Ultra-Short Bond Fund

AAA

DEFINITION of 'Ultra-Short Bond Fund'

A type of bond fund that invests only in fixed-income instruments with very short-term maturities. An ultra-short bond fund will ideally invest in instruments with maturities around one year. This investing strategy tends to offer higher yields than money market instruments, with less price fluctuations than a typical short-term fund.

INVESTOPEDIA EXPLAINS 'Ultra-Short Bond Fund'

Ultra-short bond funds offer investors greater protection against interest rate risk than longer term bond investments. Since these funds have very low durations, increases in the rate of interest will affect their value less than a medium or long-term bond fund.

While this strategy offers more protection against rising interest rates, they usually carry more risk than most money market instruments. While certificates of deposits follow regulated investment guidelines, an ultra-short bond fund has no more regulation than a standard fixed-income fund.

RELATED TERMS
  1. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. ...
  2. Maturity

    The period of time for which a financial instrument remains outstanding. ...
  3. Duration

    A measure of the sensitivity of the price (the value of principal) ...
  4. Interest Rate Risk

    The risk that an investment's value will change due to a change ...
  5. Fixed Income

    A type of investing or budgeting style for which real return ...
  6. Surrender Period

    The amount of time an investor must wait until he or she can ...
Related Articles
  1. Ultrashort Bond Funds: More Risk Than ...
    Bonds & Fixed Income

    Ultrashort Bond Funds: More Risk Than ...

  2. Evaluating Bond Funds: Keeping It Simple
    Mutual Funds & ETFs

    Evaluating Bond Funds: Keeping It Simple

  3. Bond ETFs: A Viable Alternative
    Mutual Funds & ETFs

    Bond ETFs: A Viable Alternative

  4. Retail Notes: A Simpler Alternative ...
    Bonds & Fixed Income

    Retail Notes: A Simpler Alternative ...

Hot Definitions
  1. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  2. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  3. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  4. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  5. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
  6. Parity Price

    When the price of an asset is directly linked to another price. Examples of parity price are: 1. Convertibles - the price ...
Trading Center