Bond prices have been volatile in recent years as the Federal Reserve hiked interest rates to combat high inflation, but with an end to rate increases potentially in sight, investors may be able to take advantage of attractive yields in short-term bonds.
Here’s what you should know about short-term bond funds and some of the best ones to consider for your portfolio.
What are short-term bond funds?
Short-term bond funds are mutual funds and exchange-traded funds (ETFs) that typically invest in government and corporate bonds with maturities of less than five years. Bonds with shorter times to maturity are less sensitive to changes in interest rates than longer-term bonds, meaning investors won’t suffer as much if rates head higher. Remember, interest rates and bond prices move in opposite directions, so as rates rise, bond prices fall and vice versa.
Investors in short-term bond funds earn a yield,…
