Short-term bond funds can provide yield seekers with a viable alternative to money market funds. Bankrate listed short-term bond funds with one of Vanguard's fixed income ETFs making the list.
During the Federal Reserve's aggressive monetary policy tightening, short-term bond funds have been the go-to option to mitigate rate risk. The Fed is starting to ease policy and rates are subsequently on the move lower. But short-term bond funds can provide a competitive yield option for those looking to park cash somewhere in the interim and allow it to marinate with interest.
"Short-term bonds can be a nice way for investors to earn a return above what they’d get in a traditional savings account without exposing themselves to too much interest-rate risk," said James Royal, Ph.D., Bankrate investing and wealth management principal writer.
Making Bankrate's list of recommended short-term bond funds is the Vanguard Short-Term Bond Index Fund ETF Shares (BSV). The broad-based fund seeks to track the performance of the Bloomberg U.S. 1-5 Year Government/Credit Float Adjusted Index.
The aforementioned index includes a diverse array of bonds for added diversification. They include all medium and larger issues of U.S. government, investment-grade corporate, and investment-grade international dollar-denominated bonds that have maturities between one and five years and are publicly issued. Furthermore, BSV offers a low expense ratio of just 0.04%.
