Friday, August 26, 2005

Low Duration Ultrashort Bond Funds

During the rising interest rate environment holding long term bonds may not be a good idea. Although money market yields are somewhat respectable today with rates around 3%, extending the duration a little bit should be able to get the investor some extra return.

The short-term bonds with duration around 2 or 3 may be a stretch for some investors. The duration of 1 or less should be ideal for today’s environment. Following are a few ultrashor/low duration type of funds with no-load, low expense ratio and investable minimumns (less than $5,000).

Schwab YieldPlus Fund (SWYPX)

  • Expense ratio 0.59%
  • Average Maturity 0.4 years
  • 30-day SEC yield 3.87%
  • Total net assets about $740 millions
  • $2,500 regular account minimum initial purchase

Harbor Short Duration (HASDX)

  • Expense ratio 0.39%
  • 30-day SEC yield 3.47%
  • Total net assets about $54 millions
  • $1,000 regular account initial investment

Fidelity Ultra Short Bond Fund (FUSFX)

  • Expense ratio 0.45%
  • 30-day SEC yield 3.51%
  • Total net assets $903 millions
  • Average maturity 1.6 years
  • Duration 0.3 years
  • $2,500 regular account initial investiment

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