Best Short-Term Bond Funds in April 2024 | Bankrate (2024)

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, which measures the income produced by the bonds in the portfolio relative to the current market price.

Who should invest in short-term bonds?

Short-term bond funds can make sense for many different investors, but they’re particularly well-suited for those saving towards short-term goals. Money that you think you’ll need in the next three to five years can be invested in short-term bonds, allowing you to earn a decent rate of return without taking on too much risk.

Pay special attention to a fund’s expense ratio, or fee, before investing. All else being equal, the lower the expense ratio is, the better off you’ll be as an investor.

Top short-term bond funds

*Data below as of April 8, 2024.

SPDR Portfolio Short-Term Corporate Bond ETF (SPSB)

The SPDR Portfolio Short-Term Corporate Bond ETF aims to track the performance of the Bloomberg U.S. 1-3 Year Corporate Bond Index. The fund offers exposure to U.S. corporate bonds with maturities between one and three years.

  • SEC yield: 5.19 percent
  • Expense ratio: 0.04 percent
  • AUM: $7.6 billion

iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB)

This iShares fund aims to track the performance of an investment-grade corporate bond index with maturities between one and five years. Holdings include bonds issued by Bank of America, JPMorgan Chase and Microsoft.

  • SEC yield: 5.21 percent
  • Expense ratio: 0.04 percent
  • AUM: $20.9 billion

Schwab 1-5 Year Corporate Bond ETF (SCHJ)

The Schwab 1-5 Year Corporate Bond ETF seeks to track the total return of an index measuring the performance of the short-term U.S. corporate bond market. The fund holds corporate bonds with remaining maturities between one and five years.

  • SEC yield: 5.13 percent
  • Expense ratio: 0.03 percent
  • AUM: $398.9 million

Vanguard Short-Term Bond ETF (BSV)

The Vanguard Short-Term Bond ETF aims to track the performance of a market-weighted bond index made up of investment-grade bonds with a dollar-weighted average maturity of 1-5 years. The fund holds government bonds, high-quality corporate bonds and investment grade international dollar-denominated bonds.

  • SEC yield: 4.71 percent
  • Expense ratio: 0.04 percent
  • AUM: $31.6 billion

Fidelity Short-Term Bond Fund (FSHBX)

The Fidelity Short-Term Bond Fund aims to produce a high level of current income while preserving capital. It typically invests at least 80 percent of its assets in all types of investment-grade debt and maintains a dollar-weighted average maturity of three years or less.

  • SEC yield: 4.77 percent
  • Expense ratio: 0.30 percent
  • AUM: $2.3 billion

Bottom line

Short-term bond funds can be a good place to invest money that you may need in the next few years. Keep in mind that these funds are not risk-free, though they are safer than investing in high-yield bonds or the stock market. Investors looking to earn yields with even less risk, might consider money-market funds.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.

Best Short-Term Bond Funds in April 2024 | Bankrate (2024)

FAQs

Are short-term bond funds a good investment now? ›

Short-term bond funds can be a good place to invest money that you may need in the next few years. Keep in mind that these funds are not risk-free, though they are safer than investing in high-yield bonds or the stock market. Investors looking to earn yields with even less risk, might consider money-market funds.

What is the best short term investment at the moment? ›

  • High-yield savings accounts. ...
  • Cash management accounts. ...
  • Money market accounts. ...
  • Short-term corporate bond funds. ...
  • Short-term U.S. government bond funds. ...
  • Money market mutual funds. ...
  • No-penalty certificates of deposit.

What is the best bond ETF for 2024? ›

  • The 10 Best Bond ETFs of April 2024.
  • Pimco Active Bond Exchange-Traded Fund (BOND)
  • Vanguard Intermediate-Term Treasury Index Fund ETF (VGIT)
  • Pimco Enhanced Short Maturity Active ESG ETF (EMNT)
  • ProShares Investment Grade-Interest Rate Hedged ETF (IGHG)
  • iShares National Muni Bond ETF (MUB)
Apr 2, 2024

Which fund is best for short term? ›

Short Duration Funds Returns Calculator
  • Axis Short Term Fund.
  • SBI Short Term Debt Fund.
  • ICICI Prudential Short Term Fund.
  • Aditya Birla Sun Life Short Term Fund.
  • HDFC Short Term Debt Fund.
  • Mirae Asset Short Duration Fund.
  • Baroda BNP Paribas Short Duration Fund.
  • Canara Robeco Short Duration Fund.

What bonds to invest in 2024? ›

  • Vanguard High-Yield Corporate Fund Investor Shares. Yield. ...
  • T. ...
  • PGIM High Yield Fund – Class A. ...
  • Fidelity Capital & Income Fund. ...
  • American Century High Income Fund Investor Class. ...
  • Osterweis Strategic Income Fund. ...
  • American Funds American High-Income Trust Class A. ...
  • BrandywineGLOBAL – High Yield Fund Class A.
Mar 15, 2024

Will bond funds recover in 2024? ›

As for fixed income, we expect a strong bounce-back year to play out over the course of 2024. When bond yields are high, the income earned is often enough to offset most price fluctuations. In fact, for the 10-year Treasury to deliver a negative return in 2024, the yield would have to rise to 5.3 percent.

How to get 10% return on investment? ›

Investments That Can Potentially Return 10% or More
  1. Stocks.
  2. Real Estate.
  3. Private Credit.
  4. Junk Bonds.
  5. Index Funds.
  6. Buying a Business.
  7. High-End Art or Other Collectables.
Sep 17, 2023

How to invest $100,000 short-term? ›

Ways to Invest $100k for the Short-Term
  1. High-Yield Savings Account. You can open a high-yield savings account at a bank or a credit union. ...
  2. Money Market Funds. ...
  3. Cash Management Accounts. ...
  4. Short-Term Corporate Bonds. ...
  5. No-Penalty Certificates of Deposits (CD) ...
  6. Short-term U.S. Government Bonds.
Mar 7, 2024

Where to invest $50 000 for 1 year? ›

Invest in Treasurys

Treasury bonds also pay interest every six months but have long-term maturities of 20 or 30 years. Another option is to put some of your $50K in a Series I savings bond (purchases are capped annually at $10,000 per taxpayer).

Should I buy bond ETF in 2024? ›

Bond ETFs can offer several potential advantages for investors in 2024, as many analysts expect the economy to slow or enter a recession, which could lead to price appreciation. Bond ETFs also offer other benefits, such as income generation and diversification.

Is TLT a good investment in 2024? ›

In the unlikely scenario that a recession begins later this year, the leading asset class is most likely to be bonds as stock prices and money market yields would fall. This makes TLT a good recession hedge and diversification tool.

Is it a good time to buy a bond fund? ›

Short-term bond yields are high currently, but with the Federal Reserve poised to cut interest rates investors may want to consider longer-term bonds or bond funds. High-quality bond investments remain attractive.

How to invest in short-term bonds? ›

For most people, the easiest way to invest in short-term bonds is by purchasing bond funds rather than purchasing individual bonds. Bond funds are mutual funds or exchange-traded funds (ETFS) that invest in bonds rather than stocks.

Which mutual fund is best for 2024? ›

Best large-cap mutual funds to invest in India

In the large-cap category, Quant Large Cap delivered a return of 55.05%, while Bank of India Bluechip Fund provided a return of 47.38%. The Quant Large Cap and Mid Cap fund delivered a return of 64.41% for investors looking for exposure to both large and mid-cap stocks.

What are ultra short-term funds? ›

Ultra short duration funds are fixed income mutual fund schemes which invest debt and money market securities such that the Macaulay Duration of the scheme portfolio is 3 months to 6 months.

Is now a good time to get into bond funds? ›

Fed rate policy's impact on your investing

Answer: Now may be the perfect time to invest in bonds. Yields are at levels you could only dream of 15 years ago, so you'd be locking in substantial, regular income. And, of course, bonds act as a diversifier to your stock portfolio.

Why is my short-term bond fund losing money? ›

Bond prices decline when interest rates rise, when the issuer experiences a negative credit event, or as market liquidity dries up. Inflation can also erode the returns on bonds, as well as taxes or regulatory changes.

What happens to short-term bond funds when interest rates rise? ›

Bond prices move in inverse fashion to interest rates, reflecting an important bond investing consideration known as interest rate risk. If bond yields decline, the value of bonds already on the market move higher. If bond yields rise, existing bonds lose value.

What are the disadvantages of short-term bond funds? ›

The downside of short-term bonds is that they generally pay lower interest rates than long-term bonds.

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