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. Passive ETF

    One of two types of exchange-traded funds (ETFs) available for investors. Passive ETFs are index funds that track a specific ...
  2. Walras' Law

    An economics law that suggests that the existence of excess supply in one market must be matched by excess demand in another ...
  3. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  4. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  5. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  6. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
Trading Center