Duration Bond

Fixed income mutual funds and ETFs can come with different duration, which... Fixed income mutual funds and ETFs can come with different duration, which measures a bond's likely price change due to a change in interest rates. Fixed income funds focusing on duration can broadly be categorized as either U.S. debt or international debt. Ultra-short duration bond mutual funds and ETFs invest the majority of their assets in debt securities maturing in less than 1 year (and often, only a few months). Short duration bond mutual funds and ETFs invest the majority of their assets in debt securities maturing between 1 and 3 years. Intermediate duration bond mutual funds and ETFs invest the majority of their assets in debt securities maturing in 3 to 6 years. Long duration bond mutual funds and ETFs invest the majority of their assets in debt securities maturing over 6 years from now. Investors who worry that interest rates will rise tend to purchase shorter duration debt, while those who think interest rates may fall usually buy longer duration debt. An important point to note is that longer duration debt carries more interest rate risk - aka price fluctuates more with changes in interest rates - when compared to short or intermediate duration debt. Last Updated: 12/27/2024 View more View less

Fixed income mutual funds and ETFs can come with different duration, which measures a bond's likely price change due to a change in interest rates. Fixed income funds focusing on duration can broadly... Fixed income mutual funds and ETFs can come with different duration, which measures a bond's likely price change due to a change in interest rates. Fixed income funds focusing on duration can broadly be categorized as either U.S. debt or international debt. Ultra-short duration bond mutual funds and ETFs invest the majority of their assets in debt securities maturing in less than 1 year (and often, only a few months). Short duration bond mutual funds and ETFs invest the majority of their assets in debt securities maturing between 1 and 3 years. Intermediate duration bond mutual funds and ETFs invest the majority of their assets in debt securities maturing in 3 to 6 years. Long duration bond mutual funds and ETFs invest the majority of their assets in debt securities maturing over 6 years from now. Investors who worry that interest rates will rise tend to purchase shorter duration debt, while those who think interest rates may fall usually buy longer duration debt. An important point to note is that longer duration debt carries more interest rate risk - aka price fluctuates more with changes in interest rates - when compared to short or intermediate duration debt. Last Updated: 12/27/2024 View more View less