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. Maturity

    The period of time for which a financial instrument remains outstanding. ...
  2. Fixed Income

    A type of investing or budgeting style for which real return ...
  3. Interest Rate Risk

    The risk that an investment's value will change due to a change ...
  4. Duration

    A measure of the sensitivity of the price (the value of principal) ...
  5. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. ...
  6. Accelerated Return Note (ARN)

    A short- to medium-term debt instrument that offers a potentially ...
RELATED FAQS
  1. What is the best managed fund for trading mid-cap stocks?

    Mid-cap stocks have a moderate capitalization and are officially valued between $1 billion and $8 billion. Actively managed ... Read Full Answer >>
  2. What is the difference between par value and face value?

    When referring to the value of financial instruments, there is no difference between par value and face value. Both terms ... Read Full Answer >>
  3. What is a good annual return for a mutual fund?

    A "good" annual return on a mutual fund can only be gauged in a relative sense, influenced primarily by the investment goals ... Read Full Answer >>
  4. What does the Macaulay duration indicate about a bond?

    The Macaulay duration measures the present value weighted average maturity for a bond. It describes how sensitive a bond’s ... Read Full Answer >>
  5. What is Z-spread and option adjusted credit spread?

    A zero-volatility spread, or Z-spread, uses the zero-coupon rate curve to calculate the spread between assets of different ... Read Full Answer >>
  6. What are the best mutual funds for investing in the electronics sector?

    Within the technology sector, the electronics industry continues to experience growth as the technology that supports producing ... Read Full Answer >>
Related Articles
  1. Bonds & Fixed Income

    Ultrashort Bond Funds: More Risk Than Reward?

    These funds' risk may overshadow their returns. Find out all you need to know before you get involved.
  2. Mutual Funds & ETFs

    Evaluating Bond Funds: Keeping It Simple

    Discover some of the key factors for determining a fund's risk-return profile.
  3. Mutual Funds & ETFs

    Bond ETFs: A Viable Alternative

    Discover the advantages of a security that tracks bond index funds, but trades like a stock.
  4. Bonds & Fixed Income

    Retail Notes: A Simpler Alternative To Bond Funds

    These securities are meant to be held until maturity, removing the burden of complex pricing that sometimes plagues bonds.
  5. Bonds & Fixed Income

    Asset Allocation In A Bond Portfolio

    An investor's fixed-income portfolio can easily beat the average bond fund. Learn how and why!
  6. Investing Basics

    Explaining Fixed Income

    A person living off a fixed income is usually a retiree receiving a fixed, steady monthly inflow of cash.
  7. Mutual Funds & ETFs

    Is the DSUM Yuan Fixed Income ETF a Good Bet?

    An an depth look at PowerShares Chinese Yuan Dim Sum Bond ETF and its risks.
  8. Trading Strategies

    Top 3 High Yield Stocks with Growth Potential

    High yield and growth potential don't often go hand in hand, except when it comes to these three stocks.
  9. Mutual Funds & ETFs

    Top Foreign Debt ETFs & Funds for Diversification

    Foreign fixed income options for investors seeking capital preservation and diversification
  10. Mutual Funds & ETFs

    Top 4 High-Yielding Preferred Stock ETFs

    ETFs offer diversification, a clear advantage. Preferred stock ETFs offer even more.

You May Also Like

Hot Definitions
  1. Standard Error

    The standard deviation of the sampling distribution of a statistic. Standard error is a statistical term that measures the ...
  2. Capital Stock

    The common and preferred stock a company is authorized to issue, according to their corporate charter. Capital stock represents ...
  3. Unearned Revenue

    When an individual or company receives money for a service or product that has yet to be fulfilled. Unearned revenue can ...
  4. Trailing Twelve Months - TTM

    The timeframe of the past 12 months used for reporting financial figures. A company's trailing 12 months is a representation ...
  5. Subordinated Debt

    A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known ...
  6. International Financial Reporting Standards - IFRS

    A set of international accounting standards stating how particular types of transactions and other events should be reported ...
Trading Center