Understanding Short-Term Bond Funds and ETFs

Short-term bond funds allow investors to earn higher yields on their savings than savings accounts while maintaining accessibility. These funds are designed to balance safety with steady returns and are usually used for managing short-term financial goals.

Short-term bond funds are mutual funds that invest in debt securities with a maturity period of 1 to 3 years. These funds aim to provide consistent returns while maintaining low risk and high liquidity.

Common investments in these funds include:

• Government securities
• Certificates of deposit (CDs)
• AAA-rated corporate bonds
• Commercial papers

The primary objective of short-term bond funds is to offer better returns than savings accounts while preserving capital, making them well-suited for short-term financial strategies.

Short-term bond ETFs provide the benefits of traditional short-term bond funds with some additional features. They are generally more cost-efficient, with lower expense ratios than actively managed funds. These ETFs also offer accessibility, as they are traded on stock exchanges, allowing for flexible buying and selling. Furthermore, they provide transparency through daily disclosure of holdings.

Short-term bond ETFs combine the potential for steady returns with the convenience of ETF trading and management.

Examples of Short-Term Bond ETFs Available on Vested

*The yields mentioned are for illustrative purposes and reflect data available at the time of publication. Actual yields may vary.