3 Funds for Short-Term Goals
We like these short- and intermediate-term bond funds as a place to stash your money for the near future.
Susan Dziubinski: Hi, I'm Susan Dziubinski from Morningstar.com. Morningstar director of personal finance Christine Benz suggests that investors with short-term goals maintain about 20% to 40% of these assets in cash equivalents, such as certificates of deposit and money market accounts; another 40% to 60% in a short-term bond fund; and the remaining 20% in an intermediate-term bond fund. Here are three of Christine's favorite funds to fill the latter two sleeves.
Alaina Bompiedi: At the end of February the U.S. Treasury yield curve was notably flat with some tenors at the shortest end of the curve actually inverted. Given that geometry, Silver-rated Fidelity Short-Term Bond was sitting in a pretty attractive position. The fund follows a 1- to 3-year benchmark compared to some peers in the short-term bond Morningstar Category, which follow a 1- to 5-year benchmark. That gives the fund a slightly shorter duration than most in its category, and while that has muted its performance over the long term, it's made it pretty resilient during periods of rising interest rates. The fund also carries about half of its assets in corporate bonds, which gives it a little bit of octane over its benchmark. Given those features we think it's a pretty dependable choice in the short-term bond category at the moment.
Susan Dziubinski does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.