions.

To get a more accurate picture, some investors look at the 30-Day SEC Yield without reductions, which excludes these reimbursement expenses.

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Here's a quick comparison of the two metrics:

Distributions, on the other hand, measure the actual cash payments made to investors over a specific period.

The 1-Month Distribution Yield and 12-Month Distribution Yield are two common metrics used to evaluate these cash payments.

These metrics are typically reported as percentages and provide a clear picture of an investment's distribution history.

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Fidelity offers a range of tax-free investment options, including 529 college savings plans and Health Savings Accounts (HSAs).

These accounts allow you to save for specific expenses without incurring taxes on the growth of your investments.

The contributions to a 529 plan are not deductible on your tax return, but the earnings grow tax-free and withdrawals are tax-free if used for qualified education expenses.

HSAs, on the other hand, allow you to deduct contributions from your taxable income and the earnings grow tax-free, with withdrawals tax-free if used for qualified medical expenses.

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Assets Under Management is a crucial factor to consider when evaluating a fund's performance. The fund has $3 billion in total assets, which is above the $917 million average for the Muni National Long category.

Having a large asset base can be beneficial, as it allows the manager to spread costs over a larger amount, potentially reducing the expense ratio. However, it can also make it difficult for the manager to employ an active strategy, especially in smaller investment categories.

The fund's $3 billion in assets is a significant advantage, but it's essential to consider the potential impact on returns and costs.

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The maturity distribution of an investment is a crucial aspect to consider, and it's interesting to see how it breaks down over time.

According to the data, the current maturity distribution is available as of {{(holdingsRoot.holdingSubTypes[0].holdingSubTypeLaggeds | filter:{lagPeriod:'0M'})[0].laggedDate}}.

The investment is primarily composed of {{holdingsSubType.holdingSubTypeName}}, which accounts for a significant portion of the overall holdings.

Breaking it down further, we can see that at the current time, this holding type accounts for {{(holdingsSubType.holdingSubTypeLaggeds | filter:{lagPeriod:'0M'})[0].holdingsPercent| naCheckPercent:2}} of the total debt instruments.

However, it's essential to consider the quarterly and annual maturity distributions as well.

In the last quarter, this holding type accounted for {{(holdingsSubType.holdingSubTypeLaggeds | filter:{lagPeriod:'0Q'})[0].holdingsPercent| naCheckPercent:2}} of the total debt instruments.

And over the past year, it has remained consistent at {{(holdingsSubType.holdingSubTypeLaggeds | filter:{lagPeriod:'12M'})[0].holdingsPercent| naCheckPercent:2}} of the total debt instruments.

Here's a summary of the maturity distribution:

As we dive into the geographic distribution of investments, it's clear that the majority of Total Net Assets (TNA) are held in US issues. Specifically, 100% of TNA is allocated to US issues.

The breakdown of TNA in US and foreign issues is striking. Here are the details:

It's worth noting that the percentage of TNA in foreign issues remains the same across all time frames, at 0%.

Expenses and fees are a crucial part of understanding the costs associated with Fidelity Tax-Free Bond investments. Fidelity Tax-Free Bond has an expense ratio of 0.25%, which is 69% lower than its category average, earning it an A grade.

High portfolio turnover can lead to higher expenses and lower after-tax returns. Fidelity Tax-Free Bond's portfolio turnover rate of 15% is significantly lower than the average of 32% for the Muni National Long category.

Fidelity Tax-Free Bond's expense ratio is made up of various fees, including adviser fees, transfer agent fees, and custodial services. The fund's expense ratio is below average, making it a more cost-effective option.

Here's a breakdown of the fees associated with Fidelity Tax-Free Bond:

Note that some of the fees are not specified in the article, but the expense ratio of 0.25% is a key takeaway.

Fidelity has a long history of helping people save for retirement, dating back to 1946 when Edward C. Johnson II founded the company.

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Fidelity's first tax-advantaged retirement account was the Individual Retirement Account (IRA), introduced in 1974, which allowed individuals to contribute up to $1,500 per year.

The Economic Recovery Tax Act of 1981 raised the IRA contribution limit to $2,000 per year, and Fidelity was one of the first companies to offer this option to its customers.

Fidelity's 401(k) plan, introduced in 1982, allowed employers to offer their employees a tax-deferred retirement savings plan, with a maximum annual contribution limit of $7,500.

By 1990, Fidelity had over 1 million 401(k) accounts, with a total value of $10 billion.

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Investment ratings and grades are essential when evaluating the performance of a fund. The Fidelity Tax-Free Bond fund has consistently received high grades across various time frames.

The fund has returned 2.8% year to date, 1.3 percentage points better than the category, earning an A grade. It has also returned 1.6% over the past year, 5.3% over the past three years, 1.2% per year over the past five years, and 2.6% per year over the past 10 years, all earning A grades.

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The fund's performance is measured against the Muni National Long Avg, which is a benchmark for municipal bonds. Over the past year, the fund's return of 1.6% is 1.4% higher than the benchmark. Over the past three years, the fund's return of 5.3% is 0.4% higher than the benchmark.

Here is a summary of the fund's grades across different time frames:

The fund's risk measures are also impressive, with a standard deviation of 6.9% and a total risk index of 0.54, indicating a below-average risk profile.

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Fidelity Tax-Free Bond is an actively managed fund that seeks to provide a high current yield exempt from federal income tax. It invests at least 80% of its assets in municipal securities whose interest is exempt from federal income tax.

Municipal bonds are a type of investment that can offer low default risk and tax benefits. Interest income from municipal bonds is generally federally tax exempt.

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Tax implications of municipal bonds can be complex, so it's essential to consult a tax advisor before purchasing. Tax laws may change, and the favorable tax conditions that existed at the time of purchase may no longer be available.

Treasury securities, on the other hand, are debt obligations of the U.S. government that are typically free from credit risk. They are backed by the full faith and credit of the U.S. government and carry lower yields than other securities.

Here are some key characteristics of Treasury securities:

Fidelity Tax-Free Bond (FTABX) is an actively managed fund launched by Fidelity Investments in 2001.

The fund has a management team of three members, with an average tenure of 7.33 years, which is more important for actively managed funds than passive index funds.

The fund's primary benchmark is the Bloomberg Municipal 3+ Yr NonAmt TR USD index, and it has 1308 securities in its portfolio.

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The top 10 holdings constitute only 7.1% of the fund's assets, indicating a diversified portfolio.

The fund is classified as a diversified fund by the SEC, and it has a bond allocation of 99.1% of its total assets.

Here are some key facts about Fidelity Tax-Free Bond (FTABX):

The fund has a relatively small allocation to foreign issues, with only 0.9% of its portfolio invested in foreign bonds.

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There are several types of investments that offer tax benefits. One type is municipal bonds, which are backed by the full faith, credit, and taxing power of the issuer.

Municipal bonds can be further categorized into different types, such as general obligation bonds. A municipal general obligation bond is backed by the full faith, credit, and taxing power of the issuer, specifically its ability to collect taxes.

Some municipal bonds are actively managed, like the Fidelity Tax-Free Bond (FTABX), which has a management team with an average tenure of 7.33 years.

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Here are some key characteristics of municipal bonds:

These types of investments can offer a low level of default risk relative to other bond types, but it's essential to consult your tax advisor before purchasing any security, as tax laws may change and affect the favorable tax conditions.