# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Average Effective Duration

Average effective duration provides a measure of a fund’s interest-rate sensitivity.

The longer a fund’s duration, the more sensitive the fund is to shifts in interest rates.

The relationship among funds with different durations is straightforward: A fund with duration of 10 years is expected to be twice as volatile as a fund with a five-year duration.

Duration also gives an indication of how a fund’s net asset value (NAV) will change as interest rates change. A fund with a five-year duration would be expected to lose 5% of its NAV if interest rates rose by 1 percentage point, or gain 5% if interest rates fell by 1 percentage point. Morningstar surveys fund companies for this information.

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