December 21, 2014
A bond fund is identified as short-term, intermediate term and long term. What does this mean? What should you do?
A bond fund is identified as short-term, intermediate term and long term. What does this mean? What should you do?
The time frame indicated on the bond fund tells how long the maturities of the bonds in the fund are. A short-term has shorter maturities and long term has longer. The longer the maturities the higher the interest rate but also the risk from interest rates rising are the greatest for longer term bonds. Long-term bonds are generally not worth the risk for the pay out, short term bonds are a good replacement for a savings account or an emergency account. Intermediate term bonds can be used as your all purpose bonds for investing or your emergency account if you are willing to take more risk on that. There is also international bonds that go in to the mix at different time frames also, they are important to consider also for a well balanced portfolio.
Wonderfully stated, Garrett. I have nothing to add.