Strategy Intermediate: How to Invest for Short-Term Goals

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1.
What is the average duration of a bond in an ultrashort bond fund?
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Six months. This is why they are called ultrashort.
2.
For many, a disadvantage of certificates of deposit is that _______.
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You must hold them for a set period. There are early-withdrawal penalties if you take your money out early.
3.
Whats the biggest benefit to using a certificate of deposit (CD) to fund a short-term goal?
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The return on a CD is guaranteed. A CDs return is predictable. Buy a 12-month CD promising X% rate and thats exactly what youll get.
4.
How do ultrashort-bond funds limit risk?
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They all invest in short-term securities, typically with durations of six months or less. Not all ultrashort-bond funds stick exclusively with high-quality securities. And they are not insured.
5.
Bank-loan funds have very little interest-rate risk to worry about.
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True. Because they invest in floating-rate loans, bank-loan funds have very little interest-rate risk.