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. Bear Fund

    A mutual fund designed to provide higher returns when the market ...
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 ...

comments powered by Disqus
Hot Definitions
  1. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  2. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  3. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  4. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  5. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
  6. Earnings Before Interest After Taxes - EBIAT

    A financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT ...
Trading Center